EXPLAINER: PROPOSED TAX REFORM BILLS NOT AGAINST THE NORTH; THEY WILL BENEFIT ALL STATES
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Governors of 19 Northern States of Nigeria, under the platform of the Northern Governors’ Forum, at their meeting on Monday, October 28, 2024, voiced their disapproval of the proposed tax reform legislation before the National Assembly that use a derivation-based approach for the allocation of Value-Added Tax (VAT).
Gombe State Governor Muhammad Inuwa Yahaya, who serves as the forum’s chairman, read the statement.
Traditional leaders from the area, including His Eminence Muhammadu Sa’ad Abubakar III, the Sultan of Sokoto, attended the Northern Governors’ Forum meeting as well.
We believe it is important to address the misconceptions and concerns regarding the tax reform that the administration has already started, even as we applaud the governors and traditional leaders for their support of President Bola Tinubu and the progress he has made in tackling the nation’s security issues.
New policy proposals recently approved by President Tinubu and the Federal Executive Council are intended to improve efficiency, remove duplications throughout Nigeria’s tax operations, and streamline the country’s tax administration procedures.
Following a thorough analysis of the current tax code, several modifications were developed. Four executive proposals aimed at modernizing and changing Nigeria’s tax system are being considered by the National Assembly.
The first is the Nigeria Tax Bill, which seeks to streamline tax requirements for individuals and businesses across the country in order to eradicate unintentional multiple taxation and increase the competitiveness of Nigeria’s economy.
Second, new guidelines for the administration of all taxes in the nation are proposed under the Nigeria Tax Administration Bill (NTAB). Its goal is to make tax administration procedures more uniform across federal, state, and municipal jurisdictions so that taxpayers nationwide can comply more easily.
Third, in order to more accurately represent the Service’s mission as the revenue agency for the entire Federation, not only the Federal Government, the Nigeria Revenue Service (Establishment) Bill aims to rename the Federal Inland Revenue Service (FIRS) as the Nigeria Revenue Service (NRS).
Fourth, the Joint Revenue Board Establishment Bill suggests replacing the Joint Tax Board with a Joint Revenue Board that would oversee all state and federal tax authorities.
The fourth bill also proposes creating the Joint Revenue Board’s Office of Tax Ombudsman, which would act as a body for taxpayer complaints.
It is instructive to observe that there will be no more taxes imposed by these proposed laws. Rather, they are intended to streamline and optimize current tax structures.
Since the goal of these revisions is to ensure a more equitable allocation of tax burdens without increasing the burden on Nigerians, the tax rates or percentages will stay the same.
No jobs will be lost as a result of the measures. Instead, they are designed to sustain a vibrant, growth-oriented economy and open up new job opportunities.
Crucially, the responsibilities of any current department, agency, or ministry will not be absorbed or eliminated by these laws. Rather, they seek to assure efficiency and collaboration by harmonizing income collection and administration throughout the federation.
Coordination between federal, state, and municipal tax authorities is currently lacking in tax administration, which frequently leads to overlapping duties, misunderstandings, and inefficiencies. This inefficiency will continue if reform is not implemented.
By coordinating efforts across several levels of government, the new legislation hope to improve tax resource management and provide taxpayers with more clarity.
Under existing laws, taxes like Company Income Tax (CIT), Personal Income Tax (PIT), Capital Gains Tax (CGT), Petroleum Profits Tax (PPT), Tertiary Education Tax (TET), Value-Added Tax (VAT), and other taxing provisions in numerous laws are administered separately, with individual legislative frameworks.
The proposed reforms seek to consolidate these multiple taxes, integrating CIT, PIT, CGT, VAT, PPT, and excise duties into a unified structure to reduce administrative fragmentation.
It is important to emphasize that the current plan, as stated in the Bill, is intended to provide a more equitable system in contrast to the proposed derivation-based VAT distribution model, which the Northern Governors oppose.
The way VAT is now distributed is determined by the location of tax remittance rather than the location of the supply or consumption of goods and services. The goal of the ongoing tax reform is to address the underlying unfairness in the current derivation model, which serves as the foundation for allocating VAT income.
A different method of derivation that takes into account the location of supply or consumption for pertinent commodities and services is described in the new proposal that is currently before the National Assembly. This implies that Northern states that grow the food we eat shouldn’t be left behind simply because their goods are consumed in other states or are VAT-exempt.
President Tinubu did not propose these reforms to weaken any region of Nigeria; rather, they are essential to enhancing the lives of Nigerians. The moment has never been greater for the National Assembly to give these proposals the attention they deserve. They will reform our tax structures and generate the money that all levels of government need to finance the critically needed development of our nation and its citizens.
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