The House of Representatives has decided to maintain the Value Added Tax (VAT) rate at 7.5%, rejecting a proposal to gradually increase it to 15% by 2030. This decision comes amid ongoing debates over the Tax Reform Bills currently being discussed in the National Assembly. Additionally, lawmakers have also rejected the reintroduction of inheritance tax, which was proposed as part of a broader plan to tax family income.
This decision has drawn mixed reactions from different groups, with some expressing cautious optimism and others calling for further scrutiny of the overall tax reform process. The Nigerian Chamber of Commerce, Industry, Mines, and Agriculture (NACCIMA) has stated that it will wait for more details before commenting on the decision, while the Movement for Socialist Alternative (MSA) has urged Nigerians not to celebrate just yet.
The Tax Reform Bills, which are intended to overhaul Nigeria’s tax system, include four key pieces of legislation: the Nigeria Tax Bill, the Nigeria Tax Administration Bill, the Nigeria Revenue Service (Establishment) Bill, and the Joint Revenue Board (Establishment) Bill. The goal of these bills is to modernize Nigeria’s tax framework, improve revenue collection, and address issues of tax fairness and efficiency.
During a plenary session held in Abuja, the Chairman of the House Committee on Finance, Mr. James Faleke, presented the committee’s report. He explained that the report reflected an extensive review of the bills, with careful consideration of public input. According to Faleke, the committee worked diligently to ensure that the concerns of the public were incorporated into the reform process.
Some of the most notable changes in the bills include adjustments to the Nigeria Revenue Service Bill, the Joint Revenue Board Bill, and the Nigeria Tax Administration Bill.
One significant amendment to the Nigeria Revenue Service (NRS) Bill involves a shift in the scope of the NRS’s duties. The committee decided to limit the NRS’s focus to federal-level revenue, excluding individual taxpayers in states and the Federal Capital Territory (FCT). This change means that the NRS will focus more on collecting revenue from federal taxes and less on the collection of state-level taxes.
The composition of the governing board of the NRS has also been revised. The new law requires the board to include six executive directors appointed by the president from each of Nigeria’s six geo-political zones. Additionally, one representative from each state and the FCT will sit on the board to ensure proper federal character representation.
Other changes to the NRS Bill include new qualifications for the Secretary to the Board, who must now be a lawyer, chartered accountant, or chartered secretary with at least the rank of Assistant Director. Additionally, the NRS’s borrowing powers have been tightened, requiring approval from both the Federal Executive Council and the National Assembly before any loans can be secured.
The Joint Revenue Board Bill also underwent significant amendments. The committee removed the requirement for Tax Appeal Commissioners to have experience in managing businesses, a qualification that was considered unnecessary. Another major change was the introduction of provisions to ensure the independence of the Tax Ombudsman’s office. This office will now be funded directly through the Consolidated Revenue Fund, which will prevent it from receiving gifts or grants that could introduce bias.
Moreover, the committee introduced regulations to ensure that the Evidence Act is strictly followed during tax appeal proceedings. The bill also proposed independent funding for the Tax Appeal Tribunal (TAT), ensuring that it is not reliant on the Federal Inland Revenue Service (FIRS) to avoid potential conflicts of interest.
The Nigeria Tax Administration Bill saw several amendments aimed at improving efficiency. For example, the timeline for issuing taxpayer identification numbers (Tax IDs) has been extended from two to five working days to account for administrative delays. Additionally, the bill reduces the time allowed for companies that cease operations to file their income tax returns, from six months to three months.
A key change in the bill relates to VAT. While the VAT rate will remain at 7.5%, the committee introduced provisions to ensure that taxable supplies are attributed to their place of consumption, regardless of where returns are filed. This change aims to address regional imbalances in VAT collection.
The bill also proposes the development of a VAT fiscalisation system to improve the efficiency of VAT collection, along with new regulations to ensure the proper distribution of VAT revenue. In terms of banking transactions, the bill raises the reporting threshold from N25 million to N50 million for individuals and from N100 million to N250 million for corporate entities.
One of the most contentious issues in the ongoing debate over the Tax Reform Bills is the VAT rate. While the House of Representatives has decided to keep the VAT rate at 7.5%, this has not satisfied all groups. Critics, particularly from civil society organizations, argue that the overall tax reform plan does not do enough to address the economic challenges faced by Nigeria’s working population.
The Movement for Socialist Alternative (MSA), a member of the Joint Action Front (JAF), called on Nigerians not to celebrate the House’s decision yet. According to the group, the rejection of the VAT increase is only a small victory compared to the broader impact of the Tax Reform Bills. They argue that the bills are still designed to increase the tax burden on the working population while offering tax relief to the wealthiest Nigerians.
In particular, MSA points out that the current minimum wage of N30,000 ($45) is far below the living wage needed to meet the rising cost of living. The group also expressed concern about the impact of the proposed reforms on small businesses and workers, arguing that the government’s focus on taxing the working class while providing tax relief for large corporations is misguided.
