The Longstanding Issue
It was known since the second half of last year that the debate of the Tax Reform Bill (TRB) has been having mixed reactions and difficult concurrences between the Federal government, and all the 36 serving state governors of Nigeria.
The proposed bill which was advanced to the legislative arm by the current president (Bola Ahmed Tinubu), was to restructure, strengthen, and foster growth in the country.
Here are the proposed bills:
1. 5% telecoms tax
2. 5% Excise Tax on Lottery and gaming income
3. 4% development levy on companies
4. 27.5% company tax
5. VAT Exemptions, and an increment in VAT.
The increment in VAT proposes to raise VAT from 7.5% to 10% by 2025, the VAT exemption seeks to have certain exempt including crude oil export, and purchased goods, the 27.5% Company Tax will handle imposing 27.5% tax rate on the total profit of every company in Nigeria, the 4% Dev Levy will fund the Nigerian Education Loan Funds (NELFund), the 5% excise tax will extract revenues from Lottery and Betting agencies, while the last 5% telecom tax will have the Nigerian Communication Commission police telecommunication companies and ensure they pay the proposed tax.
Initial Deliberations and Disagreement
At some point in 2024, the 36 governors had a general meeting and deliberated on the suggested rise in taxation. Many controversies strongly erupted during the forum’s brainstorming, weighing the effects it would have on each of their respective states which they currently oversee. More especially the Northern Governor’s Forum.
The North had an in-depth overview of the tax reform bills. They involved every traditional title holder’s opinion, including the Emirs and other well-recognized personalities in the Northern part of the country, showing a solid sign of unity.
The North saw that the bill would have quite some weighty effects on them, and its proposal would be unfair to them.
During one of the general Governor’s meetings, a motion was pushed by the Oyo State governor, Seyi Makinde, and other governors from different parts of the country recommending that there be a withdrawal of the bill so that stakeholders be carried along.
The dogged analysis during several meetings did not yield any positive agreement with all the 36 governors and the Federal government, and this continued not until a fresh gathering of the governors on Thursday, January 16th, 2025, yielded a partial acceptance of the bill.
The Final Agreement/Deliberation
NGF members collaborated on a subnational consultation and engagement with the presidential committee on Tax Reforms at the January 16th congress, which was held at the Congress Hall of the Transcorp Hilton Hotel in Abuja.
After this deliberation, a decision was reached, which was officially announced in a communiqué signed by AbdulRahman AbdulRazaq (Chairman of the Nigerian Governors’ Forum and Governor of Kwara State).
An important point of the communiqué issued contained a final agreement of:
1. The forum endorsed a revised VAT sharing formula to ensure equity distribution of resources.
(a). 50% based on equality
(b). 30% based on derivation
(c). 20% based on population
The deliberation, after this agreement, now supports the legislative arm to go ahead and pass the Tax Reform Bill in the manner in which the NGF has deliberated.
With this latest development, everyone awaits the action of the legislative house and an eventual activation into law.
