…Removes contentious clauses, retains 7.5% VAT
The 10th Senate yesterday passed two of the four Tax Reform Bills transmitted by President Bola Tinubu in October 2024, aimed at overhauling Nigeria’s tax system.
The Bills passed include the Nigeria Tax Administration Bill 2024 and the Nigeria Revenue Service (Establishment) Bill 2024.
The remaining two – the Nigeria Tax Bill 2024 and the Joint Revenue Board (Establishment) Bill 2024 – are expected to be concluded on Thursday.
The Senate President, Godswill Akpabio, announced the passage of the two Bills, following a majority voice vote by the senators.
He also disclosed that a harmonisation committee would be set up to align the Senate’s version with the one passed by the 10th House of Representatives in March.
Once harmonised, the unified Bills would be forwarded to the President for assent. Akpabio said the legislation would reshape Nigeria’s tax collection and distribution structure, and stated that the Senate was committed to finalising the outstanding Bills without delay, even if it required working late into the night.
“These Bills will add immense value to governance, transform how taxes are collected and shared in Nigeria”, he noted.
“We are committed to concluding the outstanding bills tomorrow, even if we have to stay here until 10 p.m.,” Akpabio emphasised.
Senators began deliberations on the Bills after a closed-door session that lasted about an hour.
Presenting the committee’s report, Chairman of the Senate Committee on Finance, Senator Sani Musa, said the proposals had been thoroughly scrutinised, including through public hearings.
He noted that over 64 organisations, including civil society groups, participated in the hearings adding that most supported the reforms.
On the Valu-Added Tax (VAT) sharing formula, the committee recommended 10% for the federal government, 55% for states and the Federal Capital Territory, and 35% for local governments.
The VAT allocation to States would be distributed based on equality (50%), population (20%), and place of consumption (30%), while local government allocations would be split 70% on equality and 30% on population. The committee also proposed that 10% each be earmarked for TETFund, NASENI, and NITDA, 5% for cybersecurity, and 10% for security and defence.
Musa urged passage of the Bills, arguing that they would simplify tax compliance, stimulate the economy and increase investor confidence.
During the clause-by-clause consideration, the Senate adopted the retention of the current 7.5% VAT rate.
It amended Clause 22 to allow States to establish their own Revenue Tax Boards and approved that 2% of the total revenue collected by the Nigeria Revenue Service be appropriated by the National Assembly.
The percentage, initially proposed at 3%, was reduced following an amendment by Senator Aliyu Wadada, who argued that 3% would amount to a revenue pool greater than the budgets of 16 States combined. He called for caution, noting the inclusion of oil and non-oil revenue in the calculations.
Former House Speaker and Senator, Aminu Waziri Tambuwal argued that the 10th National Assembly lacked the constitutional power to create State-level tax agencies, urging the removal of Clauses 87 to 97 from the Bill.
The President will chair the Revenue Service Board, while an Executive Vice Chairman, subject to Senate confirmation, will serve as the Head of the Service. Clause 7 was amended to reflect this leadership structure.
To ensure inclusivity, 6 Executive Directors will be appointed, each from a different geo-political zone, with a rotational system to ensure no Executive Director and Vice Chairman come from the same State.
Clause 4 of the Bill expands the Service’s responsibilities to include: assessing corporate taxpayers, collaborating with ministries to review tax regimes, and adopting measures to trace, freeze, confiscate, or seize proceeds from tax fraud. Clause 13(2) requires that the Secretary of the Board be a lawyer, chartered accountant, or chartered secretary not below the rank of Deputy Director. The Service must submit its annual reports within three months after each fiscal year.
The Senate also introduced updated penalties to curb non-compliance. Failure to register with the tax authority will attract a ₦100,000 fine in the first month and ₦50,000 for each additional month. Failure to file returns will incur ₦200,000 in the first month and ₦50,000 for each subsequent month.
Also, individuals who fail to keep proper records will be fined ₦10,000, while companies will be fined ₦100,000. Offenders also face imprisonment for up to three years, depending on the severity of the violation.
In his closing remarks, Senate President Akpabio commended the Finance Committee and the Senate for their thorough work. He thanked a group of senior senators who helped resolve contentious issues through consultations with religious leaders, regional organisations, and other stakeholders.
Deputy Senate President, Barau Jibrin also praised the Senate and particularly the Finance and Elders Committees for their role in navigating disagreements and building consensus. He acknowledged that although the Bills were initially met with resistance, the Senate had successfully resolved major concerns through constructive dialogue.
The tax Bills, which were the sole item on the report submitted by Senator Musa, are expected to become key instruments for fiscal transformation and national development.
