By Owaikhena Osikhekha
One of the campaign promises of President Bola Tinubu was to reform Nigeria’s tax system. He didn’t waste time after his inauguration before setting up a committee to work on reforming the tax mechanisms.
The proposed Tax Reforms Bills currently before the National Assembly for consideration and passage were derived from the report of the Presidential Committee On Fiscal and Tax Reforms, led by a tax expert, Taiwo Oyedele..
However, the bills have generated controversy with some people alleging that they are targeted against some sections of the country.
The governors of nineteen Northern States of Nigeria at their meeting on October 28, 2024, in Kaduna rejected the new derivation-based model for the Value-Added Tax (VAT) distribution in the new tax reform bills.
Also, the National Economic Council ( NEC), comprising the 36 State governors and chaired by the Vice President, in its meeting last month, advised the President to withdraw the Tax Reforms Bills from the National Assembly to give room for more consultations.
President Tinubu in his response rejected the advice on the grounds that the bills were still proposals which can be subjected to more debates and inputs from different stakeholders before their final passage.
The President was right in taking that decision.
The Senate and the House of Representatives have the power to organise public hearings to get suggestions from experts and different stakeholders before passing the bills.
It is obvious that there are misunderstandings and misgivings around the tax reform already embarked upon by the current administration. The National Assembly is to consider four executive bills designed to transform and modernise Nigeria’s tax landscape.
The first one is the Nigeria Tax Bill, which aims to eliminate unintended multiple taxation and make Nigeria’s economy more competitive by simplifying tax obligations for businesses and individuals nationwide.
The second which is the Nigeria Tax Administration Bill proposes new rules governing the administration of all taxes in the country. Its objective is to harmonise tax administrative processes across federal, state and local jurisdictions for ease of compliance for taxpayers in all parts of the country.
The third, the Nigeria Revenue Service (Establishment) Bill seeks to rename the Federal Inland Revenue Service (FIRS) as the Nigeria Revenue Service (NRS) to better reflect the mandate of the Service as the revenue agency for the entire federation, not just the Federal Government.
The fourth, the Joint Revenue Board Establishment Bill proposes the creation of a Joint Revenue Board to replace the Joint Tax Board, covering federal and all states’ tax authorities.
The fourth bill also suggests establishing the Office of Tax Ombudsman under the Joint Revenue Board, which would serve as a complaint resolution body for taxpayers.
It is instructive to note that these proposed laws will not increase the number of taxes currently in operation. Instead, they are only designed to optimise and simplify existing tax frameworks.
The tax rates or percentages will remain the same under these reforms, as they focus on ensuring a more equitable distribution of tax obligations without adding to the burden on Nigerians.
These bills aim to harmonise revenue collection and administration across the federation to ensure efficiency and cooperation.
At the moment, tax administration lacks coordination among federal, state, and local tax authorities, often resulting in overlapping responsibilities, confusion, and inefficiency. Without reform, this inefficiency will persist.
The proposed laws are meant to coordinate efforts between different tiers of government, resulting in better tax resource management and greater clarity for taxpayers.
The proposed reforms seek to consolidate multiple taxes, and excise duties into a unified structure to reduce administrative fragmentation.
On the proposed derivation-based VAT distribution model, which the Northern Governors oppose, is designed to create a fairer system. The current model for distributing VAT is based on where the tax is remitted rather than where goods and services are supplied or consumed. The ongoing tax reform seeks to correct the inherent inequity in the current derivation model as a basis for distributing VAT revenue.
The new proposal before the National Assembly outlines a different form of derivation which considers the place of supply or consumption for relevant goods and services. This means that states in the northern region that produce the food we eat should not lose out just because their products are VAT-exempt or consumed in other states.
These reforms are critical to improving the lives of Nigerians and were not put forward by President Tinubu to undermine any part of the country.
These tax reforms deserve our full support because revenue from taxes are more reliable than the earnings from crude oil which are prone to volatility…
• Osikhekha is a Public Affairs analyst.
