- President’s team explains Bill to senators
The Chairman of the Federal Inland Revenue Service (FIRS), Zaccheus Adedeji, Director-General of the Budget Office, Tanimu Yakubu, and Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele have appealed to the Senate to pass four Tax Reform Bills to catalyse the country’s development.
The trio, who appeared before the Senate in Abuja, explained that the bills seek to bring everything about taxation and administration of tax in the country under four different legislations.
The proposed tax laws are: the Nigeria Tax Bill; Nigeria Tax Administration Bill; the Nigeria Revenue Service Establishment Bill and the Joint Revenue Board Establishment Bill.
Adedeji, Yakubu, and Oyedele explained that the bills contain all major taxes payable by individuals and companies packaged as a compendium of taxes.
They said, contrary to some information in the public domain, the Bills are meant to radically transform tax administration for better efficiency.
The FIRS, Budget Office, and Presidential Tax Reforms Committee bosses added that the bills would update all archaic tax laws and simplify the complicated tax ecosystem.
They also said that the reforms favour low-income earners and small businesses as they would be exempted from paying personal and company taxes.
FIRS boss Adedeji allayed the fears of Nigerians on possible introduction of new taxes through the Reform Bills.
The FIRS chief said: “We thank the Senate leadership for allowing us. You know it is unusual to be here at this time, but we are here today (yesterday) because of the critical nature of these bills and the transformative capacity that they all possess.
“This committee was set up more than a year ago; it has moved around the country, made consultations with the governors, commissioners, with everybody; the consultations will still continue until the bills are passed, and even after that, education will continue.”
He explained that the essence of the bills was to stimulate the economy, adding: “Don’t forget that Mr President had said that he would not tax poverty but prosperity, fruits and not seeds, returns and not investments.
” This is the beginning of Mr President’s commitment to fulfilling these so that we can have a solid foundation that will lead to the prosperity of this country,”
After his remark, Adedeji called on Oyedele to present details of the proposed reform bills to Senators for a better understanding.
Oyedele said the proposed Tax Reform Bills are designed to address immediate fiscal challenges and lay the sustainable framework for the economic growth and development of the country.
He added that the current economic situation in Nigeria had necessitated immediate and comprehensive tax reforms to address poverty, improve revenue collection and create a favourable business environment.
He said: “Our economy has not been growing well enough over the past 10 years. Our growth rate on average has been under 2% below our population growth rate and this means that more people get into poverty every day than the previous day.
“Our inflation is very high, so is unemployment. Government revenue is very low, and public debt is rising, as well as the cost of servicing the debt.
“Investment in our country is declining. In the whole of Q2 of 2024, we only attracted about $29 million in foreign direct investment.
“We have seen several companies exit the country. We have seen those that have closed down and some that have scaled down their operations from having about five plants to about two, including some local companies.
“On the next slide, we have significant areas of work in progress in reforming our economy and taking Nigeria to a place where we all aspire for the country to be. We also have areas where we are beginning to see positive results.
“For the areas where we need to make improvements, this includes our exchange rates, the strength of the Naira, and the stability of the Naira. We need to rein in inflation, as well as the cost of doing business. We need to address rising poverty in the land and the cost of doing business, as well as finding decent jobs for our people, particularly our young population.
“Our interest rate environment is very high, almost impossible to do any legitimate business, borrowing at 40 to 50 percent. We also have challenges around efficient public financial management, coordination of government policies across different levels, as well as public communication.
“But areas where we’re beginning to see positive results include the balance of trade and current account surplus. We are beginning to see inflation slowing down in developed markets, which means as they cut their rates, more investments will come in our direction. We’re seeing a decline in budget deficits, we’re seeing rising revenue, though remains small, and we’re seeing crude oil local refining in Nigeria, which is good news.
“We have our capital markets not doing badly, could be better and these are some of the context about what led to the reforms.
He described the current Value Added Tax (VAT) sharing formula as unfair, saying it only favours states.
Oyedele further stated that the proposed tax reforms would engender a more equitable distribution, based on consumption within states.
He urged the Senate to consider the proposed bills favourably to create a more conducive environment for investments and business operations in the country.
Oyedele added: ‘’Mr. President (Bola Ahmed Tinubu) set up the Presidential Fiscal Policy and Tax Reforms Committee last year, August.
“Some of the findings driving our recommendations today are that our budget is very low. It’s not enough to fund our development.
“For the year 2024 that is coming to an end, the total of the budget of the Federal Government, including the amendment to the Appropriation Act, and all the 36 states of the federation, comes to about N51.1 trillion only.
“If we convert this to the United States dollars, it is just barely $32 billion. This amount is the size of the budget of Kenya, that has only 54 million people and a lot of poverty in the land as well. This amount is less than one quarter of the budget of South Africa. $130 billion is their budget, and they have about 60 million people.
“When government cannot raise revenue rightly and they print money to spend, it is effectively taxation without legislation because the value of the money in everybody’s pocket reduces proportionately.
“Unfortunately, this way of imposing taxes without legislation further imposes more burden on the lower end of the ladder and this will promote inequality and further fuel insecurity because of the social tension, hopelessness and not caring for our people enough.
“The question we ask ourselves is that if we do not do these reforms now, then when should we do it? If it’s not us, then who should do these reforms?
“We conducted a national study trying to find out from the Nigerian people their perception towards paying taxes because you know that tax is at the heart of the social contract, is the reason why societies can exist. It turns out that only 17% of Nigerian adults believe that they should pay their taxes and that tax evasion is wrong and punishable. 83% of Nigerian adults would do anything but pay their taxes.
“This is the lowest that we have seen of any country where this study has been conducted. When we asked them why is it that they don’t want to pay taxes, they gave us three very important reasons. The first one is that they said they do not trust governments.
‘’Our finding is that the fiscal system we have today inhibits growth. And in my private sector experience before my current role, I was involved for over a decade in looking at tax system in more than 180 countries worldwide.
“I can tell you with all sense of responsibility, Nigeria’s tax system is one of the most backward in the world.
This cannot help us with our ambition of a great country which is what we desire and truly deserve.
“We cannot want to grow manufacturing and then we are taxing investment. We thought it’s important for us to make sure that our tax and fiscal policies are consistent with our growth and development aspirations.
“Tax neutrality, so that tax does not become a burden for those who are doing business. Competitiveness: can we attract investment to Africa, just within Africa. What we are beginning to see from our analysis, Nigeria’s income tax rate for companies runs in the top 10 highest tax rate in the world, Nigeria is in the top 10.
“One of the reasons why America is one of the greatest countries in the world today is they support their businesses. Even when the business has made a loss, America allows you in some states to go and sell the loss and collect money so you can continue to fund your business.’’
