Tax reforms globally have always been controversial considering its impact on citizens. However, they always hold benefits of making the economy better positioned for growth; BENJAMIN UMUTEME reports.
On October 3, 2024, President Bola Tinubu had written the senate and the House of Representatives four different executive bills for far-reaching tax reforms following recommendations of the Taiwo Oyedele-led presidential committee on fiscal and tax reforms.
The bills are “the Nigeria revenue service (Establishment) bill,”; “Transmission of fiscal policy and tax reform bills to the National Assembly,”; “Nigeria tax administration bill”; and the joint revenue board (Establishment) bill.
According to the president, the proposed tax bill presents substantial benefits to a library, government connectives and economic growth by enhancing tax payers compliance, strengthening fiscal institutions, and fostering a more effective and transparent fiscal regime.
“In this, I am confident that these bills, once passed into law, will encourage and stimulate the economy,” he said.
The tax reform bills have not been without its controversies with many saying that it is anti-people, while another group opines that it will damage the economy. While another school of thought argues that it is targeted at northern Nigeria.
Analysts have partly blamed the government for the misconception about the bills saying it has not created enough awareness.
However, many of the criticisms against the bills have been more of a bandwagon effect with many not having read the bills to be able to make informed opinions.
Bills’ll ensure economic growth
The Minister of Budget and Economic Planning, Atiku Bagudu, in an interview with journalists emphasized that the tax reform Bills will ultimately benefit Nigerians and ensure economic growth.
He said: “We have to recognise that some legislation, by nature, is difficult, even in advanced countries, tax legislation is a very big issue in economic development. It determines elections even in the US. Today, the British economy has a challenge even with tax, basically a mini budget that cannot be supported by the tax. Today, the British Prime Minister is facing a challenge because of taxation and debates about taxation.
“If you recall, historically, even in the 80s, Ronald Reagan, supply side economies, they are all tax issues. Today, Trump is talking about tariffs in a way that those are all about taxation. So, we are no different but what is happening in Nigeria is that there are laws that have been there for long.
“Today, if one looks at one of the tax bills, particularly the one that is, I think, generating the most controversy, is about 247 pages long, a lot of it with definitions, technical jargons that you need guidance in order to understand.
“Secondly, that legislation repealed about 12 laws that have been existing. So, if you are a small scale businessman or businesswoman or a bank, you need a compliance unit that understands those 12 laws in order not to run a call of one. Equally, that legislation is amending other 19 laws, as well as revoking laws. So, again, why this controversy? If a legislation is submitted to National Assembly, every part of Nigeria is represented, it could be that I’m from a fishing community, and if somebody say, I want to come, under the river there is diamond mine, and I have been given license, I have the right to ask, okay, what will happen to my fishing community? And that’s why I’m there, and then debate it and say, okay, even if we are doing it for the greater good, how can we accommodate my fishing communities? It’s not a monologue. And even when the Senate said six weeks for a public hearing, we can debate about time. We can debate about arguments. But what is wrong is for us, given the great effort that we are making to put our economy in the right direction, to be swayed by arguments of tribalism, of religion, of sentimental arguments.”
Multiple taxation
One good thing many have pointed to in the bills is the elimination of multiple taxation of businesses, especially small businesses who continually lamented the negative impact multiple taxes were having on them.
Analysts continue to insist that proposed bills would eliminate multiple taxation and favour low-income earners in the country.
“The benefits of the tax reforms include no multiple payments of tax. It will be based on the money you make, and it will lessen the burden of tax payments on low-income earners,” Director-General of National Orientation Agency (NOA), Malam Lanre Issa-Onilu, Said.
Also, “we want Nigerians to understand the contents of these bills, bring their inputs and make amendments for standard bills acceptable to all,” NOA Director in Niger, Malam Yahaya Gbongbo, added.
Opposition
There has been opposition to the bills which borders on derivation on value added tax (vat). This has raised significant concerns, sparking heated arguments among stakeholders.
Revenue Mobilization Allocation and Fiscal Commission (RMAFC) in a memorandum to the National Assembly, titled “Memorandum On The Position Of The Revenue Mobilisation Allocation And Fiscal Commission On Four (4) Bills In Respect Of The Tax Reform And Fiscal Policy Bill At The National Assembly For Deliberation”, and signed by its Chairman, Mohammed B. Shehu, emphasized that it has the constitutional mandate of ensuring that VAT allocation adheres to the principles of fairness, justice, and equity, highlighted why any arbitrary apportionment may be inappropriate and unconstitutional.
According to the Commission, any deviation from a formula not crafted by the RMAFC risks violating constitutional provisions and undermining the Commission’s role as the impartial arbiter of revenue allocation in Nigeria.
“The Constitution, being supreme, does not envisage that any other Act of Parliament such as the VAT Act could assume this responsibility. Any such attempt would contravene the Constitution. Therefore, the RMAFC remains the sole arbiter in producing allocation formulae that are fair, just, and equitable for the three tiers of Government.
“VAT remains a critical revenue stream for all tiers of government, and its allocation must adhere to constitutional provisions to prevent inequities and national discord. By affirming the RMAFC’s role in determining the VAT revenue-sharing formula, the legislators would have demonstrated commitment to constitutional governance and equitable fiscal management,” RMAFC stated.
Sensitisation
Experts say the government needs to create more awareness on the Bills as many of those opposed to the Bill are yet to fully understand its content.
Speaking with Blueprint Weekend, economist Aliyu Ilias said the bill is a good one but lacked enlightenment on it fully.
He said, “I think there is not much enlightenment concerning the tax reform bills because there are a lot of things people are just discovering about the bills, and because I am interested in the economy of Nigeria that is why I took a big interest in it.”
Even the Small And Medium Enterprises Development Agency of Nigeria (SMEDAN) has said it will engage small businesses nationwide on the implications and opportunities of the proposed tax reform bills.
SMEDAN DG Charles Odii said the move is to educate SMEs which constituted over 90 per cent of Nigeria’s businesses and employ more than 80 per cent of the workforce.
“This means more small businesses will no longer pay taxes, and resources can be reinvested into their growth.
“The reforms also include the consolidation of taxes, elimination of nuisance levies, and zero VAT on exports and essential goods.
“We want SMEs to fully understand the provisions of the bills and ensure they are adequately represented in the legislative process.
“These reforms aim to reduce operational costs and increase accountability in tax implementation,” Odii stated.
For economist Adefolarin Olamilekan, much opposition to the Bills is mostly from a general distrust of the government than from the demerit of the Bills.
He told this newspaper that the impatience of many Nigerians to read the Bill is responsible for opposition.
“Unfortunately, the tax bill was seen by the majority of commentators as one of those anti people policies of the government , particularly as opposition to finding recourse to mystifying the bill in a political economy orientation, thereby living dumping the substance of the tax bill for frivolous and ethnic sensation.
“Currently, in our clime, we have issues with public trust that have created a deep gap of mistrust and low confidence, when it comes to faith in government.
“Apart from this, many Nigerians are inpatient to read or study government policy papers, not just the tax bill.
“Many a times Nigerians feed with wrong information on the details of government policy, especially when opposition politicians and opportunist opinion leaders and influencers engage in matters like this and turn it into a We vs Them.
“More so, the government on their own did not take into account that such sensitive public policy issues would generate this divided opinion and rejection,” Adefolarin said.
Adefolarin, who is also a development researcher, tasked the government to continue engagement with the public through mass media sensitization and rural enlightenment.
“Another is dissemination of the tax bill discussion not just in the city centre or urban areas, but serious engagement with people far into the interior areas in the language they understand.
“Lastly, MSMEs stakeholders in the country must assure that the tax bill is not to distort their business but benefit their businesses in the long term.”
