The tax reform bills have continued to generate controversy, with a segment of the North erroneously claiming that the bills, if passed in their current form, would pauperise the region.
The presidency has vehemently denied this, saying the reforms are meant to simplify the tax system for easy administration, ease the burden of the poor, and eliminate multiple taxations.
It has been observed that most commentators on the tax reform bills haven’t even read them. Please, don’t comment on people’s comments. Obtain the bills, read them with an open mind before forming your opinion about them because there are a lot of misinformation and disinformation on the bills.
There are many favourable provisions for the poor and business people in the tax reform bills. For instance, those who earn less than N1 million annually will no longer pay income tax. Only those earning above N50 million will pay 25 per cent income tax, unlike the current threshold of N3.2 million.
Businesses with turnovers below N50 million won’t pay tax. The current threshold is N25 million. Medium and large companies will see corporate taxes drop from 30% to 25% by 2026. Companies that fail to declare profits will no longer pay a mandatory one per cent gross earnings tax.
A new two per cent development levy replaces the current 3.75% in additional tax, directly funding student loans from 2030. No VAT will be charged on food items, electricity, school fees, or medical services, ensuring prices stay low for the poor.
The major part of the bills facing criticism from some northern leaders is the provision for derivation-based distribution model for the VAT proceeds. The misgivings stem from lack of understanding of the provision which may favour the North in the long run.
The bills recommend a new VAT sharing formula of 55% to the states instead of the current 15%. The federal government’s share is reduced from 15% to 10%, while the share of the local governments is raised to 35%.
There is a provision that 60% of the amount standing to the credit of states and local governments shall be distributed on the basis of derivation. This is a more equitable distribution model based on consumption within the states as against the current sharing formula which favours Lagos, Rivers and the Federal Capital Territory because they host the headquarters of corporate organisations.
For instance, under the prevailing model, it is assumed that once a telecom company pays VAT from its head office in Lagos, it is credited to Lagos even when other states have millions of subscribers.
Under the proposed model, the telecom company is expected to furnish the tax authorities details of the locations of the subscribers nationwide for the purposes of distributing VAT proceeds. This will benefit the North which has millions of telecom subscribers. Kano alone has 11.9m subscribers.
It is Lagos, Rivers and the FCT that should complain about the new sharing formula, not the North. In any case, whatever is contained in the tax reform bills remains mere proposals. They can be amended.
All the complaints the North has against the bills should be properly documented and presented to the National Assembly through their representatives for debate instead of calling a total rejection of the well-articulated tax reform bills. The North should also ask how it should be compensated for the food items it produces, but exempted from VAT.
The Senate President Godswill Akpabio has promised that experts, governors, traditional rulers and other stakeholders will be invited during debates on the tax reform bills. He promised that the senate will give Nigerians what is good after listening to them. What else do we really want?
The tax reform process which began 14 months ago is still in progress. Nothing is cast on stone. New inputs can still be infused. Suggestions have not been foreclosed. So, the North has nothing to worry about. Disagreements over some provisions in the tax reform bills should not be allowed to truncate the process.
The poor need the reforms. The business people crying over multiple taxations need the reforms, and Nigeria, which is in need of rapid economic development, needs the tax reforms.
