Tax Bills: TETFUND, NASENI, others to lose special privileges, Student Loan Fund gains

The tax reform bills in the National Assembly are proposing some radical measures that could affect the funding of tertiary institutions in Nigeria, a review of the bills .

President Bola Tinubu is pushing for the passage of the bills as part of efforts to reform the country’s tax laws.

However, the proposed legislations face stiff opposition both within and outside the National Assembly, particularly from the northern parts of the country.

Although the focus has largely been on the sharing formula of the VAT as prescribed by the bills, there appears to be other equally pressing issues that have been overlooked in the course of this debate.

A thorough review of the proposals, the bills seek a review of the special tax privileges granted to the National Information Technology Development Fund (NITDF), the National Agency for Science and Engineering Infrastructure (NASENI) Fund, and the Tertiary Education Trust Fund (TETFUND).

The biggest beneficiary is set to be the Student Loan Fund, which will receive all educational development funds.

The proposals seek the phased removal of taxes charged exclusively for these three trust funds.

While the NITDF levy is currently calculated as 1% of the profit before tax (PBT) of companies earning above N100 million, under the existing laws, 0.25% of profits before tax of commercial companies and firms with turnovers of N100 million and above in the banking, telecommunications, ICT, aviation, maritime, and oil and gas sectors are collected for NASENI. The levy is managed by the Federal Inland Revenue Service (FIRS) and credited to NASENI’s account.

For TETFUND, the tertiary education tax is payable by companies registered in Nigeria at the rate of 3% of their assessable profit. For NITDF, it is calculated as 1% of the profit before tax of eligible companies.

The new proposal sets 2029 as the expiry date for these special privileges.

Section 59 of the Nigerian Tax Bill seeks to consolidate all development levies into a single levy of 4% of the profits of all eligible entities in 2025 and 2026. From 2027 to 2029, the rate will be reduced to 2%, and by 2030, the levies will cease entirely.

The proposed sharing formula allocates 50% of the levy to TETFUND in 2025 and 2026, increasing to 66% from 2027 to 2029, and then reducing to 0% by 2030.

The Student Loan Fund is set to receive 25% of the developmental levy in 2025 and 2026, increasing to 33% between 2027 and 2029, and eventually receiving 100% by 2030.

Similarly, the NITDF and NASENI are to be excluded from the development levy by 2027.

This proposal is expected to be a significant blow to TETFUND, which received over N800 billion in the 2024 budget.

The fund is responsible for providing infrastructure in public tertiary institutions and training lecturers.

On Sunday, Governor Babagana Zulum of Borno State raised concerns about the issue during an interview, claiming that the bills seek to scrap the three agencies.

However, the Chairman of the Presidential Committee on Fiscal Reforms, Taiwo Oyedele, and the Chairman of the Federal Inland Revenue Service (FIRS) have insisted that the proposal will not scrap the agencies.

Instead, the government will directly approve funding for them rather than relying on existing statutory transfers.