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THE CONTROVERSY OVER TAX REFORM BILLS, BY BOLAJI ADEBIYI
The ongoing controversy over the tax reform bills shows democracy is maturing in the country, writes Bolaji Adebiyi
One major takeaway from the ongoing controversy over the tax reform bills is that Nigeria’s democracy is maturing. Although the debates initially evoked ethnic and regional emotions, the contestations have gradually moved towards discussing facts and figures, which should be central to the issues ab initio.
Signs of trouble emerged two weeks ago when 19 Northern governors and their top traditional rulers rose from a meeting, raising objections to one of the four bills because it was against the region’s interest. Somehow, they managed to convince the other 17 governors from the South to block the bills at the National Economic Council presided over by Vice-President Kashim Shettima.
The Council, which comprised the 36 state governors, Ministers of Finance and Coordinating Minister for the Economy, Budget and Economic Planning, and Federal Capital Territory, and the governor of the Central Bank, resolved to advise the President to pause the legislative process on the bills pending further consultations with relevant stakeholders. Of course, the Presidency initially rejected the advice, saying those opposed to the bills should engage with the legislative process to make their case.
Not a few people felt that the Presidency’s initial reaction was impolitic, given the governors’ influence on federal legislators, many of whom derived their positions from the benevolence of the state executives. It was not long before it became apparent that a hard time awaited the bills at the federal legislature, where they were headed for approval.
Despite passing the second reading in the Senate, the bills ran into a brick wall in the House of Representatives, which had to suspend their consideration to avoid being killed. Even the Senate has paused further consideration pending the outcome of negotiations by its 10-man committee, which was set up to consult with stakeholders over the bills’ grey areas.
However, it is important to note that only two clauses in one of the bills, the Nigeria Tax Administration Bill 2024, have attracted controversy, which threatens to endanger the remaining bills: the Nigeria Tax Bill 2024, the Nigeria Revenue Service Establishment Bill 2024, and the Joint Board Revenue Service Bill. The culprits are Sections 77 and 12 (12), which seek to increase the Value Added Tax from 7.5% to 10% in 2025 and 15% in 2030. They also seek to adjust the sharing formula by increasing the derivation criteria from 20% to
60%. Besides, there are complaints about attribution.
The Northern governors felt that these clauses would further impoverish their region and tilt the advantage in favour of a few states in the South, particularly Lagos, Ogun and Rivers, which host the headquarters of most of the VAT-paying companies. Interestingly, Lagos and Rivers have argued that they would lose 80% of their earnings, contrary to the North’s claim. Significantly, the debate has been engaging, shifting from emotional to rational arguments as stakeholders are challenged to state and defend their cases.
It is noteworthy that despite the complaints of the Northern governors, many people from the region have supported the bills, contending that they would challenge them to be more creative and productive. Some even argue that the governors’ position was baseless because the North stands to gain more from the overall intent of the bills.
Ironically, the bills aimed at fixing the economy to engender shared prosperity for all citizens have become enmeshed in steep controversy. Many analysts have argued that they contained more beneficial provisions to increase the country’s revenue base and move it closer to fiscal federalism. For instance, S77 of NTAB seeks to reduce the federal government’s share of VAT revenue to 10% while increasing the state and local governments’ share to 55% and 35%, effectively putting 90% in the pockets of the subnational governments.
In addition, the bills seek to reduce the tax burden on the poor and low-income earners while enhancing the environment for businesses to thrive. Subsequently, low-income earners will be exempt from paying income tax. This tax exemption would benefit about 90% of government and private sector workers. To cushion the poor, there will be 0% VAT on over 600 food items, education, health, electricity generation and distribution, and fuel. As for businesses, over 60 taxes have been collapsed into about 11. So, there is something in the bills for everyone. Yet, they have now been threatened by the ongoing bickering.
It remains to be understood how the product of an over 100-member committee, including 40 students, government officials, private sector players, and trade union organisations from the country’s six regions, has become so controversial that it has even been accused of lack of widespread consultation.
The good news is that all the warlords realised the need to approach the table for intelligible conversations that would engender trade-offs. This is commendable and shows that the nation understands that democracy is about dialogue to resolve issues of common interest. The Tayo-Oyedele-led Presidential Committee on Revenue and Fiscal Reforms should be commended for owning the bills and stepping forward to engage. Its chairman, Tayo Oyedele, a professor and tax expert, deserves special commendation for his calmness and articulate responses to stakeholders’ queries. It is reassuring that he has left no one in doubt that his committee’s proposals are not resistant to informed review.
The bottom line has to be the overall interest of Nigerians groaning under the weight of the prevailing economic hardship brought about by decades of mismanagement of the nation’s resources. President Bola Tinubu now has the mandate and responsibility to reverse this. As part of discharging that responsibility, he set up the Oyedele Committee to put the nation’s fiscal framework in shape for the revival of the economy. Now that the job is almost done, the President must take personal responsibility to engage and negotiate the grey areas for a fruitful outcome.
Adebiyi is the media aide to the Minister of Budget and Economic Planning, Senator Abubakar Bagudu
