The tax reform bills proposed by the Bola Tinubu administration are not against the interests of northern states, contrary to the belief of some northern leaders, a presidential aide has said.
President Tinubu’s spokesperson, Bayo Onanuga, disclosed this in an explanation he sent to PREMIUM TIMES on Thursday.
Onanuga was responding to the Northern Governors Forum, which opposed the bills, especially the Value Added Tax provision.
PREMIUM TIMES reports that President Tinubu sent the four bills to the National Assembly as part of efforts to reform Nigeria's tax system. The bills seek, among other things, to create a central revenue service that will collect all government revenue, including those currently collected by agencies such as customs and the port authority. The bills also seek to allocate more VAT revenue to states, but would allow the states where the VAT is generated to get the lion's share. It is this latter position that northern leaders believe would not favor the states of the region.
Onanuga, however, said the northern leaders' position was based on inaccurate information. He said it was “necessary to address the misunderstandings and misgivings surrounding the tax reform that the administration has already undertaken.”
“These reforms emerged after an extensive review of existing tax laws. “The National Assembly is considering four executive bills designed to transform and modernize Nigeria’s fiscal landscape,” he wrote.
Read Mr. Onanuga's full statement below.
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EXPLAINER: TAX REFORM LAW PROPOSALS NOT AGAINST THE NORTH; WILL BENEFIT ALL STATES
The Governors of 19 Northern States of Nigeria, under the platform of the Northern Governors Forum, in their meeting on Monday, October 28, 2024, expressed their opposition to the new derivation-based model for the distribution of Value Added Tax ( VAT) in the new tax reform bills before the National Assembly.
The chairman of the forum, Governor Muhammed Inuwa Yahaya of Gombe State, read the statement.
The meeting of the Northern Governors Forum was also attended by traditional rulers of the region, led by the Sultan of Sokoto, His Eminence Muhammadu Sa'ad Abubakar III.
While we commend the Governors and traditional rulers for supporting President Bola Tinubu for the success recorded in addressing the country's security challenges, we find it necessary to address the misunderstandings and misgivings surrounding the tax reform already undertaken by the administration.
President Tinubu and the Federal Executive Council recently endorsed new policy initiatives aimed at streamlining Nigeria's tax administration processes, improving efficiency and eliminating redundancies across the country's tax operations.
These reforms came about after an extensive review of existing tax laws. The National Assembly is considering four executive bills designed to transform and modernize Nigeria's fiscal landscape.
First is the Nigerian Tax Bill, which aims to eliminate unintended multiple taxation and make Nigeria's economy more competitive by simplifying tax obligations for businesses and individuals across the country.
Secondly, the Nigerian Tax Administration Bill (NTAB) proposes new rules governing the administration of all taxes in the country. Its objective is to harmonize tax administrative processes in federal, state and local jurisdictions to facilitate compliance for taxpayers in all parts of the country.
Thirdly, the Nigerian Revenue Service (Establishment) Bill seeks to rename the Federal Inland Revenue Service (FIRS) as Nigerian Revenue Service (NRS) to better reflect the Service's mandate as a revenue agency for the entire federation, not just for the federal government. Government.
Fourth, the bill on the establishment of the Joint Board of Revenue proposes the creation of a Joint Board of Revenue to replace the Joint Board of Revenue, which encompasses federal and all state tax authorities.
The fourth bill also suggests establishing the Office of Tax Ombudsman under the Joint Board of Revenue, which would serve as a complaint redressal body for taxpayers.
It is instructive to note that these proposed laws will not increase the number of taxes currently in effect. Rather, they are designed to optimize and simplify existing tax frameworks.
The tax rates or percentages will remain the same under these reforms as they focus on ensuring a more equitable distribution of tax liabilities without increasing the burden on Nigerians.
The reforms will not lead to job losses. Rather, they are structured to stimulate new avenues of job creation by supporting a dynamic, growth-oriented economy.
Importantly, these laws will not absorb or eliminate the obligations of any existing department, agency or ministry. Instead, it aims to harmonize revenue collection and administration across the federation to ensure efficiency and cooperation.
At the moment, tax administration lacks coordination between federal, state, and local tax authorities, often resulting in overlapping responsibilities, confusion, and inefficiency. Without reforms, this inefficiency will persist.
The proposed laws aim to coordinate efforts between different levels of government, which will result in better management of tax resources and greater clarity for taxpayers.
Under existing laws, taxes such as Corporate Income Tax (CIT), Personal Income Tax (PIT), Capital Gains Tax (CGT), Petroleum Profits Tax (PPT) , the Tertiary Education Tax (TET), the Value Added Tax (VAT) and other tax provisions contained in numerous laws are administered separately, with individual legislative frameworks.
The proposed reforms seek to consolidate these multiple taxes, integrating the CIT, PIT, CGT, VAT, PPT and excise taxes into a unified structure to reduce administrative fragmentation.
Regarding the proposed derivation-based VAT distribution model, which is opposed by the Northern Governors, it should be noted that the new proposal, as set out in the bill, is designed to create a fairer system.
The current VAT distribution model is based on where the tax is remitted and not where goods and services are supplied or consumed. The ongoing tax reform seeks to correct the inequity inherent in the current derivation model as a basis for distributing VAT revenues.
The new proposal before the National Assembly describes a different form of derivation that considers the place of supply or consumption of relevant goods and services. This means that northern states that produce the food we eat should not lose out just because their products are exempt from VAT or consumed in other states.
These reforms are critical to improving the lives of Nigerians and were not proposed by President Tinubu to undermine any part of the country. There is no better time than now for the National Assembly to give due consideration to these bills that will reform our tax systems and create the revenue that all levels of government need to fund the development our country and our people urgently need.
Bayo Onanuga Special Adviser to the President (Information and Strategy)