Nigeria Senate passes two tax reform bills

As part of the economic plans of the current government of Nigeria, the Senate has passed two major tax reform bills.

The bills passed include 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 expected to be concluded on Thursday.

The Senate President, Godswill Akpabio, announced the passage of the two bills following a majority voice vote by the senators.

Presenting the committee’s report, Senator Sani Musa, Chairman of the Senate Committee on Finance, said the proposals had been thoroughly scrutinised, including through public hearings.

He noted that over 64 organisations, including civil society groups, participated in the hearings and most supported the reforms.

On the VAT sharing formula, the committee recommended 10% for the federal government, 55% for states and the Federal Capital Territory, and 35% for local governments.

The VAT allocation to states would be distributed based on equality (50%), population (20%), and place of consumption (30%), while local government allocations would be split 70% on equality and 30% on population. The committee also proposed that 10% each be earmarked for TETFund, NASENI, and NITDA, 5% for cybersecurity, and 10% for security and defence.

Musa urged passage of the bills, arguing that they would simplify tax compliance, stimulate the economy, and increase investor confidence.

Senator Abdullahi Yahaya, representing Kebbi North and a member of the Special Committee on Tax Reform, confirmed that the committee’s report had been merged with the Finance Committee’s recommendations.

During the clause-by-clause consideration, the Senate adopted the retention of the current 7.5% VAT rate.

It amended Clause 22 to allow states to establish their own Revenue Tax Boards and approved that 2% of the total revenue collected by the Nigeria Revenue Service be appropriated by the National Assembly.

The percentage, initially proposed at 3%, was reduced following an amendment by Senator Aliyu Wadada, who argued that 3% would amount to a revenue pool greater than the budgets of 16 states combined. He called for caution, noting the inclusion of oil and non-oil revenue in the calculations.

Clause 39 also sparked debate.

Senator Adams Oshiomhole, supported by Senator Ibrahim Dankwambo, warned against over-legislating operational financial decisions, which he said could delay urgent actions.

Musa responded that the clause was intended to enhance oversight and prevent unauthorised disbursements, not to stall executive functions.

The Nigeria Revenue Service (Establishment) Bill introduced several structural and operational reforms.

The President will chair the Revenue Service Board, while an Executive Vice Chairman, subject to Senate confirmation, will serve as the head of the Service. Clause 7 was amended to reflect this leadership structure.

He also disclosed that a harmonisation committee would be set up to align the Senate’s version with the one passed by the House of Representatives in March.