• Bills likely for passage Tuesday
Members of the House of Representatives yesterday considered and approved the Report submitted by the House Committee on Finance on the Tax Reform Bills.
Their approval set the stage for the Bills’ third reading and likely passage on Tuesday.
The Finance Committee of the Senate which, like the House Committee, proceeded on a retreat after the public hearing, is yet to table its recommendations.
It was learnt that the Bills might be presented before senators and passed next week.
The bills were presented on October 8, 2024 by President Bola Ahmed Tinubu to the National Assembly for legislative action.
The bills are: Nigeria Revenue Service (Establishment) Bill; the Nigeria Tax Bill; the Nigeria Tax Administration Bill and the Joint Revenue Board (Establishment) Bill.
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 the six-day retreat and resolved.
The committee recommends the appointment of six Executive Directors for the Nigeria Revenue Service to be appointed by the President and one representative from the 36 states to ensure equitable representation.
He expressed concern 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.
On the distribution of Value Added Tax (VAT) revenue which has been one of the contentious issues, the House considered and approved that a new basis for the distribution of the 55 per cent and 35 per cent respectively for State and Local Government allocation has been introduced.
Faleke said that 50 per cent of VAT revenue will be distributed equally, 20 per cent to be distributed based on population and 30 per cent to be based on consumption, adding that emphasis has also been placed on the actual place of consumption, irrespective of where the VAT returns are filed.
The Finance committee chair explained that emphasis should be on the place of consumption in the collection and distribution of VAT resources, irrespective of where the tax was filed or where the headquarters of the company filing the return is domiciled.
He stressed the need for stringent measures to ensure that those collecting VAT on behalf of the government remit the same as against the recent trend where supermarkets collecting VAT remit less than 10 per cent of what they collect.
The House also approved the recommendations that the President seeks and obtain the approval of the National Assembly to exempt any person or class of income/profits from tax, while the Accountant-General is to receive a resolution from the National Assembly in order to deduct any unremitted revenue due from Ministries, Departments and Agencies (MDAs).
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 five per cent or alternatively, maintain the current rate of 7.5 per cent 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.
The proposal for an introduction of a 1.5 per cent service charge, based on the economic development tax credit, for companies operating in the priority sector, was also considered.
Faleke said that 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 the current provisions of the NEPZA and OGFZA Act, as well as the current practice of the enterprises within the free zone entities.
He explained that the Committee proposed amendments to remove the staggered reduction in Company Income Tax (CIT) rate from 30 per cent to 27.5 per cent in 2025 and 25 per cent in 2026.
On the NGF recommendation, the tax rate of companies other than small companies remains 30 per cent. The Committee further recommends that the tax rate of companies in the priority sector should be reduced to 25 per cent during the priority period of five years.
Faleke listed the collection of taxes in the currency in which the taxes were accessed as part of the approved recommendations at yesterday’s plenary, adding there has been an argument that when taxes are accessed in foreign currency, they should be collected in naira.
“The committee agreed that taxes should be collected in the currency in which it was accessed,” Faleke said.
He also disclosed that while the free trade zones were established as tax free zones for export production, companies operating in the zones have begun to import their produce into the Nigerian market in contravention of the rules.
In the light of this, he said the committee recommended that such companies be allowed to import only 25 per cent of the manufactured goods into the Nigerian market while the balance of 75 per cent should be exported out of the country with evidence before they can enjoy the tax incentives.
He said further that the committee also recommended the period for filing tax returns for companies wishing to wind up their operation be reviewed down ward from six months to three months.
The Ikeja Federal Constituency (Lagos) lawmaker said: “Amendments were made to this section to emphasise that only multinationals with a group aggregate turnover of at least 750 million pounds sterling or its equivalent are subject to the global minimum tax, in line with global best practices.
“The section was also amended to increase the qualifying threshold for minimum tax for resident from a turnover of N20 billion to N50 billion, as well as exclude free zone entities which export at least 75 per cent of its goods and services, from the minimum tax regime.
“Furthermore, the net profit of life assurance companies to be considered for the minimum tax has been amended to exclude gross premium and investment income for policyholders.”
Tax reform policy will be acceptable
Faleke said that the Tax Reform Bills will be acceptable to all Nigerians as they would revolutionize the tax system.
He said: “These bills took three full days of public hearing, where we took memoranda from more than 80 critical stakeholders. After the three days, we resorted to a retreat for six days, debating all the clauses in each of the bills.
“I am glad that members of the house saw that we had done a thorough job and have approved all our recommendation.
“We want to appreciate our members and all Nigerians who showed interest in this bills and we assure that the laws that will come after these bills acceptable by all Nigerians.”
He appreciated the leadership of the house for entrusting the committee with the responsibility of processing the tax bills and to lay them before the House, while l commended the President for considering it worthy to amend tax laws saying that some of our tax laws are as old as 1959.
According to him, Nigeria cannot continue to operate with archaic tax laws to meet our demands for survival, business and for the revenue target that we seek to achieve.
Deputy Committee Chairman Saidu Abdullahi (APC-Niger) said no bill in the 10th Assembly had generated such controversies as the Tax Reforms Bills, adding that under the leadership of Speaker Tajudeen Abbas, the House was able to build consensus among all the stakeholders.
Abdullahi said that interest groups from each geo political zone and regional leaders were drafted into the committee to allay the fears of the people, adding that the recommendations of the committee was an offshoot of all the inputs of the various stakeholders.
“There were never seen as a perfect document, there were proposals from the Executive and the puli hearing provided Nigerians the platform to make the better and from what we have seen today, the whole country represented by the lawmakers have assented to it,” he said.
