The House of Representatives on Thursday moved a step closer to the eventual passage of the four tax reform bills presented by President Bola Tinubu to the parliament on October 8, 2024 with the consideration and approval of the report of the House Committee on Finance.
The four bills will now be read for the third time before eventual passage.
The bills included the Nigeria Revenue Service (Establishment) Bill, the Nigeria Tax Bill, the Nigeria Tax Administration Bill, and the Joint Revenue Board (Establishment) Bill.
The four bills were read for the first time on October 8, 2024, but debate on the bills had been held back in the House due to disagreement by members on the content of the Nigeria Tax Administration Bill following objections by northern leaders and the Nigerian Governors Forum.
Presenting the report for consideration by members, Chairman of the House Committee on Finance, James Abiodun Faleke said all contentious areas of the bills were considered by the committee during a six day retreat and resolved, adding that the outcome of the retreat after the public hearing from the report was considered.
Bill submissions at the public hearing
Nigeria Revenue Service Bill Recommendation for one representative from the 36 states in the Board of the Service.
Power to distrain conferred on the Service to be subject to a valid court order.
Concerns that the definition of ‘tax’ as contained in the Bill may encroach on the revenue collection function of other agencies such as the Nigeria Customs Service.
Joint Revenue Board (Establishment) Bill
Recommendations to delete the tenure and retirement age of the Secretary to the Tax Appeal Tribunal and include new qualifying conditions for the Coordinating and Zonal Secretaries of the Tribunal.
Suggestion to scrap the newly created Office of the Ombud to the Tribunal as the former creates an additional layer of costs without proportional benefits, in addition to leading to overlapping jurisdictions between the two bodies.
Recommendation to create a Tribunal Fund into which 2% of non-oil revenue will be paid to guarantee uninterrupted and adequate funding.
Nigeria Tax Administration Bill
Suggestions that the Joint Revenue Board establish uniform guidelines regarding the accreditation of tax agents, and that this be subject to certification by the Chartered Institute of Taxation of Nigeria, being the professional tax body in Nigeria.
Recommendations to remove regulations relating to the State Revenue Service and Local Government Tax Boards, as the inclusion is ultra vires of the powers of the National Assembly.
Proposed restriction of the President’s powers to exempt/waive tax payments by introducing an annual limit for such exemptions and waivers.
Suggestions to clearly describe and define what constitutes attribution and derivation for the purpose of distribution of Value Added Tax (VAT) revenue.
Recommendation of a phased implementation for fiscalization for VAT purposes.
Call for further consultations with relevant agencies and institutions to arrive at an equitable VAT sharing formula.
Suggestions to consider a flexible implementation of the requirement to possess a Tax ID in order to operate a bank account, so as not to discourage the informal sector from utilizing banking services.
Call for deletion of the provision which allows the tax authorities to sell taxpayers’ movable assets without a court order.
Proposal to reinstate the deleted provision on the use of Tax Clearance Certificates (TCCs), on the basis that TCCs are the best tool to ensure taxpayers’ compliance.
Recommendation to remove seemingly mundane matters – offences, penalties, & other administrative areas – from the Bill, as these can be addressed via subsidiary legislations, in order to allow for future alignment with realities without legislative changes.
Faleke said the committee proposed the replacement of the word ecclesiastical’ with ‘religious’ in the Nigeria Tax bill as the former is associated only with the Christianity and the latter is religion-neutral.
He also said the Committee agreed to the deletion of the proposed re-introduction of inheritance tax under the guise of taxation of family income, as this oversteps divine jurisdiction which places inheritance matters within the scope of the Sharia and Customary Laws of the North and South respectively.
The committee also proposed reduction of VAT rate to 5% or alternatively, maintain the current rate of 7.5% while also recommending for the reinstatement of contributions towards NASENI and NITDA, and a call to ensure continuous funding from the Development Levy.
The House also considered and approved the recommendations to reinstate the need for a Certificate of Acceptance of Fixed Assets (CAFA), to claim capital allowance, as historically issued by the Industrial Inspectorate Department of the Federal Ministry of Industry, Trade and Investment.
Proposal for an introduction of a 1.5% service charge, based on the economic development tax credit, for companies operating in the priority sector.
Faleke said oil and gas royalties will not be collected by the Federal Inland Revenue Service while the NUPRC will be restricted to operational matters since royalty is considered a form of tax, while also deleting the exemption and incentive clauses of the NEPZA and OGFZA Act while reverting to revert to the current provisions of the NEPZA and OGFZA Act, as well as the current practice of the enterprises within the free zone entities.
