Tinubu’s proposed tax reform bills pass a second reading in Senate
The bills scaled the second reading a day after the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, appeared before the Senate
The four tax reform bills proposed by President Bola Tinubu have passed a second reading in the Senate.
They are the Joint Revenue Board of Nigeria (Establishment) Bill, 2024 -SB.583; The Nigeria Revenue Service (Establishment) BILL, 2024- SB.584; The Nigeria Tax Administration Bill, 2024-SB.585; and the Nigeria Tax Bill, 2024 – SB.586.
The executive bills were sponsored by the Senate Leader, Opeyemi Bamidele, during plenary on Thursday.
After the debate on the general principles of the bills, the lawmakers read them for the second time and referred them to the Senate Committee of Finance for further legislative action.
The bills scaled the second reading a day after the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, appeared before the Senate to explain their purpose.
Mr Oyedele told the lawmakers that the bills aimed to lift the tax burden on 90 per cent of Nigerian workers.
Mr Bamidele, while leading a debate on the general principles of the bills, stressed the need to reform Nigeria’s tax system to help low income earners.
He said the bills essentially seek to ensure uniformity in the country’s tax revenue collection system.
Nigeria’s tax reforms bill is a significant move to overhaul the country’s tax system. These bills aim to simplify the tax landscape, reduce the burden on small businesses and streamline how taxes are collected
“In broad terms, the four bills seek to ensure uniformity in tax revenue administration in Nigeria in accordance with the provisions of the Constitution, eliminate the incidence of double taxation across the country, deploy taxation as a tool to encourage private sector investments in critical industries and boost individual disposal incomes through targeted tax exemptions as captured in the various bills,” he said.
Mr Bamidele, the senator representing Ekiti Central Senatorial District, further explained that the bills seek to exempt Nigerians who earn below the minimum wage from the Pay As You Earn (P. A.Y.E) deduction.
The senate leader noted that the bills, when passed and assented to by the president, will also exempt small businesses from paying tax.
“In the area of tax exemptions, there is a proposal to exempt those whose salaries are not more than the minimum wage from P.A.Υ.Ε deductions while small businesses with annual turnover of N50,000,000 or less are equally exempted from payment of taxes,” he stated.
Mr Bamidele said the bills seek to reduce company income tax from 30 per cent to 25 per cent.
Aside from the reduction of company income tax, the senate leader explained that the provisions of the bills also seek to use certain percentages of various taxes to fund the student loan scheme of the federal government.
“Similarly, there is a proposed huge reduction in company income tax from the current 30 per cent to 25 per cent by 2026.
“As part of deliberate attempt to curtail the incidence of double taxation and multiplicity of taxes and levies, multiple taxes hitherto paid by companies under various tax heads namely 2.5 per cent education tax, 0.25 per cent NASENI tax have been harmonised into a development levy of 2 per cent which by 2030 will be applied to fund the newly established student loan scheme which will benefit many Nigerian youth,” Mr Bamidele said.
On the sharing formula of the Value Added Tax (VAT), the senate leader explained that the bills propose to allow state governments to take 55 per cent of VAT revenue while the remaining will be shared between the federal and local governments with the former taking 10 per cent.
“However, local government’s share of VAT revenue remains unaffected. Relatedly, basic items consumed by Nigerian households such as food items, medical services and pharmaceuticals, educational fees, electricity etc., are exempted from VAT,” he said.
Afterwards, Mr Bamidele urged his colleagues to support the tax reform bills and see them as part of the legislative intervention needed to support ongoing fiscal and tax reform measures needed to reposition the Nigerian economy for growth and productivity.
The Senate Minority Leader, Abba Moro, seconded the motion.
Mr Moro, a PDP member representing Benue South Senatorial District, said the reforms would assist many Nigerian workers who are low-income earners and also help small business enterprises operating within the country.
Niger East Senator Sani Musa also said the tax reform bills are in the interest of the country.
Mr Musa, the chairman of the Senate Committee on Finance, assured that his committee will involve all concerned stakeholders during the public hearing.
He also urged his colleagues to support the bills because it is a development for the nation.
Seriake Dickson (PDP, Bayelsa West) said he supports the bills because they will encourage state governors to create an enabling environment for economic activities in their respective states.
“There is emphasis on derivation according to taxation, and the attempt now is to encourage states to be productive. This is a situation where states will abandon their core responsibility to create an enabling environment, attract investments, promote economic activities so that that state can boost its revenues. That’s a good thing. That’s not a bad thing,” he said.
Mr Dickson said there was nothing wrong with the sharing formula of the Value Added Tax since each state will get a percentage of what is consumed within their territory.
“The other area, in fact, according to derivation, when we get to the committee stage, we’ll look at the specific details. But there’s nothing wrong in saying that the telephone calls that are made in Bayelsa or Akwa Ibom, or Sokoto or Kano, the VATs on those things that are consumed, be calculated and paid to those states.
“And we are told that that is the essence of these bills, and there’s nothing wrong about it, because VAT is a consumption tax. It’s not a production tax.”
Ali Ndume (APC, Borno South) demanded that the bills be withdrawn and that the Presidential Committee on Fiscal Policy and Tax Reforms negotiate with the National Economic Council, governors and traditional rulers before they are considered at the National Assembly.
Mr Ndume noted that his major reasons for opposing the tax reform bills were because of the sharing formula of the Value-Added Tax and the derivation of the tax system.
Tahir Monguno, the Senate chief whip, urged the Senate to disregard Mr Ndume’s demands because they are baseless.
Mr Monguno said that there was no need to withdraw the bills because necessary concerns of the NEC, governors and traditional rulers will be addressed during the public hearing on them.
After the debate, Senate President Godswill Akpabio directed the committee members to report back to the Senate within six weeks for consideration.
Mr Akpabio urged the committee to involve the National Economic Council (NEC), Nigerian Governors’ Forum (NGF) and Civil Society Organisations in the public hearing.
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