It appears that there is a somewhat general view that the Nigeria Tax Bill 2024 presents an opportunity for Nigeria to reform its tax system, but it also poses challenges that must be navigated with care. The reservations of the northern region this past week, including those of Vice President of Nigeria Mr Kashim Shettima, reflect valid concerns that must be integrated into the final legislation. Only through a collaborative and empathetic approach can Nigeria achieve a taxation system that is truly reflective of a working society for all. So, what is the issue concerning everyone right now?

This dates back to August 2023 when President Bola Tinubu’s general reforms towards a working society for all thought to inaugurate the Tax and Fiscal Reform Committee. It is a task group still fully engrossed with its duties and is headed by a renowned tax expert and former PricewaterhouseCoopers (Pwc) Fiscal Policy Partner and Africa Tax Leader Taiwo Oyedele.

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On Friday, 8 November 2024, Mr Oyedele was on a Channels Television broadcast talking about the Nigeria Tax Bill 2024 being debated in Nigeria’s parliament. In the northern part of the country, there appears to be sentiments from the lawmakers representing this region over the four individual tax reform bills at the National Assembly for consideration.

Individually, the bills split as the Nigeria Tax Bill 2024, which wants to provide a fiscal framework for taxing groups. Next is the Tax Administration Bill, which, if passed, will busy itself with sorting out legalities based on a direction that has been carved out and agreed on by parliamentarians.

Citizens need to learn about a couple of bills coming after the previous two. The Nigeria Revenue Service Establishment Bill has to do with retweaking and a name change. This will repeal the Federal Inland Revenue Service Act and establish the Nigeria Revenue Service. Finally, the Joint Revenue Board Establishment Bill caters to judging tax matters because there will be disputes to work out.

All these were sent to the national assembly by President Tinubu on 3 September to streamline tax collection in Nigeria and stop it from being duplicated. What did Mr Taiwo Oyedele tell Channels Television’s Maupe Ogun-Yusuf while appearing on Hard Copy?

The first is to dissect the mood before he made the TV appearance. The core of the debate centres around the proposed shift to a derivation-based model for distributing Value Added Tax (VAT), which would allocate tax revenue to states based on where goods and services are consumed, rather than where companies are headquartered.

This proposed change has sparked a heated discussion, as it could potentially alter the fiscal landscape of Nigeria’s federating units. The northern governors, under the Northern Governors’ Forum, have rejected the new derivation-based model for VAT distribution, arguing that it does not align with the interests of the North and other sub-national entities. They contend that the bill would be detrimental to the region’s economic standing, as it would favour regions with higher consumption rates, which are typically the more economically developed southern states.

What led to having such debates stemmed from a constitutional oversight, says federal Tax and Fiscal Reform Committee chairman Taiwo Oyedele. By 1999, VAT had been implemented for about five years and was becoming a top revenue tax. Its absence in the 1999 Constitution, which replicated the 1979 Constitution, was a significant oversight. This omission has led to legal interpretations that VAT is a residual matter belonging to subnational governments. If the Supreme Court rules favour state collection, it will result in reduced revenue, business challenges, and economic regression.

Vice-President Kashim Shettima, representing the executive arm of the government, has also recommended that the bills be withdrawn in the meantime. This is to allow for broader consultations and consensus building which the presidential tax committee also said is necessary. The move asking all to take a step back was obviously after feedback and discussion with the National Economic Council (NEC) he heads.

Thirty-six state governors are members of this council and most pointed out a need to revisit the texts of the bills to satisfy stakeholders even more. Maybe then the proposed strings of legislation will be passed since they come as a whole.

One other point still sharp and growing in the minds of everyone connected is the proposed increase in VAT from 7.5% to 15% by 2030.

While this gradual increase is intended to bolster the country’s revenue base, it raises concerns about the impact on the cost of living, especially for the less affluent populations predominantly residing in the North. On the flip side, companies are likely to see a reduction in the corporate income tax (CIT) they pay.

Now, the CIT rate is 30 percent of their revenue, but it is expected to drop to 25 percent by 2026. A policy document from the Federal Ministry of Finance says that addressing low domestic revenue mobilisation through various measures, including strengthening tax administration and improving tax compliance, particularly in corporate income tax (CIT), an increase in the value-added tax (VAT) rate and broadening the tax base. Progressively increase the VAT rate from 7.5 percent to 15 percent.

Meiza Nigeria