Yemi Olakitan
The controversy surrounding President Bola Tinubu’s tax reform bills has sparked heated debates across Nigeria. While some see the proposed reforms as a necessary step towards economic growth and fairness, others, like Governor Bala Mohammed of Bauchi State, have expressed strong opposition, citing concerns about the potential negative impact on northern states.
At the heart of the controversy lies the proposed sharing of Value-Added Tax (VAT) revenues, which northern governors claim will reduce their states’ allocations. However, a closer examination of the proposed reforms reveals that they aim to ensure uniformity in tax revenue administration, eliminate double taxation, and boost disposable incomes through targeted tax exemptions.
Rather than viewing the tax reform bills as a threat, northern leaders should engage in constructive dialogue with the presidency to address their concerns. This collaborative approach could lead to more inclusive and effective policies that benefit all regions of Nigeria.
The proposed reforms have already passed their second reading in the Senate, but their progress has been halted due to opposition from northern lawmakers. It’s essential to consider the broader implications of the tax reform bills, rather than focusing solely on regional interests.
Ultimately, the tax reform bills should be evaluated based on their potential to promote economic growth, fairness, and national unity, rather than being dismissed solely due to regional concerns. As President Tinubu himself has emphasized, the reforms aim to create a more equitable tax system in which all regions contribute their fair share.
Furthermore, as a result of the opposition from northern governors concerning the tax reforms, a general belief seems to have been established that the north is generally against the tax reforms. This notion has been debunked in a new grassroots report that presents a marked difference from the perception that the influential northern region is strongly opposed to the tax reform bills.
The new report by research firm SBM Intelligence shows that people in northern Nigeria recognize that the reforms could enhance revenue generation capabilities and foster greater industrial competitiveness in the region.
According to the report, respondents in the key northern states of Bauchi and Kano, as well as the federal capital, Abuja. States in southern Nigeria – Anambra, Cross River, Lagos, and Rivers were also included in the survey. The findings revealed that most respondents were aware of the proposed reforms and generally viewed them favourably, particularly regarding the potential benefits for their businesses and the poor.
Critics of the reforms have mostly come from the north, amid fears they would diminish the revenues of state governments. One of the most vocal opponents has been Ali Ndume, the senator from Borno in the north-east, who threatened to leave the ruling party if the president pushes forward with the reforms.
The people interviewed in the survey welcomed the president’s reforms. Bunmi Bailey, head of research at SBM Intelligence, says the support for the bills by the respondents in the north was surprising.
“We discovered that those who have been talking about the reforms are the lawmakers and stakeholders,” Bailey says, “We wanted to go down to the streets and gauge the perception. Most of them support it but they want a further explanation of the VAT aspect.
The report found that another concern from the north is the removal of VAT from agricultural items as they would be zero-rated under the bill. The report further states that support for the tax reform bills has been almost unanimous. In parliament, senators from the south-west, where the president comes from, and their counterparts in the south-south, which hosts Nigeria’s crude oil installations, threw their weight behind the bills.
The SBM report noted that the VAT discourse highlights the persistent north-south divide in Nigeria’s fiscal and political landscape. Southern states, particularly Lagos and Rivers, have long argued for greater control over VAT generated within their territories, citing their significant economic contributions to the national purse, the report said.
On the other hand, the northern states continue to push for the maintenance of the status quo, arguing that it would address regional imbalances by ensuring resource distribution to less developed regions.
Components of the Tax Bill
The Nigeria Tax Bill 2024 seeks to repeal existing laws on various taxes and provide a consolidated legal framework for income tax, including Company Income Tax (CIT), Personal Income Tax (PIT), Petroleum Profit Tax (PPT), Capital Gains Tax (CGT), Value Added Tax (VAT), and excise and stamp duties.
The Tax Administration Bill aims to establish a streamlined system for the collection and administration of taxes, reducing duplication and enhancing efficiency in Nigeria’s taxation system.
Nigeria Revenue Service Establishment Bill seeks to repeal the Federal Inland Revenue Service Act and establish the Nigeria Revenue Service, responsible for assessing, collecting, and accounting for federal revenues.
The Joint Revenue Board Establishment Bill: This establishes the Joint Revenue Board, the Tax Appeal Tribunal, and the Office of Tax Ombudsman, for the harmonization, coordination, and promotion of the rights of taxpayers, and tax dispute resolution.
Furthermore, some stakeholders have also questioned whether the tax reforms truly benefit the poor. According to President Tinubu, the reforms aim to eliminate colonial-based assumptions in the nation’s tax environment and widen the tax net to promote economic growth.
These bills seek to provide a fiscal framework for taxation, establish a clear and concise legal framework for all taxes, and create a tax tribunal and a tax ombudsman.
Tinubu believes the reforms are pro-poor and will benefit the vulnerable. However, some northern states governors, like Babagana Zulum of Borno State, have expressed concerns about the reforms, citing the need for caution and careful consideration.
While the reforms’ impact on the poor is still a subject of debate, it’s essential to consider the potential benefits, such as the fact that the reforms aim to reduce disputes and make tax administration more efficient, by widening the tax net, the government can generate more revenue to fund public services and infrastructure. The reforms will also promote economic growth by encouraging investment and entrepreneurship.
However, critics argue that the reforms could disproportionately affect certain regions or groups, exacerbating existing economic disadvantages.The reforms may lead to an increased tax burden on certain individuals or businesses, which could negatively impact the poor.
Ultimately, the impact of President Tinubu’s tax reforms on the poor will depend on the specific details of the reforms and how they are implemented.
According to President Tinubu in a recent media chat with top Nigerian journalists, the tax reform will lead to an increased tax exemption threshold:
The reforms aim to increase the tax exemption threshold, which would reduce the tax burden on low-income earners. The reforms propose targeted tax exemptions for vulnerable groups, such as the elderly, people with disabilities, and low-income families. It also aims to reduce tax rates for small businesses and micro-enterprises, often owned by low-income individuals.
The reforms will also simplify tax administration, reducing the complexity and costs associated with tax compliance, which can disproportionately affect low-income individuals and small businesses. The reforms will increase revenue for the government, which can be used to fund social services, such as healthcare, education, and social welfare programs, that benefit low-income individuals and families.
The Nigerian Reform Bill will provide Tax incentives for businesses that invest in low-income communities. The reforms propose tax incentives for businesses that invest in low-income communities, which can help stimulate economic growth and job creation in these areas.
While these aspects of the tax reforms have the potential to benefit low-income individuals and families, it’s essential to carefully monitor its implementation and impact to ensure they achieve their intended pro-poor objectives.
President Bola Tinubu has said that he is ready to address all concerns regarding the controversial tax reform bills. Tinubu disclosed this during his first Presidential Media Chat in Lagos on a Monday night.
When asked if he was willing to make concessions to address some concerns, particularly over the VAT component of the bills, to where some stakeholders raised objections, he responded that the tax amendments require negotiations and concessions, and he was open to such.
The tax bills are currently before the National Assembly.
