The Tax Reform Bills will modernise the economy and enhance the standard of living of Nigerians, some stakeholders said yesterday.
The Nigeria Extractive Industries Transparency Initiative (NEITI) and Trade Union Congress (TUC) said the bills represented major transformative changes for the country.
Also, a former National Assembly member, Bamidele Faparusi, said only those opposed to the progress of the nation would stand on the way of the bills.
NEITI’s Executive Secretary, Dr Orji Ogbonnaya Orji, said the bills would modernise tax system, streamline and broaden its administration to align with global best practices.
TUC commended the Federal Government and the Nigeria Governors Forum (NGF) for reaching an agreement on the bills.
The Labour Centre said the agreement reached by both parties captured some of the concerns it raised last year.
President, Trade Union Congress (TUC), Festus Osifo, said it was a relief that the agreement captured two of its concerns – Value Added Tax (VAT) and tax-funded agencies.
The TUC had raised concerns on VAT increase; tax exemptions limited to those earning N800,000 per annum and the gradual defunding of TETFUND and NASENI.
Osifo said: “Allowing the Value Added Tax (VAT) rate to remain at 7.5 per cent is in the best interest of the nation, as increasing it would place an additional financial burden on Nigerians, many of whom are already struggling with economic challenges. At a time when inflation, unemployment, and the cost of living are rising, imposing higher taxes would further strain households and businesses, potentially slowing economic growth and reducing consumer purchasing power.
“It is also good to note that both TETFUND and NASENI will remain a going concern, as these institutions have greatly impacted the country through their respective mandates. Both have respectively been instrumental in improving our tertiary education and the adoption of homegrown technologies to enhance national productivity and self-reliance. Their continued existence is vital for sustaining progress in education, technology, and economic development across the country.
“On a general perspective, we welcome the inclusion of the derivation component in the Value Added Tax distribution amongst the three tiers of government. When passed into law and properly implemented, it will encourage productivity at the sub-national level thereby move us gradually from a total rent seeking economy to a derivation based system that will stimulate economic activities.”
Orji said NEITI’s observations followed a detailed review of the draft legislation, which showed extensive research and consultation to produce the innovative provisions that are being deliberated upon.
The bill, NEITI noted, emphasised the consolidation of legal frameworks, taxing digital assets, addressing resident and non-resident taxation, and introducing measures to curb tax evasion while demonstrating a strong commitment to fiscal transparency and efficiency.
“A detailed review of the Bill revealed that it has the potential to impact positively on revenue generation, household livelihoods, job creation, and overall economic opportunities.”
As an agency with legitimate interests in the draft legislation, NEITI said “the public debate generated by the Bill underscored the overwhelming public interest by Nigerians and the need for greater clarity and trust in its provisions after it is finally passed into law”.
They agency said its section-by-section review of the draft law revealed its strengths and weaknesses, particularly as they affect the extractive industries, which is the core of NEITI’s specific mandate.
According to NEITI, Sections 1 and 2 aim to ensure a unified tax legislation across Nigeria for individuals and legal entities.
However, they do not have explicit guidelines to harmonize federal and state tax laws and clarify roles of subnational governments.
NEITI said: “Careful management of the transition process and robust public awareness campaigns were critical to avoid administrative confusion.
The agency recommended the introduction of clauses to address the alignment with state tax systems and provide guidance for resolving jurisdictional conflicts.
NEITI noted that the provision on taxation of digital assets aligned with global practices. It called for clear definitions of the taxable assets, events and valuation guidelines to be established to ensure effective reporting mechanisms and implementation, allowing for exemptions or phased implementation for small businesses, to support growth.
On Resident and Non-Resident Taxation, NEITI commended the provision for significant economic presence, but said it required clear criteria to avoid disputes and challenges in enforcement. While the provision requiring minimum effective tax rates for foreign subsidiaries was desirable to curb profit shifting, NEITI said collaboration with international tax authorities was essential for its success.
The transparency and accountability agency stated further that it supported the provisions on taxation of undistributed profits, but advised that consideration must be given to small and medium enterprises (SMEs), to avoid disproportionate impacts on their businesses. The Agency also recommended the provision of exemptions for small businesses or startups to encourage reinvestment and growth, stipulation of explicit thresholds for significant economic presence to simplify enforcement and compliance with taxation of non-resident persons.
On Benefits in Kind (BIK) and Employee Taxation, NEITI called for explicit guidelines to be established for valuing benefits like accommodation and other perks, to ensure smooth implementation and minimize disputes.
Furthermore, NEITI noted the exclusion of partnerships and joint ventures in petroleum operations which presents a huge gap that should be addressed to ensure fairness and accountability in the extractive sector. On taxation of petroleum operations, NEITI called for the reduction of hydrocarbon tax rates for smaller operators to promote industry participation, expansion of incentives for carbon capture and the introduction of incentives for renewable energy development projects and energy transition investments to align with energy transition goals.
Describing the provisions on Stamp Duties and Value Added Tax (VAT) as comprehensive, NEITI observed that its enforcement in the informal sector and compliance burdens on SMEs remain concerns to be mitigated, while the success of efforts to provide relief on double taxations would depend on robust international agreements and institutional capacity to effectively implement the scheme.
Also, NEITI called for the reassessment of tax rates for small-scale service providers, including the simplification of processes for compliance with Excise Duty on Services to ease their burden. NEITI recommended the implementation of robust digital tax administration tools to track, monitor and prevent VAT evasion, compliance and fraud. The Transparency Agency also called for simplified application procedures to be established and incentives expanded to include climate change mitigation and renewable energy projects and provision of targeted incentives for renewable energy projects to align with energy transition goals.
NEITI urged the National Assembly to expand exemptions under the tax incentives to include renewable energy and other sustainability projects, pointing out that placing emphasis on sustainability and environmental initiatives was limited and weak.
Other recommendations include the need to streamline application procedures and the provision of technical support for applicants for Economic Development Tax Incentives; definition of eligible sectors exemptions from Stamp Duties and VAT transactions for greater transparency as well as lower stamp duty rates for priority sectors to encourage investment.
In terms of the general provisions, NEITI recommended investment in capacity-building for tax administrators and adoption of data-driven monitoring systems.
On Relief for Double Taxation and Taxation of Dutiable Instruments, NEITI recommended the inclusion of provisions for the establishment of clear dispute resolution mechanism, possibly through tax tribunals for arbitration or negotiations. It equally called for the introduction of reduced rates or exemptions for priority sectors to encourage investment.
NEITI therefore called for robust engagements with critical stakeholders especially the civil society. The Agency offered to lead the engagements with the third sector on the reform Bill, given its experience in relationship management, goodwill and confidence building it has developed over time with the civil society.
TUC urged the government to review the threshold for tax exemptions and increase it from the current N800,000 per annum, as proposed in the bill, to N2.5 million per annum.
The Congress also urged the Taiwo Oyedele -led Presidential Committee on Tax Policy and Fiscal Reforms to review the proposed bill assigning royalty collection to the Nigeria Revenue Service (NRS) and instead assign the task to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
“The proposed bill assigning royalty collection to the Nigeria Revenue Service (NRS) appears beneficial on the surface but would most likely result in significant revenue losses for the government. Royalty determination and reconciliation require specialised technical expertise in oil and gas operations, which NUPRC possesses but NRS lacks, potentially leading to inaccurate assessments and enforcement issues. Additionally, this shift would create regulatory burdens, increase compliance costs for industry players, and reduce investor confidence due to overlapping functions and inefficiencies between NUPRC and NRS.
“While we deeply appreciate the Federal Government’s efforts to listen and adjust to our advocacy, we still advocate that the above concerns be considered and adopted in the Tax Reform Bill, they will be highly beneficial to the Government and Nigerian populace.
“The Trade Union Congress of Nigeria has a shared responsibility to promote policies that improve the lives of Nigerians amongst whom are workers. We believe that proactive measures when implemented are for the maximum good of the citizens and are evidence of great and sincere leadership. As the conversations around the Tax Reform Bill continue, it is our expectation that the focus would be equitable economic growth and improved living conditions for all Nigerians,” TUC stated.
Faparusi said the opposition to the tax reform bill by some National Assembly members has exposed those who want Nigeria to remain backward and under-developed.
The ex-lawmaker representing Gbonyin/ Ekiti East/Emure federal constituency, said this in a statement by his Media Office and made available to journalists in Ado Ekiti, the state capital on Tuesday.
Faparusi who called on the lawmakers opposing the bill to have a rethink, said that archaic and obsolete tax laws in operation, had constituted impediments to the economic development of Nigeria and responsible for the revenue leakages as well as disparity in tax administration.
Espousing his views in the proposed tax laws, Faparusi commended the Nigerian Governors Forum (NGF) for adopting the tax reform to overcome controversies trailing the proposal.
Lambasting the federal lawmakers opposing the bills, Faparusi stated that it was shameless and disappointing for leaders at that echelon to be criticizing the tax bills they knew nothing about, saying this testified to the high level of degeneration in the leadership system.
The All Progressives Congress chieftain was upbeat that the new tax regime would reinforce revenue generation and solidify the country’s economy when fully operational.
Faparusi hailed the governors for not backing the unwarranted and misdirected calls for the withdrawal of the bills already pending before the National Assembly, saying this signposted extreme display of patriotism and service to the nation.
“Those calling for the new Tax bills’ withdrawal are enemies of progress. It highly disappointing and most unfortunate to see members of National Assembly bragging that they are not interested to even read the contents of the bills, let alone considering them.
“Such members should be ashamed of them selves now that the Governors has endorse the new Tax reform.
“I urge the NASS to do the job the Nigerian people elected them to do faithfully, rather than playing sectional and ethic politics with the future and prosperity of Nigeria.
The New Tax bills are about attracting investment, creating prosperity and reducing poverty.
“In my view it will ensure equitable shared prosperity in Nigeria.
I understand the need to protect diverse interests, the status quo might have conferred undue benefits on some sections of the country, notwithstanding, any criticism of the reform must be objective, nationalistic and progressive.
“We should give President Tinubu free hands to navigate us out of the decade of economic mismanagement that has brought the country to his knees. If the President needs this tax reform as a tool , it’s only reasonable to give it to him”
