Understanding What Tax Reform Bills Means for Nigerians- Experts

Tax Reform Bill Proposes VAT Revenue Shift  To 55% For States, Tax Reliefs

2 weeks ago
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Tax Reform Bill Gains Momentum in Senate

The Nigerian Senate has advanced the Tax Reform Bill, proposing significant changes to the country’s tax framework.

Key reforms include an increase in the percentage of Value Added Tax (VAT) revenue allocated to states from 50% to 55%, with the Federal Government’s share dropping to 10%.

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This adjustment aims to strengthen state economies and promote fiscal decentralization.

Simplifying the Tax Landscape

Senate Leader Bamidele Opeyemi, speaking during Thursday’s plenary session, outlined the objectives of the Tax Reform Bill.

“These bills aim to simplify the tax landscape, reduce the burden on small businesses, and streamline how taxes are collected,” he stated.

The bill proposes exemptions for workers earning below the minimum wage from Pay As You Earn (PAYE) deductions. Small businesses with an annual turnover of ₦50 million or less would also be exempt from tax payments. Additionally, the corporate income tax rate is set to decrease from 30% to 25% for the next two years, encouraging business growth and job creation.

Addressing Double Taxation

To tackle double taxation, multiple levies such as the 2.5% education tax and 0.25% NASENI tax have been consolidated into a single development levy of 2%. The funds raised will support initiatives like the recently established student loan scheme.

READ ALSO: Tax Reform Bills Scale Second Reading At Senate

“By 2030, this levy will help fund the education of many Nigerian youths,” Opeyemi explained.

Other reforms include VAT exemptions for essential goods and services like food, medicine, educational fees, and electricity. These measures aim to alleviate the financial burden on households.

Innovative Sharing Formula

A key proposal under the Tax Reform Bill is the revised VAT sharing formula. States will receive 55% of VAT revenue, up from 50%, while the Federal Government’s share drops to 10%. Local governments will retain their current share.

Ali Ndume, Senator representing Borno South, expressed reservations.

“I am not against the reform,” Ndume said. “My problem is timing and the issue of derivation. The 1999 Constitution has to be amended before the bills can be effective.”

Concerns Over Implementation

The Senate has called on Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, and Zacch Adedeji, Chairman of the Federal Inland Revenue Service, to provide further insights into the proposed legislation.

The bills aim to cushion the impact of broader economic policies, such as the removal of fuel subsidies and adjustments to electricity tariffs. However, lawmakers like Ndume emphasized the need for constitutional amendments before implementation.

Despite mixed reactions, the Tax Reform Bill marks a significant step toward creating a more equitable and efficient tax system in Nigeria.

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Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.

Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.

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