By Akin Adesanya
The Nigeria Tax Reform Bill, a set of four legislative initiatives, has been one if not the most popular bill in recent time, presented to the National Assembly since the return of democracy in 1999.
The bills, which include the Joint Revenue Board of Nigeria (Establishment) Bill, 2024; the Nigeria Revenue Service (Establishment) Bill, 2024; the Nigeria Tax Administration Bill, 2024; and the Nigeria Tax Bill, 2024, aim to transform Nigeria’s tax architecture, spread and promote economic growth.
BREAKDOWN OF THE BILL
The Nigeria Tax Reform Bill proposes several key changes to the country’s tax system. One of the major provisions is the appraisal of the sharing formula of the Value Added Tax (VAT) accrued to the states and Local Governments. The bill proposes a decrease of VAT to the federal government from 15% to 10%, with 55% going to state governments and 35% to local government councils. This proposal has its merit and it is a strategic formula that will stimulate productivity, especially as more resources will be available to states and prompts the states to look within its immediate environment and create wealth.
Another significant provision is the exclusion of small businesses (SMEs, MSMEs) with an annual turnover of N50 million or total assets of N250 million from paying taxes. This move will boost the growth of SMEs, which account for about 48% of Nigeria’s GDP.
Other propositions of the bill are the creation of a tax tribunal and a tax ombudsman, which will increase transparency and accountability in the entire tax administration system. Furthermore, the bill seeks to introduce a tax pardon program, which will provide the opportunity for taxpayers to regularize their tax issues without penalty or interest.
PROS OF THE BILL
The Nigeria Tax Reform Bill has several benefits that make it a welcome development. Some of the pros include:
Increased Revenue: The bill is expected to increase revenue for state and local governments, which will enable them to easily fund more developments and provide better services to their citizens.
Simplified Tax System: The bill will simplify the tax system and reduce the burden of taxation on citizens and industries.
Boost to SMEs: The exclusion of small businesses from paying taxes will boost their growth and enable them to create more jobs, as more SMEs will come on stream and further drive economic activities at the grassroots.
Increased Transparency: The bill proposes the establishment of a tax tribunal and a tax ombudsman, which will increase transparency and accountability in Nigeria’s tax system.
Improved Tax Compliance: The bill’s provision for a tax pardon program will allow taxpayers to resolve their tax issues and encourage compliance.
CONS OF THE BILL
While the Nigeria Tax Reform Bill has several benefits, it also has some drawbacks. Some of the cons include:
Concerns over VAT Distribution: Some state governments, particularly the northerners, have voiced their worries over the suggested VAT distribution formula, which they claim will be of disadvantage them to run the government successfully, pay salaries and execute project. Some saw the bill as a deliberate attack on the north.
Fear of Job Losses: Some critics have expressed fears that the bill could lead to job losses, especially in the tax administration sector.
Need for More Consultation: Some people, including the former vice president and the flag bearer of the People Democratic Party in the 2023 Presidential Election, Atiku Abubarka have called for more consultation with the public before the bill is passed into law.
Risk of Tax Evasion: Some critics have expressed concerns that the bill’s provision for a tax pardon could encourage tax evasion and weaken the honesty of the tax administration system.
ADDRESSING FEARS AND CONCERNS
While the fears expressed by some stakeholders are valid, they can be addressed through more consultations. The federal government has already begun engaging with stakeholders, to address their concerns and build consensus around the bill. This is a commendable step being taken by the Federal Government and must be sustained to allow a wider acceptance and for a smooth implementation
To address the concerns over the distribution, the federal government could consider revising the proposed formula to ensure that it is fair and equitable to all states. Additionally, the government could provide more information and data to support the proposed formula and alleviate the concerns of state governments.
To address the fear of job losses, the federal government can provide guarantees that the bill will not lead to job losses in the tax administration sector. The government should also provide massive training and re-skilling programs for tax officials to allow them to acclimatize with the new system.
To address the need for more discussion, the federal government should extend the period for public consultation and engagement to ensure that all stakeholders can have a feedback on the bill.
CONCLUSION
The Nigeria Tax Reform Bill is a great development that has the potential to transform Nigeria’s tax system and promote economic growth. While there are some concerns and fears. As the bill makes its way through the committees at the National Assembly, it is important that everyone, Federal Government, State Government, Lawmakers and Nigerians work together to ensure that it is passed into law and implemented effectively. As implementation sometimes seem to be a major challenge in Nigeria.
The passage of the bill will not only increase revenue for state and local governments but also simplify the tax system, boost the growth of SMEs, and increase transparency and accountability in the tax system. It is, therefore, imperative that all stakeholders support the passage of the bill and work together to ensure its successful implementation.
