The Nigerian Senate has approved two out of four major tax reform bills proposed by President Bola Tinubu, marking a significant step toward modernizing Nigeria’s fiscal framework.
However, the upper chamber rejected the proposed increase in Value-Added Tax (VAT) from 7.5% to 10%, opting to maintain the current rate while allowing VAT input claims on fixed assets, overhead costs, and administrative expenses.
The bills passed include the Nigeria Revenue Service Establishment Bill, which repeals the Federal Inland Revenue Service, and the Joint Revenue Board Establishment Bill, aimed at harmonizing tax collection across the country.
Two additional tax bills, the Nigeria Tax Administration Bill and the Nigeria Tax Bill, are scheduled for consideration and passage on Thursday.
Commitment to Fiscal Reform and Revenue Collection
The Senate’s approval of these tax reforms followed a clause-by-clause review of the bills in the Committee of the Whole, leading to their third reading and final passage on the floor of the chamber.
President Tinubu had originally transmitted the bills to the Senate as part of his administration’s broader efforts to overhaul Nigeria’s taxation system and improve revenue collection mechanisms.
Senate President Godswill Akpabio hailed the legislative progress, emphasizing the critical role of the bills in strengthening governance and enhancing tax administration.
“These bills will add immense value to governance and transform how taxes are collected and shared in Nigeria,” Akpabio stated.
He also affirmed the Senate’s commitment to concluding work on the remaining bills promptly, indicating lawmakers are willing to extend their sitting hours to achieve this goal.
Funding Strategy for Key Government Agencies
Beyond its decision to retain VAT at 7.5%, the Senate also rejected proposals to phase out funding for several critical government agencies, including the Tertiary Education Trust Fund (TETFUND), the National Information Technology Development Agency (NITDA), and the National Agency for Science and Engineering Infrastructure (NASENI).
Instead, the upper chamber introduced a 4% development levy to sustain funding for these agencies, with distribution structured as follows:
- TETFUND – 50%
- Nigerian Education Loan Fund – 15%
- NITDA – 10%
- NASENI – 10%
- National Cybersecurity Fund – 5%
- Defence Security Fund – 10%
Akpabio emphasized that these agencies play a vital role in human capital development and economic growth, warning that phasing out their funding could stifle advancements in education, technology, and national security.
What you should know
- During plenary, Deputy Senate President Barau Jibrin commended lawmakers for their maturity and resolve in navigating early disagreements surrounding the tax reform process.
- He noted that the establishment of a committee of elders helped facilitate dialogue among religious leaders, regional organizations, and other stakeholders, ultimately ensuring a robust and well-rounded legislative approach.
“It is time to congratulate the entire Senate and, in particular, the committee on finance and the elders committee for the wisdom and leadership shown in these bills,” Jibrin stated.
- The four tax reform bills have already been passed by the House of Representatives, setting the stage for final legislative approvals before implementation.
With these reforms, Nigeria moves closer to establishing a more efficient, equitable, and transparent tax system, laying the groundwork for sustainable economic development.
