Proposed tax reform bills not against North, says Presidency

The Presidency has reassured the public that the tax reform bills currently under consideration by the National Assembly will benefit all states, countering concerns about job losses and perceived marginalization of the North. This clarification follows a meeting of Northern Governors held last Monday to address various misunderstandings surrounding the reforms.

Bayo Onanuga, the Special Adviser to the President on Information and Strategy, articulated this point in an explanation titled, “Explainer: Proposed tax reform bills not against the North; they will benefit all states,” released on Thursday.

During the October 28, 2024 meeting, governors from the 19 Northern States, convened under the Northern Governors’ Forum, expressed their opposition to the new derivation-based model for Value-Added Tax (VAT) distribution included in the proposed tax reforms. Traditional rulers, led by the Sultan of Sokoto, His Eminence Muhammadu Sa’ad Abubakar III, also participated in the discussions.

A communiqué read by the forum’s chairman, Governor Muhammed Yahaya of Gombe State, stated that the proposal undermines the interests of the North and other sub-national entities.

Recently, President Bola Tinubu and the Federal Executive Council endorsed new initiatives aimed at streamlining Nigeria’s tax administration. The Federal Government asserted that these new laws aim to enhance efficiency and eliminate redundancies within the nation’s tax system.

The reforms stem from a review of existing tax laws that began in August 2023, with the National Assembly currently evaluating four executive bills related to these tax initiatives. The Nigeria Tax Bill seeks to eliminate unintended double taxation and simplify tax obligations for both individuals and businesses, thereby making Nigeria’s economy more competitive.

The Nigeria Tax Administration Bill proposes rules to standardize tax administration across federal, state, and local levels, enhancing compliance for taxpayers nationwide. The Nigeria Revenue Service (Establishment) Bill aims to rename the Federal Inland Revenue Service to the Nigeria Revenue Service, better reflecting its role as the revenue agency for the entire federation. Lastly, the Joint Revenue Board Establishment Bill calls for the creation of a Joint Revenue Board to replace the existing Joint Tax Board, encompassing all tax authorities.

The fourth bill also suggests establishing an Office of Tax Ombudsman under the Joint Revenue Board to handle taxpayer complaints.

The Presidency emphasized that these proposed laws will not increase the existing tax burden but will instead aim to optimize and simplify current tax frameworks. Onanuga stated, “These reforms will not lead to job losses. Rather, they are designed to create new job opportunities by fostering a dynamic, growth-oriented economy.”

He further explained that the reforms will not disrupt the responsibilities of any current department or agency, but will instead harmonize revenue collection and administration across the federation to improve efficiency and collaboration.

Currently, Nigeria’s tax administration suffers from a lack of coordination among federal, state, and local authorities, leading to overlapping responsibilities and inefficiencies. The proposed laws aim to enhance coordination among different government tiers, resulting in better tax resource management and clearer guidelines for taxpayers.

Under the existing system, taxes such as Company Income Tax, Personal Income Tax, and Value-Added Tax are managed separately, each with its own legislative framework. The proposed reforms intend to consolidate these taxes, integrating them into a more unified structure to reduce administrative complexity.

Regarding the contentious derivation-based VAT distribution model, which has faced opposition from Northern Governors, the Presidency maintained that the new approach aims to establish a fairer system. It noted that the current distribution method is based on where taxes are collected rather than where goods and services are consumed.

“The ongoing tax reform seeks to address the inequities inherent in the current distribution model,” Onanuga explained. “The new proposal considers the place of supply or consumption, ensuring that states in the Northern region that produce essential goods are not disadvantaged simply because their products are VAT-exempt or consumed elsewhere.”

The Presidency asserted that these reforms are essential for improving the lives of Nigerians and were not introduced to undermine any region. “Now is the time for the National Assembly to seriously consider these bills, which aim to reform our tax systems and generate the revenue necessary for the development our country urgently needs,” it concluded.