Jigawa anti-corruption commission seeks monarchs’ support

Mixed reactions have trailed the proposed tax reform bills even as the National Assembly has assured that both the Senate and the House of Representatives will thoroughly scrutinise the bills and align with the wishes of the people and the desires of the people they represent.

Besides, economy experts have warned against improper handling of the tax reform bills and cautioned against introducing new tax increases in the current economic climate.

They further described some of the proposals as “a grossly capitalist policy” that would stifle economic growth and worsen the plight of the masses.

Also, financial analysts have defended one of the contentious parts of the tax reforms, stressing that a derivation-based VAT distribution model could be beneficial for creating a more self-sustaining, regionally-driven economy.

National Assembly
Meanwhile, speaking with journalists early after a meeting that started Wednesday night and into the early hours of Thursday with the thirty-six state Governors under the aegis of Nigeria Governors’ Forum, NGF, Deputy Speaker of House of Representatives, Rt. Hon. Benjamin Okezie Kalu who noted that the issue of tax reform was not discussed during the session, said, “To be fair to the governors, The governors did not dwell on tax reforms, it was generally about the constitution, they spoke on the local government reforms, what we are looking at. They were open-minded towards all the areas we are trying to look at in the Constitution. To be honest the governors were not so much interested in tax reforms and what we are doing.

“We only informed them that it is before the parliament and the parliament will look at it critically and align ourselves with the wishes of the people, the desires of the people we represent. I don’t think the governors are averse to this.”

The proposed bills
Recall that on September 3, 2024, President Tinubu transmitted four tax reform bills to the National Assembly for consideration, following the recommendations of the Presidential Committee on Fiscal and Tax Reforms headed by Taiwo Oyedele for the review of existing tax laws.

The bills include the Nigeria Tax Bill 2024, which is expected to provide the fiscal framework for taxation in the country, and the Tax Administration Bill, which will provide a clear and concise legal framework for all taxes in the country and reduce disputes.

Others are the Nigeria Revenue Service Establishment Bill, which will repeal the Federal Inland Revenue Service Act and establish the Nigeria Revenue Service, and the Joint Revenue Board Establishment Bill, which will create a tax tribunal and a tax ombudsman. Commenting, the Manufacturers Association of Nigeria (MAN) said the tax reforms would be one of the best tax reviews in Africa, if properly implemented.

Director General of MAN, Segun Ajayi-Kadir, said the setting up of the Presidential Committee on Fiscal Policy and Tax Reforms is one of the high points of the Tinubu administration.

He said: “The committee has done a good job. The private sector was brought, and MAN is represented in the committee. And there have been several recommendations. We have entered the implementation aspect, and MAN is still represented at the implementation level.

“We are satisfied with the outcome of the work of that committee so far because we are part of it, we consulted with our members, we made recommendations.

“And some of the outcomes of the committee’s work are already being implemented. And if all of the recommendations are implemented, Nigeria will have one of the best tax reviews that you can think of on the continent. It will be fair and just, because those who are poor will pay little or no taxes. The more than 60 taxes will be brought down to below 10. We are going to have accountability, with an established office of the ombudsman which will make it easier for everyone.”

Ajayi-Kadir however added that the President will need greater political courage to implement the recommendations fully because, according to him, the tax reforms will affect the rich more.

CPPE cautions against introducing new tax increases

Reacting to the tax reform bills, Dr. Muda Yusuf, Chief Executive Officer of the Center for the Promotion of Private Enterprise (CPPE) described the proposed tax bills as potentially beneficial in many respects.
However, he also expressed reservations about certain provisions, even as he reiterated the importance of consultation and consensus-building in the legislative process.

He said: “The purpose of deliberations in the National Assembly and public hearings is to make the process inclusive and ensure all opinions and perspectives are considered before the bills are passed.”

According to Dr Yusuf, the bills aim to harmonize the tax system, reduce the number of taxes, and expand exemptions from Value Added Tax (VAT) for items that impact public welfare and business operations. He noted the proposal to increase the percentage of VAT revenue allocated to states from 50% to 55%, while reducing the federal government’s share from 15% to 10%, as a positive development. He also highlighted provisions aimed at enhancing the tax administration capacity of states to boost revenue collection through improved efficiency rather than higher tax rates.

However, the former Director General of the Lagos Chamber of Commerce and Industry (LCCI), raised concerns over the proposal to allocate 60% of states’ VAT revenue based on the principle of derivation, which could lead to political and economic tensions.

“This provision could create a sense of disadvantage among certain regions due to economic disparities between states,” he stated.

He suggested that this politically sensitive provision be reconsidered or removed to avoid unnecessary pushback, ensuring the broader benefits of the bills are not overshadowed.

Dr. Yusuf also cautioned against introducing new tax increases in the current economic climate.
He stated, “Given the high cost of living, doing business, and the significant economic and social costs of recent reforms, this is not the time to raise taxes. Instead, the focus should be on improving the efficiency of tax administration.”

He opined for a more robust engagement with the National Assembly to refine the bills, streamline tax systems, and ensure the reforms are implemented in a way that balances economic growth with public and business welfare.

Tax reform will deepen poverty, expert warns FG
A development expert and founder of the Global Initiative for Nigeria Development, Micheal Ale, has cautioned the Federal Government against implementing tax reforms that could deepen poverty among Nigerians.

Ale, in a statement on Thursday in Ado Ekiti, Ekiti State, described the proposed tax reforms as “a grossly capitalist policy” that would stifle economic growth and worsen the plight of the masses.

He urged the government to focus on creating an enabling environment and addressing social concerns instead of burdening citizens with additional taxes.

“Tax reform will make the poor poorer and the rich richer,” Ale said.

Ale argued that sustainable development required more than just increased revenue.

“For me, budgetary increase is not the sole indicator of national development. Environmental and social considerations are critical. Whatever is spent on infrastructure will not result in meaningful development if these other factors are neglected,” he said.

He also stressed that Nigeria’s current economic climate was unsuitable for such capitalist-driven reforms, noting that the poor would ultimately bear the brunt of increased taxation.

“Even if companies are taxed, the adverse effect will trickle down to the people who patronize their products and services. The poor always pay for the rich, irrespective of how the tax is structured,” Ale added.

To mitigate the impact of taxation on the masses, Ale proposed a progressive tax system where individuals and businesses are taxed based on their financial capacity.

Derivation-based VAT model aligns with the principles of fiscal federalism
Reacting to the tax reform bill, Clifford Egbomeade, Public Affairs Analyst/Communications expert said: “ From a national development perspective, a derivation-based VAT model would incentivize states to foster business environments and increase their revenue capacities. This approach aligns with the principles of fiscal federalism, which is a more autonomous model where regions generate and manage revenues based on their economic activities.

Similarly, the President of the Center for Marine Survey in Nigeria, Engr Akin Olaniyan said that proposed bills are commendable if they are based on the principle of equity is that the more you pay tax, the more share of the tax you get”.

He said: “ If that is the crux of the matter, then there is nothing wrong with the bill. When passed into law, IT will encourage states to work more to raise their tax level.

Olaniyan, the Regional Chief Executive Officer of the International Naval Survey Bureau, INSB, likened the situation to the Niger Delta region that produces oil for the country and even get less than states that do not have such resources.

He said: “You cannot sit down somewhere in your comfort zone and expect to have a fair share of the tax with states that produce what we use to run the economy.