Ten things to know about Reps’ tax reform bills amendments

The House of Representatives on Thursday considered and adopted the reports of its committee on finance regarding the four tax reform bills transmitted to the National Assembly by President Bola Tinubu transmitted in October, 2024.

The reports were considered clause-by-clause and were subsequently approved ahead of the third reading. The bills include: The Nigeria Tax Bill 2024, the Nigeria Tax Administration Bill 2024, the Nigeria Revenue Service Bill 2024, and the Joint Revenue Board Tax Bill, 2024.

Read also: Reps amend knotty revenue sharing formula in Tinubu tax reform bills

Here are 10 amendments adopted by the Green Chamber on Thursday.

Revenue derivation formula

This was one of the most contentious sections in the proposed tax administration bill. The amended bill reduces the proposed derivation formula from 60 percent to 30 percent. Currently, the value added tax (VAT) revenue is shared as follows: 15 percent to the federal government, 50 percent to states, and 35 percent to LGAs. States use a 50:30:20 formula—50 percent for equality, 30 percent for population, and 20 percent for derivation.

The House amended Section 77 of the Tax Administration Bill and approved that notwithstanding any formula that may be prescribed by any other law, the net revenue accruing by virtue of the operation of Chapter Six of the Nigeria Tax Act shall be distributed as follows —10 percent to the federal government; 55 percent to the state governments and the Federal Capital Territory; and 35 percent to local governments.

The House recommended that the amount of the VAT revenue standing to the credit of states and local governments shall be distributed among them on the following basis: equally – 50 percent; population – 20 percent; and consumption – 30 percent.

In addition, the House proposed that the basis of VAT taxation will now be consumption, rather than where the returns are filed. This is meant to address the concerns raised by various stakeholders at the public hearing that some regions may be disadvantaged as the headquarters of companies are largely located in one region, where all returns are usually filed.

7.5% VAT retained

In Section 146 of the Nigeria Tax Bill, the VAT rate was amended to retain the current 7.5 percent as opposed to the earlier proposed increase to 15 percent by 2030.

Funding for TETFUND, others retained Section 59, which focuses on the development levy, was amended to remove a sunset provision in the bill and the sharing of the levy. Beneficiary agencies were expanded to include the Tertiary Education Trust Fund– 50 percent; the Nigerian Education Loan Fund – 3 percent; National Information Technology Development Agency Act (NITDF) – 5 percent; and the National Agency for Science and Engineering Infrastructure (NASENI) – 10 percent.

Moreover, the Defence Infrastructure Fund has 10 percent; Nigeria Police Trust Fund – 5 percent; National Sports Development Fund – 5 percent; Social Security Fund – 10 percent; National Board for Technological Incubation – 10 percent; and National Cybersecurity Fund – 1 percent.

Read also: N’Assembly advances tax reform bills amid stakeholder concerns

Restriction of presidential powers

The House amended Section 74 of the Tax Administration Bill, which provides for the power of the president or governor to remit taxes, to include the need to obtain the approval of the National Assembly or states’ houses of assembly for federal and state taxes.

Similarly, Section 75, which provides the power of the president to exempt companies from income tax, was amended to include the need to obtain the approval of the National Assembly.

Deletion of 5% excise duty

The House deleted sections 130 – 132, which made provisions relating to excise duties. All provisions relating to compliance with excise duty charges were expunged to align with the similar amendments to the Nigeria Tax Bill.

The House argued that the excise duty on telecoms will lead to hike in the tariffs, which will be passed on to the end-users, leading to possible loss of jobs and worsening rate of unemployment in the country. The House added that the excise duty on foreign exchange transactions may lead to shortage of forex inflows into the economy.

Removal of inheritance tax

The House amended Section 4 of the Nigeria Tax Bill to exclude income on inherited assets before distribution from the income of a family that may be chargeable to tax. Lawmakers explained that this amendment clarifies that inheritance tax is not being introduced into Nigerian tax law in any manner.

30% Company Income Tax

The House amended Section 56 of the tax bill to remove the ‘staggered’ reduction in the companies’ income tax rate from 30 percent to 27.5 percent in 2025 and 25 percent in 2026.

For the recommendation by the Nigerian Governors’ Forum, the tax rate of companies, other than small companies, remains 30 percent. The House further recommended that the tax rate of companies in the priority sector be reduced to 25 percent during the priority period of five years.

Taxation of free trade zones

In the second schedule of the tax bill, the House introduced provisions to allow the claim of available incentives. The conditions include the following: When goods and services are sold to persons engaged in upstream, midstream, or downstream petroleum or gas operations in the customs territory, or when at least 75 percent of goods or services are exported or used as inputs in goods or services, at least 75 percent of which are exported. The evidence of export proceeds, either in the form of cash flow, imported materials, or equipment, must be provided.

Read also: Nigeria to attain $1tn economy through tax reform bills Senate

Lottery, gaming business

The House removed reference to the Lottery Trust Fund in alignment with the Supreme Court judgment. Section 62 had proposed that notwithstanding anything to the contrary in any other law, the income of lottery and gaming trade or business shall be subjected to tax. However, the House noted that a court has ruled against the National Lottery Act, noting that such tax would not be charged.

Exemption of military personnel from tax

The House proposed tax exemption for military personnel on their personal income, stating that the reason is due to the critical nature of their assignment.