NASS Urged to Pass Tax Reform Bills for Economic Growth

Ex-FIRS Boss Pushes for Tax Reform Bills

“This performance shows that the reforms embarked upon to reposition the economy and ensure better fiscal...”

Former FIRS Chairman Muhammad Nami urges the National Assembly to pass tax reform bills. Learn more about the benefits of these reforms for Nigeria's economy.

The Federal Government has reaffirmed its dedication to implementing tax reforms aimed at bridging the economic inequality gap and fostering prosperity for low-income Nigerians. This commitment was reiterated by Sunday Dare, Special Adviser to the President on Media and Public Communications, in a statement issued on Monday, November 25, in response to the recent GDP report released by the National Bureau of Statistics.

President Bola Tinubu submitted four tax reform bills to the National Assembly on October 3, marking a significant step towards achieving these goals. The bills include the Nigeria Tax Bill, Tax Administration Bill, Joint Revenue Board Establishment Bill, and the Nigeria Revenue Service Establishment Bill. These proposed reforms aim to address the challenges faced by Nigeria's tax system, such as the multiplicity of taxes, fragmentation of revenue administration, and excessive tax burdens on vulnerable citizens.

The proposed tax reforms have sparked debates, with some arguing that they could stifle economic growth and deepen poverty. However, the bills include provisions designed to protect poor and vulnerable Nigerians, such as the removal of taxes on essential items like food, education, healthcare, housing, and transportation. This move is expected to save more money in the hands of ordinary people, ultimately promoting economic growth and prosperity.

The proposed tax reforms aim to alleviate the tax burden on small businesses while addressing the disparities in revenue distribution. According to Sunday Dare, the reforms seek to rectify the “headquarters effect,” where states hosting company headquarters, such as Lagos, the FCT, and Rivers, receive a disproportionate share of tax benefits.

To promote tax equity, the current administration plans to allocate revenue based on the place of consumption rather than headquarters locations. This move is expected to reduce the tax burden on low-income earners and small businesses. In fact, the proposed reforms include a reduction or elimination of VAT on essential goods and services such as food, health, education, accommodation, and transportation.

The reforms also aim to strike a balance between lowering the tax burden on low-income earners and ensuring that the wealthiest contribute more to government revenue. For instance, lower-income earners would be completely exempt from personal income taxes, while those earning higher amounts would see incremental increases in their tax rates, eventually reaching 25%.

“The proposed tax reforms demonstrate the administration's resolve to reduce the tax burden on small businesses and spread prosperity to the poor,” Dare said.

The presidential adviser linked the recent tax reforms to Nigeria's impressive 3.46% GDP growth in the third quarter of 2024. This growth rate surpasses the 3.19% recorded in the second quarter, demonstrating progress under President Tinubu's economic policies.

President Tinubu expressed optimism about the GDP growth, acknowledging that there's still work to be done. The administration remains committed to achieving a $1 trillion economy by 2030 and improving living standards for Nigerians. This goal is ambitious, but the recent GDP growth is a promising step in the right direction.

“This performance shows that the reforms embarked upon to reposition the economy and ensure better fiscal management are beginning to yield fruits,” he said.

Tinubu reiterated his commitment to ensuring Nigerians feel the positive impact of these policies.

Former FIRS Chairman Muhammad Nami has been advocating for the National Assembly to pass these bills, highlighting their potential to address issues in VAT administration.

Nami explains that the current system attributes VAT returns to company headquarters, leading to uneven revenue distribution. The reforms aim to report VAT based on consumption, benefiting states with higher economic activity.

Currently, VAT returns are attributed to the location of company headquarters rather than where consumption occurs, leading to an inequitable distribution of revenue.

Nami emphasizes the importance of fiscalisation, using technology to automate tax compliance and ensure accurate reporting. He suggests a phased implementation of the reforms to address structural challenges.

To achieve transparency and accountability in Nigeria's tax system, a national revenue data center is essential, and significant investments from both federal and state governments are required. This data center will facilitate the tracking of cashless transactions, enabling immediate tax refunds and enhancing revenue generation.

The proposed tax reforms have sparked optimism among the presidency and tax experts, who believe they will drive equity, strengthen Nigeria's fiscal systems, and promote shared prosperity. However, they also emphasize the importance of careful execution to maximize the impact of these reforms. Implementing these changes without adequate preparation could lead to resistance from stakeholders.

The tax reforms are part of Nigeria's broader economic reforms, which have been ongoing since May 2023. These reforms aim to stabilize the economy, promote growth, and improve the lives of citizens. The World Bank has supported these efforts with a $2.25 billion financing package to help Nigeria achieve its economic goals.