Taxes, tariffs, duties and levies are ways the government rakes in revenue to run institutions of governance and finance provisions of physical infrastructures including social amenities.

Taxation is as old as humanity so much so that it is even in the holy books. Zacchaeus in the Bible is said to be a tax collector while Jesus himself paid tax.

Remember the popular phrase of giving unto Caesar what is Caesar’s and unto God, what is God’s. Biblical records about tax payment can be found in Matthew 17:24-27 and 22:15-22. During the pre-colonial era, Yoruba people paid isakole and owo-ori, which are forms of taxation.

Really speaking, most people don’t want to pay taxes for different reasons. Many Nigerians believe that the government is rich enough with proceeds from crude oil and gas sales and does not need additional income to run its affairs.

Some refuse to pay because of the assumption that there is no accountability and transparency from the government on what it has done with monies paid by those who complied, especially proceeds from Pay As You Earn, which is deductible from the salaries of workers. Corruption is one of the barriers and impediments to voluntary tax compliance.

Many Nigerians are also of the opinion that they are not earning enough to enable them to pay taxes. Research has shown that many corporate organisations making super profits in Nigeria and the super-rich people in the country do not pay commensurate taxes if they pay at all.

As part of his economic restructuring, President Bola Tinubu on Tuesday, August 3, 2023, inaugurated the Presidential Committee on Fiscal Policy and Tax Reforms with Taiwo Oyedele as its chairman.  In October last year, the President sent four tax reform bills to the National Assembly for passage.

The bills are: the  Nigeria Tax Bill, which harmonises all the major taxes, such as corporate income tax, personal income tax, VAT etc.; the Nigeria Tax Administration Bill, which provides a framework for tax management covering taxpayer identification, registration, assessment, collection, enforcement, etc.; the Nigeria Revenue Service (Establishment) Bill, which seeks to replace the FIRS with the NRS to perform a broader role of revenue administration in Nigeria and drive collaboration with subnational governments and MDAs and the  Joint Revenue Board (Establishment) Bill meant to transform the JTB to JRB with an expanded mandate and enhanced role for cooperation and tax harmonisation.

The bill also sets up the office of the tax ombudsman to protect taxpayers and advocate for tax simplification.

A December 3, 2024 tweet on the X handle of Taiwo Oyedele (@taiwooyedele) says, “Altogether, the bills offer a comprehensive overhaul of the nation’s tax framework to drive economic growth, support Nigerian households and position the country as a competitive economy within the comity of nations. These reforms reflect a commitment to equity, efficiency, and sustainable development.”

It is noteworthy that since the bills were sent by President Tinubu to NASS for passage, there has been a lot of pushback by many northern elites including governors, senators and House of Representatives members.

Among those who spoke out against the bills were Governors Bala Muhammed of Bauchi, Prof. Babagana Zulum of Borno and Abdullahi Sule of Nasarawa State.

Senator Ali Ndume also did not hide his disdain for the bills. The bone of contention in the bill majorly was the revised sharing formula for the distribution of the Value Added Tax.

Recall that under the immediate past administration of President Muhammadu Buhari, this was very contentious to the extent that the then Governor Nyesome Wike of Rivers State had to drag the Federal Government to court over what it considered to be an inequitable sharing formula of VAT.

The Northern Elders, Arewa Consultative Forum and many powerful northern power brokers queued behind their governors and federal lawmakers to issue subtle threats to President Tinubu, indicating that they would not support his reelection bid in 2027.

Indeed, on October 31, 2024, the National Economic Council asked President Bola Tinubu to withdraw the Tax Reforms Bills from the National Assembly to allow for wider consultations and consensus building.

Oyo State Governor, Seyi Makinde, said that formed part of resolutions reached at the 144th meeting of the National Economic Council at the State House, Abuja.

On December 3, 2024, the Minister of Information and National Orientation, Mohammed Idris, in a statement said President Bola Tinubu had directed the Ministry of Justice to work with the National Assembly to address the concerns raised by different quarters on the tax reform bills.

It is important to highlight some of the salient provisions of the four tax reform bills.

According to the earlier referenced tweet by Oyedele, changes to income tax laws will attract remote work opportunities in the global business process outsourcing sector, enabling Nigerian youths to thrive in the digital economy; goods, services, and intellectual property exports will benefit from zero-rated VAT and other incentives to enhance Nigeria’s global trade competitiveness; tax exemptions, including zero per cent corporate income tax, VAT, and withholding tax, will apply to small businesses with annual turnover of N50m or less; minimum wage earners will be exempt from personal income tax, while over 90 per cent of workers across the private and public sectors will see a reduced tax burden.

Essential items such as food, education, and healthcare will enjoy zero per cent VAT while rent, public transportation, and renewable energy will be exempted, providing relief for low-income households that spend nearly 100 per cent of their income on these necessities.

Furthermore, over 50 nuisance taxes are to be repealed, with the remaining levies harmonised into a few numbers of taxes.

Corporate income tax rates will reduce from 30 per cent to 25 per cent over the next two years, and earmarked taxes on companies will be replaced with a streamlined single levy; businesses will benefit from input VAT credits on assets and services, eliminating the minimum tax on loss-making and low-margin companies.

This will lower production costs and stimulate investment; a redesigned tax framework will ensure progressive personal income tax, VAT, and capital gains tax while safeguarding low-income earners.

Taxes on foreign currency-denominated transactions will be payable in naira, easing compliance for businesses and reducing pressure on the exchange rate; VAT revenue will be distributed among states based on an equitable model to reward economic contributions, rather than the current model which is skewed in favour of states with head office locations where VAT remittances are usually made;  the introduction of tax ombudsman to improve the tax system by protecting vulnerable taxpayers and advocating for fairness and lastly,  a strategic framework for fair taxation, responsible borrowing, and sustainable spending will be established to guide the fiscal system.

In a rider to those points, Oyedele said, “These tax reforms aim to alleviate the rising cost of living, foster economic equity, and create a business-friendly environment to attract local and foreign investments.”

It is heartwarming to note that the Nigerian governors who were initially against this bill were able to meet with the Taiwo Oyedele Presidential Tax Reform Committee last week and ironed out their differences.

In a communique issued by the Chairman of the Nigeria Governors’ Forum and Governor of Kwara State, AbdulRahman AbdulRazaq, the forum reiterated its strong support for the comprehensive reform of Nigeria’s archaic tax laws.

The forum endorsed a revised Value Added Tax sharing formula to ensure equitable distribution of resources:  50 per cent based on equality, 30 per cent based on derivation, and 20 per cent based on population.

Members agreed that there should be no increase in the VAT rate or reduction in Corporate Income Tax at this time, to maintain economic stability. The forum advocated for the continued exemption of essential goods and agricultural produce from VAT to safeguard the welfare of citizens and promote agricultural productivity.

The meeting recommended that there should be no terminal clause for TETFUND, NASENI, and NITDA in the sharing of development levies in the bills and lastly, the meeting supports the continuation of the legislative process at the National Assembly that will culminate in the eventual passage of the Tax Reform Bills.

This is a classic case of using political solutions to resolve economic conundrums. Commendable!

X: @jidejong