Daily Trust Editorial of December 9, 2024
Since October 3, 2024, when President Bola Ahmed Tinubu transmitted four bills that constitute the Revenue Reform Bills, 2024 to the National Assembly, the presidency has defied calls for thorough review of the contents of the bills. The Senate, treating them with dispatch, has allowed the draft bills to pass through first and second readings, in spite of appeals by some members of the National Assembly for caution. As if attending to the misgivings expressed by a cross-section of Nigerians about the bills, the presidency said last week that Tinubu had “directed the Federal Ministry of Justice and relevant officials who worked on the drafts to work closely with the National Assembly to ensure that all genuine concerns have been addressed before the bills are passed.”
To us, the president’s directive is too narrow for the kind of consultations necessary before the bills are passed into law.
The reform bills include (i) Nigeria Tax Administration Bill; (ii) Nigeria Revenue Service Establishment Bill; (iii) Nigeria Tax Bill; and (iv) Joint Revenue Board Establishment Bill. The overriding objectives of the bills include the following: to address the challenge of multi-layered taxation; to consolidate various legal frameworks relating to taxation; to expand the country’s tax base; to generate sustainable revenue streams for national development; to address the complexities of the current tax system; and to enhance tax compliance. It is apparent that the bills are put together to bring about major changes, not just in the tax system but also in revenues from tax and how such revenues are distributed. Such bills with monumental implications for individuals, corporate organisations, subnational and federal governments must be scrutinised and properly dissected before they are approved to become law.
It is disturbing, therefore, that the presidency has shrugged off appeals for the bills to be withdrawn from the National Assembly and subjected to thorough examination.
On October 31, 2024, the National Economic Council (NEC), which is constitutionally empowered to counsel the president on economic matters, advised Tinubu to withdraw the bills for now. Instead of yielding to the advice, the presidency gave the National Assembly the nudge to hurriedly consider the bills. Apart from the NEC, state governors and traditional rulers, many of them economists and learned in statecraft, have called for the bills to be suspended.
There are several contentious sections in the bills, especially the Nigeria Tax Bill (NTB) and the Nigeria Tax Administration Bill (NTAB). For instance, in Clause 22 (12) of the NTAB, the concept of ‘derivation,’ which determines the allocation of 60 per cent of Value Added Tax (VAT) revenues to sub-national entities, has not been clearly defined. The framers of the bills have glossed over the matter by publicising the fact that states and local governments will be entitled to more revenues than the federal government, but they have failed to come up with data that supports their projection.
Clause 75(1) of the proposed NTAB gives the president enormous powers to give tax exemption to any company without providing clear criteria for doing so. Clause 56 of the bill proposes the gradual phasing out of the distribution of VAT collections to some institutions, like the Tertiary Education Trust Fund (TETFund), the agency that provides financial support and project management to public tertiary institutions; the National Information Technology Development Agency (NITDA), an agency that is responsible for developing and regulating the country’s information technology (IT), and the National Agency for Science and Engineering Infrastructure (NASENI), which, according to its mandate, was set up “to manage the research and development of capital goods, production and reverse engineering to enhance local mass production of standard parts, goods, and services required for the nation’s technological advancement.” Under the proposed Development Levy, the funds that now accrue to the above bodies will be channelled into the Nigerian Education Loan Fund (NELFUND). This kind of amendment to the existing system cannot be carried out with levity.
The bills exempt low-salary earners from paying income tax, but they are not exempted from paying VAT, which costs them more tax on their salaries. What is couched as VAT is actually consumption tax. Nigerians will now pay a higher consumption tax in the next regime. Nigerians will begin to pay 10% VAT by 2025, 12.5% from 2026-2029, and 15% by 2030 if the bills are passed the way they are. To enforce this heavy burden on the people, Nigerians who have no tax identity card or tax payment evidence may be barred from carrying out banking transactions. This way, the new laws will impose more burdens on Nigerians, who have been serially and seriously impoverished by the removal of subsidies on petrol and the devaluation of the naira. Even Tinubu, in his 2012 speech against the Goodluck Jonathan administration, admitted that the removal of fuel subsidies was a major form of taxation. He called it ‘Jonathan tax.’
It is apparent that Tinubu is zealous about increasing government revenue, but such a drive that has a negative impact on the population and the states cannot be carried out recklessly.
On the flip side, it is disturbing that mischief makers have introduced regional division to this sensitive issue. This is a matter that deserves an unbiased approach by all devoid of political mischief to achieve a consensus for the benefit of all.
We, on our part, call on the National Assembly to suspend the process of passing the bills into law. Doing that is not a sign of weakness. The federal government must return to the drawing board and subject the bills to serious scrutiny to ensure that all grey areas are weeded out. We must achieve a genuine national consensus on the tax bills before they are passed into law.
