The apple of discord in Nigeria’s new tax laws

In a very rare development, the President of Nigeria, Alhaji Bola Ahmed Tinubu, has rejected a decision of the National Economic Council (NEC) headed by the Vice President, Alhaji Kashim Shettima. The NEC at its October 2024 meeting, came up with a resolution that the tax reform bills already sent to the National Assembly be withdrawn for further consultations with stakeholders.

However, President Tinubu insists that the legislative process, which has already begun “provides an opportunity for inputs and necessary changes without withdrawing the bills from the National Assembly.” While urging the NEC to allow the legislative process to take its full course, Tinubu posits that further consultations and engagements with stakeholders to address any reservations about the bills could go on, while the National Assembly considers them for passage.

The National Economic Council (NEC) in Nigeria is a constitutional body established to promote economic cooperation and coordination among the three tiers of government. It has the vice president as chairman; and the members include the 36 state governors, governor of the Central Bank of Nigeria (CBN), ministers of finance, budget and national planning. Others are minister of agriculture and rural development; minister of industry, trade and investment; minister of works and housing; minister of water resources, and minister of health.

The tax reform bills were forwarded to the National Assembly based on the report and recommendations of the Presidential Committee on Fiscal and Tax Reforms set up by President Tinubu to help boost revenue generation in the country. But the governors after their last NEC meeting, noted the “need for sufficient alignment between and amongst the stakeholders for the proposed tax reforms.”

The NEC in their resolution observed that “adequate consultation needed to be made to get the views of stakeholders including the state governors, to ensure that the law (tax bills) is favourable to all Nigerians.” Governor Seyi Makinde of Oyo State, who spoke on behalf of the NEC said: “Council recommended the need to withdraw the bill currently before the National Assembly on tax reforms so that we can have wider consultations and also build consensus around these reforms to the benefit of the entire country…”

Coincidentally, and surprisingly too, the NEC resolution came just a few days after the Northern Governors’ Forum (NGF) announced their rejection of some parts of the same tax bills. The rejection of the content of these tax bills by critical stakeholders, a rare occurrence in Nigeria’s economic history, is really a testament to the disharmony, even frosty relationship among the three tiers of government.

Although the NEC was established by Section 153(1) of the 1999 Constitution of the Federal Republic of Nigeria to advise the president on economic policy matters, at no time in the past has a sitting president openly rejected resolutions of the body. This is so because the NEC, apart from its advisory role, also fosters inter-governmental cooperation, coordinates economic planning and budgeting, as well as partakes in setting national economic development goals.

This is why, while calling for the retrieval of the tax bills from the National Assembly, the governors noted: “the Council acknowledged that the country is underperforming on all indices as regards yield from major revenue sources, also tax-to-GDP ratio, among others.” Further buttressing their interest in the reforms, they said: “after extensive deliberations, NEC noted the need for sufficient alignment between and amongst the stakeholders for the proposed reforms.”

But while overruling the NEC stance on the tax bills, President Tinubu insisted that “the tax bills before the National Assembly aim to streamline Nigeria’s tax administration processes, completely overhaul the nation’s tax operations, and align them with global best practices.” He submitted that the tax reform bills were distilled from the extensive work of the Presidential Committee on Fiscal Policy and Tax Reforms.

The four tax bills before the National Assembly are: The Nigeria Tax Bill, which seeks to eliminate multiple taxation; The Nigeria Tax Administration Bill (NTAB), which proposes new rules governing the administration of all taxes in the country; The Nigeria Revenue Service (Establishment) Bill, which seeks to re-establish the Federal Inland Revenue Service (FIRS) as the Nigeria Revenue Service (NRS); and The Joint Revenue Board Establishment Bill which proposes creating a Joint Revenue Board to replace the Joint Tax Board.

Explaining the common objective of these bills, the Presidential spokesperson, Bayo Onanuga said in a statement that “The bills’ overarching objective is to effectively coordinate federal, state, and local tax authorities, thereby eliminating the overlapping responsibilities, confusion, and inefficiency that have plagued tax administration in Nigeria for decades.”

However, these explanations notwithstanding, not a few critical stakeholders in the nation’s fiscal space have been voicing their reservations and/or outright rejection of the tax bills. Apart from the 36 state governors (major bloc in the NEC), the NGF and top legislators are also calling for the recall of the Bills. Senate Chief Whip, Senator Ali Ndume, for instance, has said that the tax bills currently in the National Assembly “are dead on arrival” if President Tinubu fails to withdraw them.

Speaking in a Channels Television programme, Ndume said: “My advice is that as the Northern Governors Forum and the National Economic Council have said, the president should do more consultation and carry Nigerians and the public along. But if he goes on like that, I can tell you it will be dead on arrival.” He further criticised the proposed increase in VAT rate, noting that Nigerians “cannot afford to pay such taxes at a time of serious economic hardship when companies are leaving the country in droves.”

Obviously, Senator Ndume’s position reflects the mindset of the legislators, and signposts the treatment the Bills are likely to be given by the National Assembly. As alluded to by the senator, the NGF had at their own meeting in Kaduna, rejected the tax bills. In the communique of the NGF meeting, the northern governors (19 in number) urged members of the National Assembly from the north to “reject all bills that are not in the interest of the north.”

The communique said in part: “Forum notes with dismay the content of the recent Tax Reform Bill that was forwarded to the National Assembly. The contents of the bill are against the interest of the north and other sub-nationals, especially the proposed amendment of the value added tax (VAT) to derivation-based model. This is because companies remit VAT using [the] location of their headquarters and tax office and not where the services and goods are consumed.”

Apparently in deep quandary and confusion about the actual import of the new tax bills, heads of a number of federal government parastatals and agencies have also been visiting the leadership of the Federal Inland Revenue Service (FIRS) for clarifications. Specifically, the leadership of the National Agency for Science and Engineering Infrastructure; the National Information Technology Development Agency, and the Tertiary Education Trust Fund have called on the FIRS boss, Mr. Zacch Adedeji in Abuja.

At the parley, Mr. Adedeji focused on dispelling the fears that the four tax bills awaiting approval at the National Assembly could jeopardise the roles or revenue streams of federal agencies. Even with these assurances, the widely-held impression out there in the Nigerian polity is that the tax bills could contain hikes in tax rates and/or levies that could be seen as obnoxious and insensitive to the economic hardship of the citizenry.

These fears are not necessarily unfounded. The “suspended” cybersecurity levy and the proposed compulsory possession of Tax Identification Number (TIN) for bank account opening/ownership amply indicate such arcane or strange impositions on the populace by the federal government. These, among others, are why the Tax Bills before the National Assembly remain an apple of discord among the critical stakeholders. We watch how things pan out!

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