Tax Reform Bills: The Verdict of Nigerians

By Abdullahi Ismaila Ahmad, Ph.D The public hearings conducted recently by the two Chambers of the National Assembly have elicited positive responses from a broad spectrum of Nigerians, cutting across regional interest groups, government agencies, civil society groups, concerned individuals, the academia, and Labour Unions, among diverse others. Contrary to a few dissensions hitherto expressed in the media, almost all the stakeholders who spoke during the week-long sessions were unanimous in their declaration that the hallowed Chambers should pass the tax reform bills after a clean-up of the grey areas. The public hearings were auspicious for all Nigerians desirous of economic growth and fiscal responsibility. They were also a watershed moment for the Federal Inland Revenue Service, which had been upbeat about the tax reforms. Indeed, the public hearings had rekindled hope in the tenets of democracy that guarantee freedom of expression and equitable space for cross-fertilisation of ideas. Without gainsaying the fact, the tax reform bills have been unarguably about the most thought-provoking issues in Nigeria today, drawing variegated perspectives and commentaries from even unlikely quarters such as the faith-based leaders, student bodies, and trade unions, which speaks much about the importance of the bills. READ ALSO: why Nigerians should not pay tax In the build-up to the public hearings, not many people believed that the bills would make it to the second reading, much less the public hearings. Even the Northern stakeholders who seemed unlikely to support the passage of the bills have softened their stance and have given valuable suggestions that would enrich the substance of the bills. The Arewa Consultative Forum came to the public hearings well-prepared with a printed booklet that addressed their concerns. It concluded with an advisory that the bills should be “Well planned, properly communicated, strategically implemented and ample dialogue and political consensus allowed for the reforms to be accepted.” The concerns of ACF ranged from the composition of the proposed Nigeria Revenue Service Board as contained in Part 111, Section 7 of the bill, the unlimited Presidential power to exempt/wave tax payment as proposed in Section 75(1) of the bill, the family income or inheritance tax as contained in Part 1, Section 4(3) of the bill, to the issues around development levy and VAT. On the development levy, the ACF stated that unless the Federal Government is considering budgetary funding for TETFUND, NASENI and NITDA, it does not see the “wisdom behind the plan to replace (them) with NELFUND”. The position of the North was equally reinforced by the Supreme Council for Shariah in Nigeria, Northern Elders Forum, Kano State Government, Professor Auwalu Yadudu, and the FCT Imams. Like the ACF, these stakeholders lent their respective voices to the Section on the Inheritance Tax in Part 1 of the bill and the use of the term ‘ecclesiastical’, which, in their views, undermines certain religious rights and beliefs. The Kano State Government, represented by Mahmud Sagagi, affirmed that “we support tax modernisation” but cautioned that “we must ensure that this process does not come at the expense of states’ constitutional rights and economic stability”. Professor Auwalu Yadudu, a constitutional law professor, drew attention to the use of the ‘supremacy clause’ and cautioned that the repeated use of “notwithstanding” in the bills would undermine the supremacy of the Nigerian constitution if passed as such. Other stakeholders that made contributions at the sessions included the Nigeria Liquefied Natural Gas, Fiscal Responsibility Commission, Revenue Mobilisation Allocation and Fiscal Commission, Federal Ministry of Industry, Trade and Investment, Institute of Chartered Accountants of Nigeria, Chartered Institute of Taxation of Nigeria, Nigeria Customs Service, and a host of others. While most of their concerns bordered on technical issues requiring fine-tuning, they were unanimous in their support for the bills. They aligned with the position of the Executive Chairman of the Federal Inland Revenue Service, Zacch Adedeji, Ph.D. and the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Mr Taiwo Oyedele, which is that the extant tax laws and fiscal regulations are obsolete necessitating reforms aimed at creating a fair and equitable tax and fiscal space to grow Nigeria’s economy. In one of the sessions, Dr Zaach Adedeji expounded on the criss-cross of trade activities in the Free Trade Zone whereby companies misuse tax waivers as exporters to sell their goods or services in the Customs Area at an amount usually less than the price the operators in the Customs Area who pay VAT and other taxes sell theirs thereby disrupting business transactions. This way, the operators in the Free Trade Zone shortchange the government in paying their due taxes by circumventing extant regulations, which are inimical to the economy’s growth. Overall, the presentations were forthright, foresighted, and helpful in elucidating the issues contained in the bills. According to the statistics read out at the end of the hearings at the Senate, 75 stakeholders were invited, 65 made submissions, and 61 made presentations. At the House of Representatives 53 stakeholders made presentations. By all means, this is a fair representation. Given the presentations, it is evident that the National Assembly has gathered enough materials to guide its deliberations on the bills. As we look forward to the passage of the bills, we commend the leadership of the National Assembly for their unwavering commitment to making the bills see the light of the day. Abdullahi is the Director of Communications and Liaison Department, FIRS.

TAX REFORM BILLS: THE NORTH MUST MODERNISE ANYHOW 

  By Abdullahi Ismaila Ahmad, Ph.D. The tax reform bills recently sent to the National Assembly by President Bola Ahmed Tinubu, GCFR, have generated controversies over the past weeks. Many commentators have expressed their views in support of the bills or against some of their provisions. The Northern Region has expressed vehement objection to the bills. They are against the bills because, in their views, the bills are entirely or partly anti-north. Given most of the observations and the pros and cons of the arguments advanced by the various commentators, it is pertinent to say that whatever views are advanced by the Northern stakeholders, the truth that must be told is that Northern Nigeria must yield itself to the full extent of modernisation, anyhow and soonest. The tax bills will invariably switch a region like the North out of its encrusted traditional and provincial life patterns. There is no need to regurgitate the controversial issues around the tax reform bills as they are already in the public domain, and much has been said about them thus far. However, three keywords about the VAT derivation model proposed in the tax bills should form the cornerstone of deliberations and whatever decisions may be taken afterwards by the Northern stakeholders. These signature words are production, consumption, and competition.  The Value Added Tax (VAT) is described as a consumption tax. However, before consumption occurs, there must be production, whether in goods or services. Therefore, production is a key factor in any consideration or discussion of the Value Added Tax. Our rudimentary economic class tells us that factors of production are land, capital, labour, and entrepreneurship, which are the building blocks of any economy. Any society that desires economic progress will not take these factors of production for granted. Without mincing words, these production factors are abundant in Northern Nigeria, almost to the point of waste. One would expect that the North will have no issue with production, which invariably gives rise to consumption.  As an output of the production process, consumption depends on the purchasing parity of a people and their cultural tastes. Nonetheless, consumption can happen away from the point where goods and services are produced. It is expected, however, that both production and consumption can occur at the same place, thereby enriching the economy of that particular place. This is because trading and commerce will enhance people’s purchasing parity. Without mincing words, Northern Nigeria is essentially a consumption society but with the potential to be a producing economy. It must embrace progressive ideas and modernisation to harness its full economic potential.  This is where competition comes in. There is competition in every aspect of our lives, from the products and services being churned out daily to how societies employ strategies to grow their economies. This makes every society think progressively and forecast the future. No society lays back or indulges in wastefulness or a careless lifestyle and expects to be at par with other societies that have moved on the fast pedestal of development.  The pertinent question to ask at this juncture is why Lagos has suddenly become the envy of the entire nineteen northern states. What does Lagos state have that all northern states do not have or cannot have? The answer to the second question is that Lagos state has painstakingly embraced the full extent of modernisation through its deliberate policy planning and execution, it has embraced technology, industrialisation, financial inclusiveness and wealth creation strategies. Northerners are among those who made Lagos State what it is today with their massive investment there.  The point being emphasised here is that the VAT derivation formula being proposed by the tax bills should also be seen as a wake-up call for the Northern stakeholders and political establishment to stir the region out of its slumber and decipher these salient issues dredged up by the bills and quickly embrace the imperative of modernisation. Modernisation does not mean only the erection of skyscrapers, the construction of flyovers, or paved motorways. Suppose we have all these, by all means, okay. In other words, modernisation refers to a reformation of habits, which W. H. Auden refers to as a ‘change of heart’, which is not simple. In this regard, modernisation ‘is the reshaping and resharing social values, such as power, respect, rectitudes, affection, well-being skill, and enlightenment’. This is to say that the Northern leadership and political establishment must change its old ways of engaging with the people and the society. It must change its way of perceiving reality to begin to understand that leadership is an instrument for improving the conditions of a people, not a tool for manipulating them. It must wake up to an understanding that modern life is about competition, progress, and overcoming challenges that improve the condition of a people. It’s not about rhetoric and hyperbole. The Northern political establishment must develop a mindset that comprehends the reality that governance is about service to the people, building capacities, developing human resources, bettering the living conditions of a people, and challenging the environment to yield its potential for the growth of the society. Indeed, governance should not be approached as a private fiefdom, a personal estate for a willful distribution of privileges and patronage. For too long, the Northern political establishment has held down its people in poverty to authenticate its affluence and influence, thereby closing the space for more engaging and productive ideas and wealth creation. That’s why the political class would instead purchase bicycles, coffins, grains, wheelbarrows, and other mundane items purportedly as empowerment when politicians from different regions build their people on ICT and technology pedestals and build food security hubs and other progressive ideas. The change of attitude required of the Northern political establishment should be the type that will lead to an organisation of economic activities, automation of business transactions, creative development of natural resources, and development of human resources through restructuring of education system and manpower training. W. W. Rostow states that for a society to

The Metaphor of the Bleached Whale and Resistance to the Proposed Tinubu Tax Bill

The proposed tax bill being debated by the Nigerian Senate whose stated goal is to overhaul the country’s tax system, simplify the tax landscape, reduce the burden on small businesses, and streamline how taxes are collected has pitted national interest against parochial tribal and regional agenda. Although objective analysis seems to suggest that on balance, the proposed tax reform is great for the overall interest of the nation as it eliminates multiple taxation across the country, deploy taxation as a tool to encourage private sector investments in critical industries and boost individual disposal incomes through targeted tax exemptions, the passage of the bill hangs in the balance. All through our history as a nation, national interest has always taken the back seat to parochial tribal and regional hegemonic interest. Even our struggle for independence from the British was almost derailed by those who perceived that their region will be disadvantaged by the more advanced and educated regions of the country. READ ALSO: Tinubu Seeks NASS Approval for N1.77trn External Loan If we were to draw an analogy to Nigerian state from the animal world, the most appropriate would probably be the image of a bleached whale in an impoverished sea-shore community whose inhabitants see a stranded bleached whale as manna from heaven and each has brought out in an orgy of gluttony, any cutting device they could lay their hands on to carve out for themselves as much of the free meat as they could grab. There is actually a concept in political science, known as political particularism, which describes the propensity of policymakers and politicians to further their careers by catering to narrow interests rather than to broader national platforms. So, it is not a unique problem to our country for politician to think national but act locally, to take into cognizance how national policies will affect their local community. After all the essence of politics is the process by which choices are made regarding how resources will be allocated and which economic and social policies government will pursue. Put more simply, politics is the process of who gets what and how. In the U.S. Congress, there is actually a term for this phenomenon of political particularism. Pork barrel projects, refer to appropriations for constituents’ sweetheart projects by senators and members of Congress that are inserted into and hidden in big omnibus legislative documents as part of the legislative negotiation process. READ ALSO: WHY I REGRET NOT BUYING ARSENAL – DANGOTE So, it is not a uniquely Nigerian problem, it is just that ours is the extreme form of political particularism in which our politicians take as their default mode of operation to subvert critical national interests in pursuit of parochial selfish agenda. Just like pigging out on the meat of bleached whale often come with the risk of botulism Type E outbreaks, and high metal toxicity, our country has paid a huge price from our tendency to treat it as a bleached whale where everyone takes as much as they could at the expense of everyone else and at the expense of our national interest. Our extreme form of political particularism, of putting tribal parochial interest above national is the root cause of our leadership failure, the stagnation of our economy, the failure of our institutions, and the endemic corruption that has stymied our national development and pauperized our citizens. It explains why a particular region or country has cornered for itself a disproportionate number of nation’s oil well licenses and why our presidential elections have become a do or die contest for tribal hegemonic domination. It is the reason that our country after 64 years of independence does not have a reliable census of its population and other critical national data for rational development planning. READ ALSO: Population Commission Denies Plan to Conduct Census in 2025 Given our history, it will take all of the political capital the president can expend to push the proposed tax bill over the line against the massive force that has been arrayed against it. Adewale Alonge, PhD, is Founder & President, Africa Diaspora Partnership for Empowerment and Development. www.adped.org

Tax Reform Bills Scale Second Reading at the Senate

The Senate has moved forward with the four tax reform bills presented by President Bola Tinubu, sending them to a second reading on Thursday.  After a lengthy debate, the bills were referred to the Finance Committee for further review, with a deadline of six weeks for a report. Among the key proposals are the Nigeria Tax Bill 2024, aimed at restructuring the country’s tax framework, and the Tax Administration Bill, which seeks to resolve disputes and create a clearer legal structure for taxes.  Additionally, the Nigeria Revenue Service Establishment Bill intends to replace the Federal Inland Revenue Service Act, while the Joint Revenue Board Establishment Bill would establish a tax tribunal and ombudsman. READ ALSO: PRESIDENT TINUBU AND THE YALE MELTDOWN Several lawmakers, including Senators Sani Musa and Seriake Dickson, expressed support for the bills, emphasizing the benefits to small businesses and the potential to reduce taxes.  In contrast, Senator Ali Ndume raised concerns about the timing of the reforms and issues related to derivation and VAT. The bills were further explained to lawmakers by President Tinubu’s economic team during the plenary session.  Despite some opposition, the Senate voted in favor of advancing the bills to the next stage.

FIRS Speaks On Going After  Skit Makers And Influencers Over Tax Payment

The Federal Inland Revenue Service (FIRS) has said it has no plans to tax skitmakers, influencers and other digital content creators. The Special Adviser on Media to the chairman of the FIRS, Dare Adekambi, was quoted as saying that social media content creators and influencers constituted a major block of tax evaders. He said content creators and influencers constitute a significant block of tax evaders, adding that a law in Nigeria requires everybody who earns income to pay tax. Adekambi stressed that the FIRS would meet with content creators and influencers and make them see why they should voluntarily pay tax. But an official of the agency who spoke to some journalists anonymously on Monday, said skit makers are individuals who do not fall within the purview of the FIRS. The FIRS official stated that the agency does not tax Personal Income Tax but only collects Company Income Tax. He said: “FIRS does not tax Personal Income Tax; State governments do. “FIRS collects Company Income Tax. Only those who are corporate names and earn profit of N25 million and more are required to pay tax.”

FG Says NYSC Will Soon Be Revenue Generating Agency

The Bola Tinubu-led federal government has unveiled a fresh plan to transform the National Youth Service Corps (NYSC) into a revenue-generating agency. The Minister of Youth Development, Jamila Bio-Ibrahim, disclosed this during an interview with ChannelsTV on Sunday night. Asked if there were immediate plans to increase the monthly allowance of corps members, the minister said the government was working on reforming the NYSC scheme to reflect the present realities of the nation. “We all understand that resources are dwindling, even oil revenues are not as they used to be but we will find innovative ways of ensuring that corps members’ welfare is well-taken care of,” she said. “When it comes to remuneration and looking totally at the holistic funding of the NYSC, we have announced a reform of the NYSC scheme itself. So, we want the scheme to go beyond that social programme of government to be that revenue-generating scheme and agency. “The reforms which transform the NYSC into a revenue-generating agency and prepare the corps members for the job market and to be decently and gainfully employed or to be employers of labour through entrepreneurship and of course, perfect matching into primary assignment and all the support they need in that career path.” She noted that corps members were no longer posted to states deemed unsafe in the wake of worsening security conditions in the country. “As an immediate intervention of the government and the NYSC as an agency, we have actually stopped posting corps members to the very unsafe states. “We have been doing it. We have been doing it in the past. There are states we have not been posting corps members to to ensure their safety,” she added. According to her, the security of corps members requires collaboration with other agencies of government. “When it comes to security matters, it is a multi-sectoral approach. So, it is not the NYSC alone and the ministry that is involved. We are working with security outlets to ensure corps members are safe,” the minister said.