In a significant legislative development, the Nigerian Senate has passed for second reading four pivotal tax reform bills proposed by President Bola Ahmed Tinubu. These bills aim to overhaul the nation’s tax administration, streamline revenue collection, and foster economic growth. However, the proposals have ignited extensive debates across political and regional lines, reflecting the complexities of Nigeria’s fiscal landscape.

Overview of the Proposed Tax Reform Bills

The four bills under consideration are:

1. Nigeria Tax Bill 2024: This bill seeks to consolidate existing tax laws, introducing a unified framework for the taxation of income, transactions, and instruments.

2. Nigeria Tax Administration Bill 2024: Aimed at providing a clear legal structure for tax assessment, collection, and accounting across federal, state, and local governments, this bill also delineates the powers and functions of tax authorities.

3. Nigeria Revenue Service (Establishment) Bill 2024: This legislation proposes the replacement of the Federal Inland Revenue Service with the Nigeria Revenue Service, tasked with comprehensive revenue assessment and collection for the federal government.

4. Joint Revenue Board Establishment Bill 2024: This bill intends to establish a Joint Revenue Board, a Tax Appeal Tribunal, and the Office of the Tax Ombudsman to harmonize revenue administration and resolve disputes effectively.

Key Provisions and Intended Benefits

The proposed reforms introduce several significant changes:

• Personal Income Tax Adjustments: The Nigeria Tax Bill proposes a progressive reduction in personal income tax rates, exempting individuals earning up to ₦800,000 annually and adjusting rates for higher income brackets to alleviate the tax burden on low-income earners.

• Corporate Tax Reforms: The bills suggest reducing the corporate income tax rate from 30% to 25% by 2026. Additionally, small businesses with an annual turnover of ₦50 million or less would be exempt from paying taxes, aiming to stimulate economic activity and job creation.

• Value Added Tax (VAT) Restructuring: A gradual increase in VAT rates is proposed, starting from the current 7.5% to 10% in 2025, reaching 15% by 2030. However, essential goods and services, including food items, medical services, educational fees, and electricity, would remain VAT-exempt to protect vulnerable populations.

• Revenue Sharing Adjustments: The reforms propose increasing the states’ share of VAT revenue from 15% to 55%, while reducing the federal government’s share to 10%, thereby promoting fiscal federalism and empowering state governments.

• Consolidation of Levies: Multiple existing levies, such as the education tax and NASENI tax, would be merged into a single development levy of 2%, simplifying the tax structure and reducing administrative burdens on businesses.

Diverse Reactions and Ongoing Debates

The tax reform bills have elicited mixed reactions from various stakeholders:

• Support for Economic Growth: Proponents argue that the reforms will enhance revenue generation, improve tax compliance, and create a more business-friendly environment, aligning with the government’s goal of achieving a $1 trillion economy.

• Concerns Over Regional Equity: Critics, including some northern governors and traditional rulers, express apprehension that the reforms may disproportionately benefit certain regions, potentially exacerbating existing economic disparities.

• Calls for Inclusive Deliberation: Former Vice President Atiku Abubakar emphasized the need for a fiscal system that promotes justice and equity, urging lawmakers to ensure the reforms do not deepen uneven development across the federating units.

• Legislative Scrutiny: The Senate Committee on Finance, chaired by Senator Sani Musa, has been tasked with further examination of the bills, incorporating feedback from public hearings and stakeholder consultations to refine the proposals.

Next Steps in the Legislative Process

Following the second reading, the tax reform bills have been referred to the Senate Committee on Finance for detailed scrutiny. The committee is expected to conduct public hearings, engage with various stakeholders, and submit a comprehensive report within six weeks. The outcome of this process will determine the final form of the legislation and its potential impact on Nigeria’s fiscal landscape.

As the nation navigates these proposed reforms, the balance between enhancing revenue generation and ensuring equitable economic development remains a central consideration. The legislative process will play a crucial role in shaping policies that aim to foster growth while addressing the diverse needs of Nigeria’s population.