Reps Pass Tinubu’s Tax Reform Bills for Second Reading

The House of Representatives on Wednesday passed for the second reading the four key tax reform bills submitted by President Bola Tinubu on October 3, 2024. These bills, which include the Nigeria Tax, Nigeria Tax Administration, Nigeria Revenue Service, and the Joint Revenue Board of Nigeria (Establishment) Bills, 2024, have been referred to the Committee on Finance for further review following extensive debate on their general principles.

Originally scheduled for debate on December 3, 2024, the discussion had been postponed indefinitely, sparking some controversy. One of the key issues of debate involved the Northern Governors’ Forum, which opposed the new derivation-based model for the distribution of Value Added Tax (VAT) proposed in one of the bills. The Northern governors argued that the proposal did not align with the interests of the North and other sub-national entities.

Article 77 of the Nigeria Tax Administration Bill, 2024 outlines a new VAT distribution model: 10% to the Federal Government, 55% to State Governments and the Federal Capital Territory, and 35% to Local Governments. Furthermore, it proposes that 60% of the amount credited to states and local governments should be distributed based on derivation.

In a twist to the ongoing debate, the Nigeria Governors’ Forum (NGF) later expressed support for the bills but insisted that the VAT sharing formula must reflect a more equitable distribution model: 50% based on equality, 30% on derivation, and 20% on population.

The bills were brought before the House for second reading a day after Speaker Abbas Tajudeen emphasized the legislature’s support for President Tinubu’s tax reforms during a visit by the leadership of the Lagos Chamber of Commerce and Industry (LCCI).

During the debate on the bills, House Leader Hon. Julius Ihonvbere (APC, Edo) praised President Tinubu for taking bold steps to reform Nigeria’s tax system, which he described as outdated and inefficient. Ihonvbere explained that the primary goal of the bills is to overhaul and modernize the tax system, which he said had been one of the most backward globally. He emphasized that the reforms aim to stimulate economic transformation, improve the lives of ordinary Nigerians, enhance revenue mobilization, and create a more competitive environment for investment.

Ihonvbere also highlighted that the reforms aim to simplify tax administration by addressing the issue of multiple tax collections and agencies. He pointed to the Nigerian Tax Administration Bill as a key component, which will establish the legal framework for managing taxes, and the Nigerian Revenue Establishment Bill, which will replace the Federal Inland Revenue Service (FIRS) to handle revenue administration. Additionally, the Joint Revenue Board Establishment Bill will expand the mandate of the Joint Tax Board, further streamlining tax operations.

The bills now move to the Committee on Finance for further legislative scrutiny.