President Bola Tinubu has directed the Attorney-General of the Federation, Lateef Fagbemi SAN, to work with the National Assembly in addressing “genuine concerns” associated with the Tax Reform Bills before their passage by the lawmakers.
This was disclosed in a statement by Mohammed Idris, Minister of Information and National Orientation, on Tuesday, December 3, 2024.
The ministry stated that the president welcomes and commends the robust nationwide debate on the new tax reform bills currently before the National Assembly.
Tax Reforms to Empower States
- According to the statement, if passed into law, the tax reform bills will bring relief to tens of millions of hardworking Nigerians across the country, while empowering and positioning the states and the 774 Local Governments for sustainable growth and development.
- Idris added that President Bola Ahmed Tinubu is implementing an ambitious fiscal reform agenda that will devolve more resources to Nigeria’s state and local governments, and ultimately to the Nigerian people, in the spirit of harnessing democracy that works for the people.
- He stated that the federal government has no sinister motive to warrant the suggestion in some quarters that the process is being rushed.
“In line with the established legislative procedure, the Federal Government welcomes meaningful inputs that can address any grey areas in the bill. In this vein, President Tinubu has already directed the Federal Ministry of Justice and relevant officials who worked on the drafts to work closely with the National Assembly to ensure that all genuine concerns have been addressed before the bills are passed,” the statement added.
- Idris stressed that, in addition to the four tax bills being debated and deliberated upon, there is also a 2023 Supreme Court judgment on financial autonomy for local governments, which will significantly empower the tier of government that is closest to the Nigerian people.
“In all, these reforms will not only facilitate increased revenues (without imposing additional tax burdens on the people), but they will also make it possible for citizens to demand and enjoy greater accountability in the management of public resources at all levels of government.
“President Tinubu and the administration will continue to champion policies that close the loopholes and gaps through which Nigeria’s valuable public resources have been frittered away for decades,” he added,
Highlighting that commentators should strive to be respectful and understanding at all times, despite the diversity of opinions associated with the bills.
He assured that the resources being conserved and realized from these reforms will be invested in critical infrastructure (healthcare, education, transportation, digital technology, etc.) and in social investments that will benefit all Nigerians.
Backstory
Nairametrics previously reported that President Bola Tinubu had rejected the National Economic Council’s (NEC) proposal to withdraw the tax reform bill, insisting that the council follow the “legislative process.”
- Nairametrics also reported that the National Economic Council (NEC), which includes the 36 state governors and is chaired by Vice President Kashim Shettima, had recommended the withdrawal of the Tax Reform Bill currently before the National Assembly.
- Governors of the 19 Northern states, along with traditional rulers and stakeholders from the region, expressed opposition to the bill, particularly concerning the draft on the derivation-based model for Value Added Tax (VAT) distribution among the country’s federating units.
- But Mr. Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, had shared sentiments regarding the injustice in the current mode of VAT distribution, which takes into account the location where VAT is remitted, rather than where goods are supplied or consumed.
What you should know
The new tax bills under consideration in the National Assembly propose adopting a derivation principle in the allocation of VAT revenues between the federal government and sub-national entities.
- These proposals have sparked controversy, with northern elites openly rejecting them, arguing that the changes may not favour their region.
- Under the current Section 40 of the VAT Act, VAT revenue is allocated as follows: 15% to the Federal Government, 50% to the States and Federal Capital Territory (FCT), and 35% to Local Governments. The allocation to states and local governments incorporates a derivation principle of at least 20%.
- Although not explicitly detailed in the VAT Act, other factors influencing the distribution include 50% based on equality and 30% based on population.
- Additionally, 4% of collections are allocated to the Federal Inland Revenue Service (FIRS) as a collection fee, while 2% goes to the Nigeria Customs Service (NCS) for import VAT.
- The tax reform bills have passed the second reading in the Senate.
