10 Facts You Should Know About Tinubu’s Tax Reform Bills

The proposed tax reform bills took a significant step forward on Thursday, passing their Second Reading in the Senate despite notable objections from some lawmakers. Presenting the lead debate on the Executive Bill, Senate Leader, Michael Opeyemi Bamidele described the legislation as “a significant move to overhaul the country’s tax system.” He said, “These bills aim to simplify the tax landscape, reduce the burden on small businesses, and streamline tax collection.” Tribune Online examines 10 facts about the proposed tax reform bills in this article. Key Bills Introduced The reform package includes four main bills: the Nigeria Tax Bill, the Nigeria Tax Administration Bill, the Nigeria Revenue Service (Establishment) Bill, and the Joint Revenue Board (Establishment) Bill. Each bill addresses specific aspects of tax administration, compliance, and enforcement. Major Benefits The proposed bills aim to ensure uniformity in tax revenue administration across Nigeria, eliminate double taxation, use taxation to encourage private sector investment in critical industries and boost disposable incomes through targeted tax exemptions. Reduction of Tax Burden A notable feature of the reforms is the proposal to reduce the corporate income tax rate from 30% to 25% over the next two years. This reduction seeks to alleviate financial pressures on businesses and foster investment. Derivation Principles in VAT Revenue Distribution The bills propose a significant shift in VAT revenue distribution, allocating revenues based on the states where goods and services are consumed rather than pooling them centrally for redistribution. The Federal Inland Revenue Service (FIRS) Chairman, Zacch Adedeji, explained that this approach aligns VAT with its nature as a consumption tax. Exemptions for Low-Income Earners The reforms propose exempting individuals earning below the minimum wage from the Pay As You Earn (PAYE) tax. Similarly, small businesses with annual turnovers of N50 million or less would be exempt from paying taxes. Harmonisation of Tax Administration The Nigeria Tax Administration Bill aims to standardise tax rules across federal, state, and local levels. This measure seeks to reduce taxpayer confusion and compliance costs, thereby enhancing transparency and efficiency in tax collection. Creation of the Nigeria Revenue Service The Nigeria Revenue Service (Establishment) Bill proposes transforming the Federal Inland Revenue Service (FIRS) into a centralised agency responsible for tax collection nationwide. This rebranding aims to improve accountability and streamline revenue generation processes. Joint Revenue Board for Taxpayer Rights The establishment of a Joint Revenue Board is proposed to replace the existing Joint Tax Board. This new body would focus on protecting taxpayer rights and resolving disputes, with representatives from all tax authorities promoting a unified approach to tax administration. Supporting Private Sector Investment The reforms position taxation as a strategic tool to attract private sector investment into critical industries, contributing to Nigeria’s broader economic development goals. Second Reading Approved in the Senate The proposed bills advanced to their Second Reading in the Senate despite some lawmakers’ reservations regarding stakeholder consultations and the derivation principle. The Senate Committee on Finance has been mandated to review the bills and report back within six weeks.

10 Facts You Should Know About Tinubu’s Tax Reform Bills

Leave a Reply