THE Senate has passed for second reading the four contentious tax reform bills that were forwarded to it for consideration for consideration.
After scaling Second Reading during plenary on Thursday, the President of the Senate, Senator Godswill Akpabio referred the four bills to the Senator Sani Musa, APC, Niger East led Committee on Finance to carry out other legislative action and report back in six weeks.
Prior to debate on the bills, the Senators had gone into a closed door session from 11.55am to 12.42pm.
The resolution of the Senate was sequel to presentation of the lead debate on the general principles of the bills by the Senate Leader, Senator Opeyemi Bamidele, APC, Ekiti Central.
After lead debate presentations on the bills by the Senate Leader , many of the Senators who made contributions on the bills like Senators Sani Musa ( APC Niger East), Seriake Dickson ( PDP Bayelsa West ) , Abba Moro ( PDP Benue South) and Senate Whip , Tahir Monguno ( APC Borno North ) fully supported the bill.
But former Senate Leader, Senator Ali Ndume, APC , Borno South kicked against the reform bills on the grounds of timing and lack of wider consultations, describing them as discriminatory in nature.
In his presentation, Bamidele said that they are "A Bill for an Act to Establish the Joint Revenue Board, the Tax Appeal Tribunal and the Office of the Tax Ombud, for the harmonization, coordination and settlement of disputes arising from revenue administration in Nigeria and for related matters, 2024 (SB. 583).
"A Bill for an Act to Repeal the Federal Inland Revenue Service (Establishment) Act, No.13, 2007 and enact the Nigeria Revenue Service (Establishment) Act to Establish the Nigeria Revenue Service, charged with powers of assessment, collection of, and accounting for revenue accruable to the Government of the Federation, and for related matters, 2024 (SB. 584)
" A Bill for an Act to Provide for the assessment, collection of, and accounting for revenue accruing to the Federation, Federal, States and Local Governments; prescribe the powers and functions of tax authorities, and for related matters, 2024 (SB. 585) –
" A Bill for an Act to Repeal certain Acts on taxation and consolidate the legal frameworks relating to taxation and enact the Nigeria Tax Act to provide for taxation of income, transactions and instruments, and for related matters, 2024 (SB. 586).
In his lead debate on the general principles of the bills, the Senate leader said, "The Nigeria's tax reforms bill is a significant move to overhaul the country’s tax system. These bills aim to simplify the tax landscape, reduce the burden on small business and streamline how taxes are collected.
"In broad terms, the four Bills seeks to ensure uniformity in tax revenue administration in Nigeria in accordance with the provisions of the Constitution, eliminate the incidence of double taxation across the country, deploy taxation as a tool to encourage private sector investments in critical industries and boost individual disposal incomes through targeted tax exemptions as captured in the various Bills. In the area of tax exemptions, there is a proposal to exempt those whose salaries are not more the minimum wage from P.A.Y.E deductions while small businesses with annual turnover of N50, 000,000 or less are equally exempted from payment of taxes.
"Similarly, there is proposed huge reduction in company income tax from the current 30% to 25% by 2026. As part of deliberate attempt to curtail the incidence of double taxation and multiplicity of taxes and levies, multiple taxes hitherto paid by companies under various tax heads namely 2.5% education tax, 0.25% NASENI tax have been harmonized into a development level of 2% which by 2030 will be applied to fund the newly established student loan scheme which will benefit many Nigerian youths.
"Furthermore, unlike what is obtained under the existing tax regime whereby the Federal Government takes a lion share of VAT revenues, it is proposed that the sharing formula should allow State Government share 55% of VAT revenue from the current 15% to 10% sharing formula. However, Local Governments share of VAT revenue remains unaffected. Relatedly, basic items consumed by Nigerian households such as ‘food items, medical services and pharmaceuticals, educational fees, electricity etc are exempted from VAT. Again, as part of efforts to ease the administration of income taxes and levies across the Federation, there is a reasonable effort made to consolidate core tax statutes and related tax legislations.
"Contrary to misrepresentations in the public domain regarding the intendment of the Bills under consideration, I wish to state that these Bills contains innovative people -oriented proposals as part of Government's deliberate fiscal and tax reform measures to cushion the effect of ongoing broader economic policies such as the removal of subsidy on petroleum products, renewed efforts to implement cost -reflective electricity tariffs in the power sector etc on Nigerian citizens."
In his remarks, Senator Henry Seriake Dickson, PDP, Bayelsa West said, " they are sent by the current administration to let the governments of Nigeria, all levels, run on tax. And tax revenue is something that I fully support. I am aware that some issues have been raised, and that is legitimate, where a country of diverse people, diverse cultures, diverse expectations, and that's the beauty and the greatness of Nigeria.
" You cannot expect to be a country that speaks with one voice or sees things only from one All those are legitimate observations and fears and expectations. All we are expected to do is to harness all of this and enact laws in the national interest, which I believe, following our rules, after the second reading at the committee stage, when the public hearing is over. Anybody who has anything to say will be invited to say, as the Chairman of the Committee has said. Now, there are issues I am concerned with. Some of these issues that have been raised are also as a result of insufficient consensus building and consultation prior to the introduction. It's understandable.
" As a former governor while some governors were interested in some of these, some expressed concerns. That is legitimate. That consultation should have taken place. And I believe between now and at the end of our legislative activities, more consultations will happen. But that does not detract from the essence of the legislations that have been sent to us.
" For example, there is emphasis on derivation according to taxation. And the attempt now is to encourage states to be productive. A situation where states will abandon their core responsibility to create an enabling environment, attract investment, promote economic activities, so that that state can boost its revenues. That's a good thing. That's not a bad thing. I am concerned from where I come from, from the experiences you and I have, where oil workers are flown into oil platforms in Akwa Ibom, in Eket and Ibuno, in Akwa Ibom, or flown into Boni and other areas in River State, or flown into Brass in Bayelsa, and in the Southern Niger area, and in Delta State, in Ogola and Folcados.
"We are interested that this is an opportunity for the payee taxes from those oil workers to be calculated and paid to the oil producing states where those activities are generated. As gains being calculated and paid the head office is located, as has been the case, where the tax is registered.
"And from the general principles underlying this bill, as I explained yesterday, there is a move and a commitment by the executive to address that issue of revenue derivation, to ensure that payee taxes, even for the Oil workers that are flown in and flown out every day after their work, be calculated and paid. If that is done, a good move that should be supported. The other area, in fact, according to derivation, when we get to the committee stage, we'll look at the specific details, but there's nothing wrong in saying that the telephone calls that are made in Bayelsa or Akwa Ibom or Sokoto or Kano, the VATs on those things that are consumed, be calculated and paid to those states. And we are told that that is the essence of these bills. And there's nothing wrong about it.
"Because VAT is a consumption tax, it is not a production tax. Those who are in the states who consume services, the VAT accruing to those should be calculated and paid I'm sure when we look at the details, we'll see whether there's enough mechanism to guarantee transparency and accuracy in terms of administration.
" Those are some of the things we'll fine-tune. this is a good move. And there is an effort also to reduce the burden on taxation, burden of taxation on Nigerians. Corporate taxes by the proposal to read the bills. There's a proposal to reduce corporate taxes from next year. Reducing it from the 30% that it is currently to 27, 25 percent. So, that is a good move. And there's also a move to remove the people at the lowest level in terms of their salaries and so on. To exempt them completely. These are good things in this bill that should be encouraged. "
"Mr. President, it is for these and other reasons. as a federalist, which I've been all my adult life, I see these bills as a move towards entrenching fiscal federalism in Nigeria, which I fully support. I use this opportunity to call on all my colleagues to agree that these bills, all four of them, should be passed for second reading to enable our committee and the experts and the general public engage in accordance with our rules."
Kicking against the bills, Senator Ali Ndume said, " reforms are necessary if we have to move forward. Oh, would you ever tell us? Even in our lives, we look at where you are, where you want to be, and how you want to be, so that you get there. I am not against reforms. And I am not against these reforms, tax reforms. My problem is, number one, the timing. The timing, as it is today, when you talk about reforms to Nigeria, whether it's good or bad, they're misconceived.
"There are four things, or three, there. But, as you said, the time for that would be at the public hearing or when we pass it for second reading. But let it be on record that my problem with the bills, I've said, one, that is the timing. Number two, the issue of derivation. The issue of derivation made the reform contagious, contaminated, and contradictory in some cases. Because the constitution has to be amended in order for some of these proposals to be effective. I'm glad we are doing a constitutional review. So even if it means reviewing the constitution. This is general principles.
"As you said, or as the Senators decided. We should not throw away the baby and the bathwater. I would have preferred we remove the baby and throw away the water first. And that is to go with what the governors and NEC proposed. That these bills should be withdrawn so that, and they are not saying that the bills should be killed. You withdraw the bill, bring it back to the National Assembly again after getting the buy-in of the governors and NEC and even our traditional rulers.
"Mr. President, let's be honest to ourselves. If we sit down here, work on these bills, assuming as it is now, because the governors have not come out publicly to change their position, the traditional rulers have not sat down publicly to change their position, NEC has not sat down to change their position. And for me, as I say, I looked at the bill. The bill contains so many good things, but these two things, derivation and VAT, even though you say it will be addressed at the public session, it's not something that many of us will agree to it.
"You started by saying, we are going to negotiate, which is good, and it's coming from you. But why don't we negotiate first before we come out to take a position? It's something that looks attractive. It may not necessarily be that. you transfer or you move people from a lower income from VAT and then you increase their taxes, the corporate taxes, the person that is manufacturing that goods will now transfer the VAT cost to it. So it means you gave him the right hand and it was taken or is taken on the left hand.
"Secondly, the Corporate tax you are talking about, when you remove the lower income, which is good, but then in the bill it's 50 million to billion, 25 percent, they reduce it from 30 percent to 25 percent. If a small person or medium enterprising company makes up to 50 million per year and you are charging him the same percentage with companies that are earning billions and declaring billions of profit. I give you example back.
"So the person that is in Nnewi managing to manufacture shoes and his turnover turns up to be 50 million, you are charging him the same with somebody that is sitting down with pen and paper. Read it and use it.
"In conclusion, Mr. President, the third problem I mentioned is the people through the governors and then and the traditional rulers say that the bills should be withdrawn, make some necessary amendments. And then bring it back and we can pass it in 24 hours. That is my position, Mr. President."
In supporting the bills, the Senate Whip, Senator Mohammed Tahir Monguno, APC, Borno North said, "with all due respect to Distinguished Senator Ali Ndume who was my minority leader in the House of Reps, a leader in the Senate, and immediate past Chief Whip of the Senate with all the cognate experience of lawmaking, I beg to disagree with you that this bill should be withdrawn first and consultation should be held with the Nigeria Governors Forum and traditional rulers.
"We have a procedure which is clearly and ambiguously stated in our rulebook for the process of lawmaking. And the Constitution, in a very clear and unambiguous tab, gave us the power to regulate our proceedings, Section 60. And pursuant to Section 60 of the 1999 Constitution as amended, we get these rules to ourselves in order to guide our proceedings. And then the process of lawmaking is very clear and unambiguous as per this book. That second reading, it will be now transmitted to the Committee for Public Hearing. In the course of the public hearing, Nigerians of all walks of life, of all groups, will come and aggregate, including the Governors and traditional rulers, are free to come and ventilate their opinion."
In his remarks, the President of the Senate, Senator Akpabio said that during the public hearing, experts will be invited as well as Governors under the aegis of Nigeria Governors Forum, NGF,Traditional rulers and other stakeholders, just as he said that at the end of the day, the Senate will give to Nigerians and the country what is good.
It therefore mandated its committee on Finance , to organise Public hearing on the bill for inputs from those against the bills like the Governors's forum , National Economic Council ( NEC ) , Northern Elders ' Forum ( NEF ) etc and report back within six weeks .
It therefore mandated its committee on Finance , to organise Public hearing on the bill for inputs from those against the bills like the Governors's forum , National Economic Council ( NEC ) , Northern Elders ' Forum ( NEF ) etc and report back within six weeks .
Recall that on September 3, 2024, President Tinubu transmitted four tax reform bills to the National Assembly for consideration, following the recommendations of the Presidential Committee on Fiscal and Tax Reforms headed by Taiwo Oyedele for the review of existing tax laws.
The bills include the Nigeria Tax Bill 2024, which is expected to provide the fiscal framework for taxation in the country, and the Tax Administration Bill, which will provide a clear and concise legal framework for all taxes in the country and reduce disputes.
Others are the Nigeria Revenue Service Establishment Bill, which will repeal the Federal Inland Revenue Service Act and establish the Nigeria Revenue Service, and the Joint Revenue Board Establishment Bill, which will create a tax tribunal and a tax ombudsman.
Also recall that the same day, both the Senate and the House of Representatives embarked on the hurried recess, the National Economic Council ( NEC ) chaired by Vice President Kashim Shettima, resolved that the tax reform bills should be withdrawn from the National Assembly by President Tinubu for wider consultation.
But President Tinubu on Thursday, 31st October, 2024, responded to the request that the bills should be allowed to pass through the required legislative processes at both chambers which according to him, will give concerned Nigerians the opportunity to get details on the bills and make their inputs, particularly at the stage of Public hearing.
Speaking further on the bills on Background to the proposed Bills, Senator Bamidele said, "the Constitution of the Federal Republic of Nigeria, 1999 (“the Constitution") and a plethora of federal and state enactments as well as case law constitutes the extant legal framework for tax administration in Nigeria. While the Constitution as the grundnorm provides for the taxing powers cum legislative powers of the three tiers government, there are enactments at the federal and state levels on specific taxes and levies which the courts have given judicial recognition in the course of exercising its adjudicatory powers under the Constitution.
"Apart from thé corpus of primary Federal and sub national tax statutes, there are equally other statutes that are not purely tax legislations but nevertheless impose profound tax obligations on Nigerian citizens and other entities doing business in Nigeria. The sheer multiplicity of conflicting statutes and case law on taxes and levies in Nigeria at the Federal and subnational levels is quite confounding that makes it difficult for efficient tax administration. There is no gainsay that the Appellate Courts’ interpretation of extant statutes has either created more confusion or generated more controversy especially as it relates to the taxing powers of the three tiers of government, the jurisdiction of existing courts and tribunals etc. Beyond this, experts had in the past. harped on the need for consolidation of tax statutes in Nigeria in simple and easy language to allow seamless administration of public revenue in Nigeria. These Bills seeks to address some of these lapses in the existing legal and institutional framework tax administration in Nigeria."
On Specific Structure and objectives of respective tax Bills, the Senate leader said, "The Joint Revenue Board of Nigeria (Establishment) Bill, 2024 -SB.583. SB.583 is made up of 60 clauses subdivided into VI parts, and three schedules. It specific objectives as can be gleaned from clause 1 of the Bill is to ( a) provide the legal and institutional framework for the harmonization and coordination of revenue administration in Nigeria; (b) provide a mechanism for efficient dispute resolution; ( c) promote the rights of tax payers. Accordingly, novel provisions in SB. 583 includes the establishment of the Joint Revenue Board under Part II, clauses 322 to replace the Joint tax Board; establishment of the Tax Appeal Tribunal with some level of autonomy under Part V, clauses 23 -34; and establishment of the Office of the Tax Ombudsman to facilitate investigation of tax complaints made by tax payers.
"The Nigeria Revenue Service (Establishment) Bill, 2024SB.584. The Bill is made up of 43 clauses subdivided into six (VI) parts and three schedules. The objective of the Bill is to provide for the legal, institutional and regulatory framework for administration of taxes and revenue under any law made by the National Assembly and to account for such taxes and revenue collected. Key novel provision is the establishment of the Nigeria Revenue Service (NRS) with: broader powers over revenues accruing to the Federation.
"The implication is that unlike the FIRS, the NRS will be more involved in collection and administration of all taxes and duties accruing to the Federation including those in the petroleum sector and those administered currently by other Federal Government agencies such as the NPA, NIMASA and Nigeria Customs.Service etc.
"The Nigeria Tax Administration Bill, 2024 -SB.585. The Bill is made up of 144 clauses subdivided into five chapters with some of the chapters further subdivided into parts as follows. The specific objectives of the Bill as outlined under clause 1 is to provide for uniform procedures for a consistent and efficient administration of tax laws in order to facilitate tax compliance by tax payers and optimize tax revenue. Specifically, the Bill provides assessment, collection and accounting for particular taxes and levels by the three tiers of Government especially on matters of income tax, capital gains etc. There are novel provisions including copious provision that allows of automation in tax collection and integration of technology into tax administration, harmonization of tax offences and penalties to promote enforcement arid compliance, introduction of installment tax ‘payment model under certain conditions and introduction of the principle of derivation in the sharing of VAT revenue unlike the current arrangement that relies on the places of VAT remittance which is usually the headquarters of service and goods suppliers and not locations across the country where the goods and services are actually consumed. The current arrangement unlike what is proposed unduly favours the most industrialized States in Nigeria to the detriment of States where such goods and services are consumed but are not lucky to host the headquarters of these service and goods suppliers. "
On the Nigeria Tax Bill, 2024 -SB.585, Bamidele said, "The Nigeria Bill, 2024 is essentially a compendium of taxes and levies charged in Nigeria and payable by individuals and companies. Accordingly, when passed will repeal about 11 existing Federal States statutes since all of them have been consolidated, updated and simplified under this Bill.
"The reforms also include a more progressive personal income tax (PIT) system, with reduced rates for low-income earners for instance those earning under N800, 000 annually pay no PIT. "
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