By Fatima Saka
The Nigerian Senate has passed two of the four Tax Reform Bills submitted by President Bola Tinubu in October 2024, marking a significant step to the revamp the country’s tax system.
The approved bills are the Nigeria Tax Administration Bill 2024 and the Nigeria Revenue Service (Establishment) Bill 2024. The remaining two—the Nigeria Tax Bill 2024 and the Joint Revenue Board (Establishment) Bill 2024—are scheduled for consideration on Thursday.
Senate President Godswill Akpabio announced the passage after a voice vote and said a harmonization committee would align the Senate’s version with the one passed by the House of Representatives in March. Once harmonised, the bills will be sent to the President for assent.
“These bills will reshape how taxes are collected and shared in Nigeria,” Akpabio stated. “We’re committed to concluding the remaining bills tomorrow, even if it means sitting until 10 p.m.”
Key Provisions and Amendments
Presenting the Finance Committee’s report, Chairman Senator Sani Musa said the bills were thoroughly reviewed, with input from over 64 stakeholders during public hearings. Most participants, including civil society groups, supported the reforms.
The Senate retained the current 7.5% VAT rate and adopted a revised sharing formula: 10% for the federal government, 55% for states and the FCT, and 35% for local governments. The allocation to states will be based on equality (50%), population (20%), and place of consumption (30%). Local governments will receive funds based 70% on equality and 30% on population.
The Committee also proposed earmarking:
10% each for TETFund, NASENI, and NITDA,
5% for cybersecurity,
10% for security and defence.
Clause 22 was amended to allow states to establish their own Revenue Tax Boards. Additionally, the Senate reduced the commission for the Nigeria Revenue Service from 3% to 2% of total revenue, following concerns raised by Senator Aliyu Wadada about excessive allocations.
Clause 39, which introduced oversight on fund disbursements, sparked debate. Senators Adams Oshiomhole and Ibrahim Dankwambo warned against legislating operational decisions. Musa clarified that the provision was intended to enhance accountability.
Senator Aminu Tambuwal raised constitutional concerns over Clauses 87 to 97, arguing the National Assembly lacked the power to create state-level tax agencies.
Structural Reforms in the Revenue Service Bill
The Nigeria Revenue Service (Establishment) Bill introduces significant structural changes:
The President will chair the Revenue Service Board.
An Executive Vice Chairman, subject to Senate confirmation, will serve as the head of the Service.
Six Executive Directors will be appointed from each geopolitical zone, with a rotational system to ensure no two top officials are from the same state.
The Service’s responsibilities have been expanded to:
Assess corporate taxpayers,
Collaborate with ministries on tax policies,
Detect and act against tax fraud,
Trace, freeze, and confiscate proceeds of tax evasion.
Clause 13(2) requires the Board Secretary to be a lawyer, chartered accountant, or chartered secretary not below Deputy Director rank.
Penalties for Non-Compliance
The updated penalties include:
Failure to register: N100,000 in the first month; N50,000 each subsequent month,
Failure to file returns: N200,000 initially; N50,000 thereafter,
Failure to keep proper records: N10,000 for individuals; N100,000 for companies,
Possible imprisonment up to three years for severe infractions.
Commendations and Consensus
Akpabio praised the Finance Committee and senior senators for resolving contentious issues through stakeholder consultations. Deputy Senate President Barau Jibrin also commended the Senate’s collaborative effort in navigating initial resistance.
The Senate adopted amendments ensuring the Nigeria Revenue Service’s role in administering federal taxes, promoting economic growth through taxation, and preventing fraud.
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Senators also approved the Nigeria Tax Administration Bill, which outlines the collection and accounting of revenue across all tiers of government and specifies the roles of tax authorities.
These bills are expected to form the cornerstone of a modern, inclusive, and efficient tax system, positioning taxation as a key instrument of national development.
