It was an audacious move when President Bola Tinubu transmitted four tax reform bills to the National Assembly on October 3, 2024. The Tax Reform Bills include: Nigeria Tax Bill 2024, Nigeria Tax Administration Bill, Nigeria Revenue Service Establishment Bill, and Joint Revenue Board Establishment Bill.
It has to be admitted that the Tax Reform Bills are meant to recondition Nigeria’s tax administration and revenue generation. Back in August 2023, some two months after his swearing-in as Nigeria’s president, Tinubu launched forth a Presidential Committee on Fiscal Policy and Tax Reforms led by the renowned tax expert Taiwo Oyedele. It was the foundational work done by Taiwo Oyedele and his committee that Tinubu presented to the National Assembly.
The Tax Reform Bill is aimed at unifying all the multiform taxes across the country into a unique law as proposed by the Nigeria Tax Bill. This way, the Nigeria Revenue Service will take over the rights of the Federal Inland Revenue Service (FIRS) to collect all national taxes such as royalties originally taken by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), excise duties, import and VAT formerly collected by the Nigeria Customs Service.
The repealing of 11 laws and enactments will follow in due course, even as 13 other extant laws will undergo comprehensive amendments.
The laws billed to be revoked are: Capital Gains Tax Act, Casino Act, Venture Capital Incentives Act, Personal Income Tax Act, Companies Income Tax Act, Deep Offshore and Inland Basin Act, Industrial Development Income Tax Relief Act, Income Tax Authorised Communications Act, Petroleum Profits Tax Act, Stamp Duties Act, and Value Added Tax Act.
Some aspects of the following legislations will concomitantly be amended: Petroleum Industry Act; Nigerian Export Processing Zones Act; Oil and Gas Free Trade Zone Act; National Information Technology Development Agency Act; Tertiary Education Trust Fund Establishment Act; National Agency for Science and Engineering Infrastructure Establishment Act; Customs and Excise Tariffs Consolidation Act; National Lottery Act; Nigerian Minerals and Mining Act; Nigeria Start-up Act; Export Incentives and Miscellaneous Provisions Act; Federal Roads Maintenance Agency Establishment Act; and Cybercrime Prohibition and Prevention Act.
According to the letter of the proposed tax bill, “This Act shall take precedence over any other law with regards to the imposition of tax, royalty, levy, excise duty on services or any other tax. Where the provisions of any other law is inconsistent with the provisions of this Act, the provisions of this Act shall prevail and the provisions of that other law shall, to the extent of the inconsistency, be void.”
If implemented to the letter, Nigerians will bear witness to a reduction in personal income tax, and a reduction in company profit tax. There would also be the harmonization of four special deductions into one levy. Increasing tax to GDP ratio is all the rage.
VAT distribution goes as follows: 10 percent to the Federal Government; 55 percent to the State Governments and the Federal Capital Territory (FCT); and 35 percent to the Local Governments. The attribution of VAT will be to the place of supply and consumption rather than the domain of remittance which places pride of place on company headquarters.
The exemption of persons earning less than N800,000 annually from paying income tax can hardly be argued against while exempting small businesses making turnovers of less than N50 million annually from corporate tax is quite welcome.
Like in most Nigerian debates, the tax reform tango has somewhat snowballed into a North/South divide. Some of the Northern Governors have, for instance, put out their voices against the derivation formula proposed for the sharing of VAT. But the critical dimension is that President Tinubu is being charged in some quarters as suffering from acute prebendalism that may not offer the tax reforms the requisite equitable pan-Nigerian implementation.
Tinubu of course used tax as a veritable instrument to increase in vast quantum Internally Generated Revenue (IGR) when he served as Lagos State Governor from 1999 to 2007, but not many Nigerians are at ease with using motor-park touts to drive tax collection. Public tax may after all end up in private pockets. There exists the further dimension of using untrustworthy tax consultants to feather private interests.
It can be argued that the government put the cart before the horse in introducing tax reforms when the Tinubu regime is yet to win the trust of Nigerians. When there is erosion of trust in governance, enacting landmark policies can hardly get off the ground.
There is grinding poverty in Nigeria such that all the talk about tax in this day and age is taken with a pinch of salt. Companies are folding up, and multinational companies are quitting Nigeria in droves. Unemployment is at an all-time high. This is definitely not the time to place so much emphasis on tax reforms. Improved productivity ought to have been the driving force of the Nigerian essence now instead of bowing the knee for the accident of taxation.
Former British Prime Minister famously said: “For a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”
It would amount to a grand effort in futility paying so much emphasis on taxation in Nigeria when the proper guideposts of having an equitable nation has not been properly erected. Nigerians across board have perforce been rendered prostate, with rancorous debates of if VAT on alcohol should be given to non-alcohol drinking states where bottles and crates of beer are broken and burnt, have been turned into a national question!
Without much relief for the broad people of the polity, tax reforms can only end up as an academic exercise. The social contract between the Nigerian government and the citizens is in dire straits, and what Tinubu ought to have done should have been akin to the masterstroke of President FD Roosevelt who united all Americans during the Great Depression by stressing: “The only thing we have to fear is fear itself.”
It was after Roosevelt restored the trust of his people that he implemented progressive tax.