N’Assembly advances tax reform bills amid stakeholder concerns

As the National Assembly moves toward the final passage of President Bola Tinubu’s proposed tax reform bills, both the Senate and the House of Representatives have pledged to incorporate concerns raised by stakeholders during recent public hearings.

While lawmakers stress that the reforms are essential for Nigeria’s economic growth and revenue generation, opposition from various quarters continues to shape the legislative process.

Background and Key Provisions

The bills, transmitted by President Tinubu in October 2024, include the Nigeria Tax Bill 2024, the Nigerian Tax Administration Bill 2024, the Nigeria Revenue Service Establishment Bill 2024, and the Joint Revenue Board Bill 2024.

These bills aim to modernize Nigeria’s tax system, streamline collection processes, and adjust tax rates across various sectors.

Among the major provisions, the proposed increase in the Value Added Tax (VAT) allocation to sub-national governments from 50% to 55% has sparked debates.

The federal government’s share would be reduced to 10%, while the remaining 35% would go to local governments. Additionally, the bills propose VAT exemptions for exports and essential goods, a reduction in corporate income tax from 30% to 25% for two years, and input VAT credit on assets and services to lower production costs.

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Governors’ Initial Opposition and Reversal

Initially, the Nigeria Governors’ Forum (NGF) and Northern Governors rejected the bills, labeling them anti-democratic.

However, by January 2025, the NGF reversed its stance and recommended a revised VAT-sharing formula: 50% based on equality, 30% on derivation, and 20% on population.

In a communique, the NGF stated, “We strongly support the comprehensive reform of Nigeria’s archaic tax laws. Modernizing the tax system is crucial for fiscal stability and aligning with global best practices.”

Senate’s Position and Stakeholder Engagement

During a two-day public hearing held last week, Senate President Godswill Akpabio emphasized the necessity of updating Nigeria’s tax framework.

“I call on all Nigerians, who are against the bills, to come and make their contributions. Don’t follow social media commentaries to act; read the bills,” he said.

Senator Sani Musa, Chairman of the Senate Committee on Finance, underscored the importance of the bills in achieving Tinubu’s vision of a $1 trillion economy.

“Wherever there are grey areas, they will be addressed. The Senate will act in the best interest of the country,” he assured.

Senator Abba Moro, Chairman of the Senate Committee on Tax Reform Bills, reiterated that stakeholder concerns have been considered.

“In the beginning, when the bills were presented, there were agitations and complaints about aspects of the bill. That, first of all, informed the setting up of the special committee,” he stated.

Moro added that President Tinubu acknowledged these concerns and called for further deliberations.

“Mr. President listened to Nigerians and said, ‘Let’s meet again and see how we can get rid of some of the apparent obstacles to the passage of the bill.’ So, that is what has happened, and hopefully, the process will be synthesized,” he noted.

Moro expressed confidence that the tax reforms, once passed, would serve the interests of all Nigerians, ensuring a fair and efficient tax regime.

On the timeline for the final passage of the bills, the senator explained that the legislative process takes place in phases. “The bill procession is a phase. The next stage, which is the public hearing, has been concluded. If you give us time for the various committees to process the public hearing, they will develop a document that will be presented to the Senate as soon as possible, practically.”

“The Senate has completed its and the House is also having its public hearing at the same time which means that they are working towards the same goal.

“It means the two chambers present the bills for a third reading as soon as possible in the most practical way possible.

“If there are variances, a conference committee within the National Assembly will look at the areas at variance and present harmonized bills to both chambers.

“But Nigerians must note that the Senate will never do anything that will jeopardize the interest of Nigerians,” he noted.

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House of Representatives: Balancing Concerns and Legislative Priorities

Meanwhile, the House of Representatives is also reviewing the bills to incorporate stakeholder concerns.

Similarly, during the two-das public hearing organized by the House Committee on Finance, opposition to the bills was more pronounced than support.

House Speaker Abbas Tajudeen assured Nigerians that the House would scrutinize the bills to ensure they balance public revenue needs with economic fairness.

“Taxes should be fair, transparent, and justifiable, balancing the need for public revenue with the burdens they impose on individuals and businesses,” he said.

James Faleke, Chairman of the House Committee on Finance, reaffirmed that lawmakers will undertake a comprehensive review of submissions before the final passage.

“When the bills are passed, the House will compare them with what the Senate passed. Any areas of differences will be harmonized,” he explained.

Contentious Provisions and Stakeholder Reactions

During the public hearing, Finance Minister Wale Edun emphasized that the reforms are designed to enhance economic prosperity rather than burden citizens.

“These bills will modernize outdated tax laws, promoting efficiency, equity, and growth,” he said.

NNPCL Group CEO Mele Kyari endorsed the reforms, stating, “As Nigeria’s largest taxpayer, NNPCL finds these bills necessary for an efficient tax system.”

Similarly, RMAFC Chairman Mohammed Shehu, who initially opposed the bills, pledged full support, urging lawmakers to adopt the NGF’s VAT-sharing proposal.

However, concerns were raised by the Academic Staff Union of Universities (ASUU), whose president, Prof. Emmanuel Osodeke, warned that removing the education tax funding TETFund would have dire consequences.

He criticized the bill’s provision to phase out TETFund’s funding by 2030, arguing, “TETFund has been crucial in developing infrastructure and research in public tertiary institutions.”

The Nigeria Customs Service (NCS) also objected to specific clauses in the bills, which it claimed conflicted with the Nigerian Customs Act of 2023. Comptroller General Adewale Adeniyi urged the Senate to address these contradictions before the bills’ passage.

The petroleum sector raised additional concerns. PENGASSAN President Festus Osifo warned that tax reforms should not jeopardize job security or discourage investment in oil and gas.

Meanwhile, the Nigerian Supreme Council for Islamic Affairs (NSCIA) called for modifications to ensure compliance with Shariah law.

Business groups, including the Association of Capital Market Academies of Nigeria (ACMAN) and NACCIMA, opposed the proposed VAT increases, cautioning that higher rates could worsen inflation and stifle investment.

ACMAN President Prof. Uche Uwaleke argued, “Increasing VAT will only heighten inflationary pressures.” However, he supported provisions granting tax exemptions for collective investment schemes and reducing corporate income tax rates.

Among the most controversial provisions is the proposed VAT increase from 7.5% to 10% by 2025, with gradual increments to 12.5% between 2026 and 2029, and 15% from 2030 onwards.

This proposal has faced strong resistance from the Trade Union Congress (TUC), the Kano State Government, the Arewa Consultative Forum, and other stakeholders, who argue that higher VAT would worsen economic hardship.

Next Steps in the Legislative Process

As both chambers of the National Assembly work towards harmonizing the bills, lawmakers are expected to finalize deliberations and present the revised versions for a third reading.

The House of Representatives, after reviewing stakeholder submissions, will propose amendments before final passage.

With President Tinubu expecting the tax reform bills to be passed by March 2025, the coming days will be crucial in determining the final shape of Nigeria’s new tax regime.

Lawmakers continue to stress that all decisions will be made in the best interest of the nation, ensuring that fiscal policies drive economic stability without imposing undue burdens on citizens.