Matters arising from the tax reform bills

The raging controversy over the proposed tax reform bills of President Bola Tinubu now before the National Assembly is unfortunate. And the controversy will likely linger until the contentious provisions of the bills are addressed. The tax bills which many Nigerians have hailed have invariably divided lawmakers and state governors from the North. The rift deepened last week Thursday in the Senate when the leadership of the Upper legislative Chamber denied that deliberation on the bills had been suspended indefinitely as earlier reported in the media.

 Instead, the Senate swiftly restructured the membership of the special committee previously set up by the Deputy Senate President Jubrin Barau to work with the team from the Attorney General of the Federation (AGF) and Minister of Justice, Lateef Fagbemi (SAN) to address the grey areas in the tax bills. One of the contentious areas in the bills is the Value Added Tax (VAT) derivation formula which the North claims will make the zone economically disadvantaged and poorer. So far, politisation of the proposed tax reforms has clouded the entire process at a time when bi-partisanship, fair-mindedness and robust debate are needed.                   

Ordinarily, matters of tax reforms are consequential, with profound far-reaching positive implications for the economy. However, that has not been the case with the tax reform bills. Issues relating to equity, fiscal federalism, and socioeconomic balance should be the hallmarks of a meaningful tax regime which Nigeria is in dire need of, without denying any part of the country or states their fair share of revenue accruing from tax collection. Indeed, taxation has for decades been a controversial matter in the country. That makes any reform aimed at correcting such structural imbalance, particularly, the over reliance on oil revenue a step in the right direction.   

According to the federal government, one of the main targets of the proposed tax reforms is to achieve a minimum of 18 per cent tax-to-GDP ratio within the next three years. Currently, Nigeria’s tax-to-GDP ratio is between 6.7 per cent and 10.8 per cent. This is regarded to be one of the lowest in the world. Even in Africa, Nigeria’s tax-to-GDP ratio is below that of South Africa and Ghana put at 27 per cent and 13 per cent, respectively. The African average is put at 16.5 per cent. The International Monetary Fund (IMF) recommends at least a 15 per cent tax-to-GDP ratio for sustainable economic growth.  Therefore, it is good that Nigeria should have a reasonable percentage of tax-to-GDP ratio to ramp up economic recovery. That will also help widen the nation’s tax base, improve revenue generation as well as ensure that the rich pay the right amount of taxes. The present tax evasion by the rich at the expense of the poor is deplorable.

Going forward, we urge that reason should prevail over politics in the deliberations of the proposed tax reform bills. That is how important legislative bills that move nations forward are usually handled. Disagreement is bound to happen, but what is crucial is consensus in the best interest of the country and the citizens. It should not be for the benefit of the government alone in terms of revenue collection. Besides, public trust and transparency are key to ensuring inclusivity in the policymaking process.

We urge the lawmakers to set aside primordial sentiments and focus squarely on the provisions of the tax bills.  Nevertheless, they should not hesitate to expunge provisions in the tax bills which are inconsistent with our extant laws. The tax reform bills are the Joint Revenue Board of Nigeria (Establishment) Bill 2024, the Nigeria Revenue Service (Establishment) Bill 2024, and the Nigeria Revenue and Nigeria Tax  Administration Bill 2024. But the Northern Governors rejected all of that, describing most of the provisions as “anti-democractic.”

Last month, the National Economic Council(NEC) at its 144th meeting held at the State House, Abuja, and chaired by Vice President Kashim Shettima, requested that the bills be withdrawn for more consultations. Oyo State Governor, Seyi Makinde, who spoke on behalf of the governors after the NEC meeting, said some sections of the country “feel uncomfortable” with some provisions of the proposed tax reform bills. The presidency insisted that the withdrawal of the bill was not an option, and tasked the National Assembly to use its discretion to delete provisions it deemed unnecessary. That is a good proposition from the presidency.

At the same time, the tax reform bills should not be rushed. Every clause should be debated diligently in the overall interest of the country, with no particular individual interest served. Nigerians are keenly watching how members of the National Assembly will discharge this enormous responsibility relating to the tax reform bills. Above all, let the contentious areas of the tax reform bills be diligently addressed.