After about two months of consideration, the National Assembly has recently passed the four tax reform bills transmitted by President Tinubu on October 3, 2024, for a second reading.

This follows the recommendation of the President of the Senate, Senator Godswill Akpabio to invite all concerned groups in the country for a public hearing.

Items on the bill include;

Nigeria Tax Bill 2024 will reframe the country’s fiscal tax structure
Tax Administration Bill will institute a legal framework to govern tax instruments
The Nigeria Revenue Service Establishment Bill revokes the Federal Inland Revenue Service (FIRS) Act and establishes the Nigeria Revenue Service.
The Joint Revenue Board Establishment Bill will institute a tax tribunal and tax advocates.

The bill “An Act to Repeal Certain Acts on Taxation and Consolidate the Legal Frameworks Relating to Taxation and Enact the Nigeria Tax Act to Provide for Taxation of Income, Transactions and Instruments, and for Related Matters” has caused a lot of chaos in Northern Nigeria.

Members of the House of Representatives from the North have said that the bill is not in the interest of the North.

The Presidency has explained that the bills are intended for the development of the country rather than targeted at any ethnic group or region.

A Summary of the Tax Reform in Nigeria

Some of the existing tax laws in Nigeria are based on the 2005 reform bill. The reform constituted a process and involved the inauguration of a group in 2002 to examine the tax system in Nigeria and make recommendations on possible solutions. By August 2005, 4 of the bills were passed;

Nigeria’s Existing Tax Laws from 2005 Reform

Bill for an act to establish the FIRS as an autonomous service
Bill for an act to amend the Companies Income Tax Act
Bill for an actor to amend the Petroleum Profit Tax
Bill for an act to amend the National Automotive Council Act.

In the same reform, the 1994 Value Added Tax, VAT tax which is a major source of government revenue was also reformed. The reform says that;

Companies operating in the oil and gas sector should not be treated as government agencies or parastatals.
VAT rate remains at 5%
VAT base and administration should be expanded to untapped areas
Exemption granted to goods and services should be limited to imports
Goods and services purchased for use in donor-funded agencies should be zero-rated
Zero rates should be limited to those producing for export
There should be consistency in the use of either “table person” or “taxpayer” to preclude any confusion.

There are inherent lapses which make the existing tax laws and the whole system in Nigeria inefficient and ineffective as the 2002 group observed. Inconsistencies in the policy make it complicated.

Nigeria Tax Reform Bill 2024

The reform bills are necessary to restructure the tax system to withhold the economic challenges of the country as the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms Taiwo Oyedele said.

The tax situation in the current bill has hindered economic growth as it produces less revenue than expected for the government. More so, tax overload on individual entities or businesses has caused certain groups to be burdened with an unhealthy tax system.

However, a reform will help cut this tax load on individuals and businesses. It will also ensure ease of doing business and promote economic growth.

Benefits of the Proposed New Tax System in Nigeria

If passed, there are benefits for individuals and businesses. Here is a quick look;

Individuals who earn the new minimum wage or slightly more, will not pay tax
The new system will decrease multiple taxations
It will take off the minimum tax for companies that are making no profit
It will give input VAT credit to businesses on assets and services to reduce cost of investment
Public and private sector workers will pay lower taxes
Low and middle-income earners will pay less taxes
It will make tax payments on foreign currency transactions in naira easy
Self-employed and business owners will enjoy tax exemptions

VAT Reform

The new tax bill proposes a change in the sharing formula of the existing VAT. It demands that VAT should go to each state based on the supply and consumption that generated VAT.

VAT reform will also change the rate for a high percentage of household items as well as include a zero (0%) rate for education and health. It exempts rent and public transportation.

Benefits of the Tax Reform Bills in Nigeria

Economy

Africa

World

Unlock News Faster ...Sign Up

Recommended

News