Tinubu’s govt tax reforms not targeting North, says Presidency

The Presidency has clarified that the tax reform bills currently under review in the National Assembly are not aimed at marginalizing any region but are intended to benefit all states and streamline Nigeria’s tax laws for improved efficiency.

Addressing recent concerns from Northern Governors about job security and potential regional disadvantages, the Presidency emphasized that the reforms by President Bola Tinubu’s administration would enhance fairness and harmonize tax administration nationwide.

The Special Adviser to the President on Information and Strategy, Bayo Onanuga, outlined this position in a statement titled, “Explainer: Proposed tax reform bills not against the north; they will benefit all states,” issued on Thursday.

On October 28, 2024, Northern Governors, convening under the Northern Governors’ Forum, rejected the proposed derivation-based model for Value-Added Tax (VAT) distribution.

The meeting, which included traditional leaders led by the Sultan of Sokoto, His Eminence Muhammadu Sa’ad Abubakar III, concluded with a communiqué read by the forum’s chairman, Governor Muhammed Yahaya of Gombe State, stating that the proposed VAT distribution model does not align with the interests of Northern states.

President Bola Tinubu, along with the Federal Executive Council, recently approved initiatives to refine Nigeria’s tax system, addressing inefficiencies and redundancies. The reform process began in August 2023, leading to the formulation of four executive bills that the National Assembly is now considering.

The reform package includes the Nigeria Tax Bill, which aims to reduce multiple taxation and make Nigeria’s economy more competitive, and the Nigeria Tax Administration Bill, which would harmonize tax processes across all levels of government. Additionally, the Nigeria Revenue Service (Establishment) Bill proposes renaming the Federal Inland Revenue Service to better represent its national role, while the Joint Revenue Board Establishment Bill seeks to establish a Joint Revenue Board and a Tax Ombudsman office to improve taxpayer support.

The Presidency has assured that these reforms will not increase the number of taxes or the current tax rates but are designed to “optimize and simplify existing tax frameworks.”

Onanuga emphasized, “It is instructive to note that these proposed laws will not increase the number of taxes currently in operation. Instead, they are designed to optimise and simplify existing tax frameworks.

“The tax rates or percentages will remain the same under these reforms, as they focus on ensuring a more equitable distribution of tax obligations without adding to the burden on Nigerians.”

He further explained that the reforms are structured to stimulate job growth rather than cause job losses and are intended to harmonize revenue collection across the country for better efficiency and cooperation. Presently, Nigeria’s tax system lacks alignment between federal, state, and local authorities, often leading to inefficiencies and overlaps. The proposed laws are designed to rectify this by promoting coordination across government levels.

“Under existing laws, taxes like Company Income Tax, Personal Income Tax, Capital Gains Tax, Petroleum Profits Tax, Tertiary Education Tax, Value-Added Tax, and other taxing provisions in numerous laws are administered separately, with individual legislative frameworks.

However, “The proposed reforms seek to consolidate these multiple taxes, integrating CIT, PIT, CGT, VAT, PPT, and excise duties into a unified structure to reduce administrative fragmentation,” said Onanuga.

On the proposed derivation-based VAT distribution model, which the Northern Governors oppose, the Presidency insisted that “the new proposal, as enunciated in the Bill, is designed to create a fairer system.”

It explained that the current model for distributing VAT is based on where the tax is remitted rather than where goods and services are supplied or consumed.

“The ongoing tax reform seeks to correct the inherent inequity in the current derivation model as a basis for distributing VAT revenue.

“The new proposal before the National Assembly outlines a different form of derivation which considers the place of supply or consumption for relevant goods and services.

“This means that states in the Northern region that produce the food we eat should not lose out just because their products are VAT-exempt or consumed in other states,” Onanuga stated.

According to the Presidency, these reforms are critical to improving the lives of Nigerians and were not put forward by President Tinubu to undermine any part of the country.

“There is no better time than now for the National Assembly to give due consideration to these bills that will overhaul our tax systems and create the revenue all the tiers of government require to fund the development our country and people urgently need,” it concluded.