The proposed tax reform bills submitted to the National Assembly have elicited mixed reactions from stakeholders, including lawmakers, economic experts, and financial analysts. While some see the reforms as a pathway to streamlining Nigeria’s tax system, others caution that poorly implemented changes could deepen economic woes and exacerbate inequalities.
National Assembly to Prioritize Public Interest
Deputy Speaker of the House of Representatives, Rt. Hon. Benjamin Okezie Kalu, has assured Nigerians that the National Assembly will critically examine the bills in alignment with public interest. Speaking after a meeting with state governors under the Nigeria Governors’ Forum (NGF), Kalu clarified that tax reforms were not a primary focus of the discussions.
“To be fair to the governors, they did not dwell on tax reforms. It was generally about the Constitution and local government reforms,” Kalu said. “However, the parliament will look at the tax reforms critically and align ourselves with the wishes of the people.”
Overview of the Tax Reform Bills
President Bola Ahmed Tinubu submitted four tax reform bills to the National Assembly on September 3, 2024, following recommendations from the Presidential Committee on Fiscal and Tax Reforms led by Taiwo Oyedele.
The bills include:
- Nigeria Tax Bill 2024: Establishes a fiscal framework for taxation.
- Tax Administration Bill: Provides a legal framework for all taxes and aims to reduce disputes.
- Nigeria Revenue Service Establishment Bill: Repeals the Federal Inland Revenue Service Act and sets up a new revenue service.
- Joint Revenue Board Establishment Bill: Creates a tax tribunal and ombudsman for oversight and accountability.
Concerns Over Economic Impact
Economists and industry experts have expressed reservations about the proposed reforms, particularly regarding new tax increases and derivation-based VAT distribution.
Dr. Muda Yusuf, CEO of the Center for the Promotion of Private Enterprise (CPPE), acknowledged that the reforms could harmonize Nigeria’s tax system, expand VAT exemptions for essential goods, and improve state revenue through efficiency rather than rate increases. However, he warned that increasing the percentage of VAT revenue allocated based on derivation could create regional disparities.
“This provision could lead to political and economic tensions due to the uneven distribution of economic activities across states,” Yusuf said. “The focus should be on enhancing tax administration efficiency rather than introducing new taxes, especially given the current high cost of living.”
Development expert Michael Ale of the Global Initiative for Nigeria Development criticized the reforms, labeling them as “grossly capitalist” policies that could worsen poverty.
“Tax reform will make the poor poorer and the rich richer,” Ale said, urging the government to prioritize social welfare over aggressive revenue generation.
Support for Derivation-Based VAT Model
Some stakeholders defend the derivation-based VAT model, arguing that it aligns with the principles of fiscal federalism. Public affairs analyst Clifford Egbomeade explained that the model incentivizes states to boost local economic activities and revenue generation.
“It encourages states to create a conducive environment for business and manage resources more effectively,” Egbomeade said.
Similarly, Engr. Akin Olaniyan, Regional CEO of the International Naval Survey Bureau, compared the approach to the Niger Delta’s fight for resource control.
“You cannot expect states that contribute little to the economy to receive the same share of VAT revenue as those driving the economy,” Olaniyan argued.
Industry Perspective
The Manufacturers Association of Nigeria (MAN) has endorsed the reforms, provided they are implemented correctly. MAN Director General Segun Ajayi-Kadir highlighted the reduction of Nigeria’s 60-plus taxes to below 10 as a significant achievement.
“If all the recommendations are implemented, Nigeria will have one of the best tax systems in Africa,” Ajayi-Kadir said. “It will promote fairness, ensure accountability, and provide tax relief for the poor.”
However, he emphasized the need for political will to fully implement the recommendations, noting that the reforms will disproportionately impact the wealthy.
Balancing Reform and Economic Growth
As deliberations on the tax reform bills continue, stakeholders have stressed the importance of consultation, consensus-building, and prioritizing policies that balance revenue generation with public welfare. The National Assembly’s scrutiny will determine whether these reforms can achieve their goals without creating new economic challenges.
