Over the past decade and a half, the government has attempted major tax reforms informed by the realisation of the glaring inequalities and inefficiencies that have resulted from imposing high rates on constricted tax bases under complex legislation in the face of weak tax administration. Under such circumstances, the tax policy’s redistributive, developmental and revenue goals became largely unrealisable.
Consequently, to reform the tax system, the present administration under President Bola Tinubu, has proposed Revenue Reform Bills 2024 to the National Assembly to amend/enact four laws.
The controversial bills are (i) the Nigeria Tax Administration Bill, (ii) the Nigeria Revenue Service Establishment Bill, (iii) the Nigeria Tax Bill, and (iv) the Joint Revenue Board Establishment Bill.
The stated objectives of these bills are to expand Nigeria’s tax base, improve compliance, and establish sustainable revenue streams for the nation’s development.
On the one hand, the bills can potentially increase government revenue, which would have a trickle-down effect on the economy through increased funding for public goods and services, such as infrastructure, education and healthcare; on the other hand, some of its provisions may have negative impacts on businesses and individual consumers if not adequately considered and redrafted.
A cursory reading of the Tax Reform Bills will reveal a commendable effort by the Federal Government to revolutionise the national economy, bring to an end the era of liquidity crises, and promote a genuinely competitive environment for businesses, irrespective of the sizes or structures, to seamlessly thrive. However, despite the laudable objectives of the Reform Bills, it has not been received with the requisite enthusiasm from the sub-national governments.
The Bills have been criticised as ill-timed, regressive and antithetical to the aspirations of the people, as well as detrimental to the interests of other segments of the federation.
“The citizens of Nigeria need to see tangible benefits in terms of better roads, functioning schools, quality healthcare, stable electricity, and sustainable social safety nets for their tax contributions.”
The Nigeria Economic Council, a constitutional body established by section 153 of the Constitution, has called on the president to withdraw the bills before the National Assembly for further consultations.
The Governors Forum and the Northern Governors Forum have all asked for a stand down of the Bills for further consultation. Despite these calls, the Executive branch is in favour of a process that allows for public engagement with the National Assembly presently considering the Bills.
It should be appreciated that Nigeria is operating as a democracy, and no matter how beneficial the tax reform bills are, they still require the buy-in of all parts of the federation. This can only be achieved through the process of consultation and enlightenment that engenders confidence in the people.
In this context, we implore the executive branch of government to publicly engage all relevant stakeholders, such as the governors, organized private sector and labour unions.
Town hall meetings should have been organised to sensitise the populace on the objectives of the bill before sending the bills to the National Assembly for passage into law.
It may not be too late in the day to allow for further consultation and public awareness on the provisions of the bills, which can only ensure its acceptance and provide the legislature with the opportunity to thinker with the provisions likely to occasion hardship or dissent.
The National Assembly should also take its job of representing the collective wishes and aspirations of the people more seriously to engender confidence in the people.
The hurry with which the legislative process is undertaken by the National Assembly leaves many questions unanswered regarding whose interests it is serving.
For instance, the haste with which the National Anthem was passed (arguably within 24 hours) created doubts about the integrity and sanctity of the legislative process in Nigeria.
Amid these calls, the Presidency has responded to the effect that those concerned about the bills should engage the National Assembly.
While this ordinarily should have been a good option, it would appear that Nigerians do not have much faith in the capacity of the National Assembly to engender a robust consideration of the bills in the interest of all segments of the population.
The Federal Government must remain open to dialogue, demonstrating its commitment to equity and fairness.
The concentration of taxation power in the Federal Government needs to be reviewed to allow states to retain some taxes.
The reforms should encourage state governments to generate more revenue internally rather than relying solely on FAAC disbursements.
This shift would foster healthy competition among states, enhance governance, and ensure accountability in resource management. A situation where billions are lost to illegal mining that benefits a few elite individuals including foreigners must stop.
The agitation from the North could reignite the call for increased derivation by oil-producing states which means less funds from the federal purse.
The tax reform debate transcends regional politics; it speaks to the heart of Nigeria’s economic future. The reforms, if implemented wisely, could mark a turning point in Nigeria’s journey toward sustainable development and reduce the risk of the country stagnating under the weight of unsustainable fiscal policies.
The northern opposition should be constructive in their engagement. However, the Federal Government must address legitimate concerns to secure buy-in from all regions.
Crucially, the Federal Government must demonstrate transparency and accountability in managing tax revenues.
The citizens of Nigeria need to see tangible benefits in terms of better roads, functioning schools, quality healthcare, stable electricity, and sustainable social safety nets for their tax contributions.
Finally, data is required to demonstrate the Tax Bill’s utility and its capacity to ensure fairness in the distribution of the accruals from VAT, which appears to be one of the most contentious areas of the reform bills.
There is a need to show through credible data that the derivation principle proposed to be used to distribute the VAT accruals will benefit all parts of the federation.
Therefore, the Tax Reform Committee and the executive branch must do more in this regard to convince the people. Only when the people’s confidence is restored in the process will a smooth passage of the Tax Reform Bills be guaranteed.
