Contrary to the erroneous reports, that the proposed tax reforms for which President Bola Ahmed Tinubu forwarded four new bills to the National Assembly will pave way for revenue collection to be taken from the Nigeria Customs Service and other government agencies, the exercise is basically to correct the restructive name of the apex tax agency – the Federal Inland Revenue Service (FIRS).
The tax reform is encapsulated in the four executive bills forwarded to the National Assembly. They are the Nigeria Tax Bill, Nigeria Tax Administration Bill, Nigeria Revenue Service (Establishment) Bill, and Joint Revenue Board (Establishment) Bill. The bills are the recommendations by the Presidential Committee on Fiscal Policy and Tax Reforms, chaired by Taiwo Oyedele, into implementable legislative framework for the benefits of Nigerians.
One of the bills, the Nigeria Revenue Service (Establishment) Bill, which mostly generated the erroneous reports, proposes to change the name of the Federal Inland Revenue Service (FIRS). In an explanatory note over initial reports that assumed that the proposed bill will subsume or take over the revenue collecting function of the Customs, a Special Assistant to the Chairman of FIRS, Mr. Dare Adekanmbi, stated that the Nigeria Revenue Service (Establishment) Bill is primarily proposing a change of name for the FIRS to the Nigeria Revenue Service.
According to him, the bill is one which seeks to correct the error of 2007 when Nigeria’s apex tax authority, FIRS, became autonomous as an operational arm of the Federal Board of Inland Revenue (FBIR). “The mandate of FIRS is to administer tax laws to assess, collect and account for revenue accruable to the federation and not the Federal Government. Especially when we consider the current sharing formula on VAT revenue, only 15 percent goes to the Federal Government. The remaining 85 percent is shared between the states and the local government areas”, the official, Mr. Adekanmbi, stated.
He revealed that tax revenue from FIRS is presently the main reason the 36 states and the local government councils smile to the banks monthly during their Federation Account Allocation Committee (FAAC) meeting. Adekanmbi said a “total of N17.8 trillion accrued to the Federation Account between January and July this year. FIRS tax revenue alone contributed N11.7 trillion, representing 65.8 percent of the total money disbursed to the federal, state and local government councils to meet their needs.”
Giving the FIRS an appellation which suggests it is solely collecting tax for Federal Government is improper and has to be corrected, he said. “Another error in the current name is contained in the word ‘Inland’ which restricts the agency to the collection of taxes within the interior territory of the country. Nigeria has huge revenue to collect from offshore transactions and only a repeal of FIRS (Establishment) Act 2007 to pave the way for the Nigeria Revenue Service (Establishment) Act can make that happen. Those suggesting that the proposed name change will translate to other revenue agencies being subsumed or merged with NRS need to get copies of the bill to clear their doubt”, he explained.
The desire to enhance the efficiency of collecting direct taxes, along with various levies that are imposed on behalf of the government, and streamline the tax collection process informed the proposed tax reforms.
With the Federal Government contending with debilitating revenue challenge that cuts across all tiers of government, the target is to attain a minimum tax-to-GDP ratio of 18 per cent. The country’s tax-to-GDP ratio is below Africa’s average and ranks as one of the lowest in the world.
Since 2010, the average for the 33 African countries has increased by 1.5 percentage points, from 14.1% in 2010 to 15.6% in 2021. Over the same period, the tax-to-GDP ratio in Nigeria has decreased by 0.6 percentage points, from 7.3% to 6.7%.
The Nigeria Tax Bill aims to codify of all taxing provisions into one single document to be known as the Nigeria Tax Act when passed into law. In the bill, chapters are devoted to the various tax types in a simplified format.
In the proposed law, companies doing businesses in the country have been re-classified into two: small and large in accordance with the companies’ respective turnover thresholds. A company will be deemed small if its turnover is N50 million or less in a year. Under the current tax regime, only companies with turnover of N25 million or less are not required to pay Companies Income Tax (CIT). However, in the new tax bill, the threshold was increased by 100 percent. Companies with yearly turnover of up to N50 million will no longer pay CIT. As regards large companies, that is, those whose turnover thresholds are above N50 million, there is a proposal in the bill to give some relief to them through a significant reduction in their CIT rate.
While the reform seeks to increase the Value Added Tax (VAT) rate from ghe current 7.5 % to 10 10%, in the proposed law, VAT will not be charged on all items that have direct existential impact on the common people. Items such as food, medicals, education, transport business and agriculture are not chargeable to VAT. For instance, tuition fee or rent paid by proprietors or purchases made by school owners for the purpose of the business of educating Nigerians will be free from VAT. It is the same for owners of hospitals, those in agric business as well as those who buy vehicles for transportation.
The Nigeria Tax Administration Bill harmonises all tax administration issues such as registration, filing, payment, dispute resolution, and delineates the roles and objectives of all tax authorities in the country as well as their relevant jurisdictions.
The misleading report published by some news outlets had claimed that President Bola Tinubu may bar Nigeria Customs Service and other revenue-generating agencies from collecting revenues on behalf of the Federal Government as he plans to introduce a single agency – Nigeria Revenue Service – to handle the task.
This had elicited controversial reactions from some maritime operators and groups who condemned the move based on the erroneous report.
