The House of Representatives has passed the four major tax reform bills that were transmitted to the National Assembly by President Bola Tinubu in October 2024. The passage of the bills, which includes changes to critical areas such as Value Added Tax (VAT) and inheritance tax, marks a significant step in the government’s efforts to overhaul Nigeria’s tax system.
The bills, which have been a subject of intense debate, are now one step closer to becoming law, pending the Senate’s approval. The reforms are expected to bring about significant changes in the country’s taxation framework, aiming to boost government revenue, improve tax collection, and address issues of tax evasion.
On Tuesday, March 18, the House of Representatives approved the four tax reform bills, which were carefully considered and reviewed by lawmakers in the past months. This decision comes after the House Committee on Finance had presented its recommendations on the proposed reforms last week. The committee’s report addressed several controversial issues, such as the proposed increase in VAT rates and the introduction of an inheritance tax, which had drawn significant attention and debate from both lawmakers and the public.
The passage of these bills is seen as part of a broader effort by the Tinubu administration to implement fiscal reforms aimed at addressing Nigeria’s economic challenges. The country has long struggled with low tax collection rates compared to other nations, and the proposed reforms are designed to modernize the tax system, ensure a fairer distribution of tax burdens, and create a more efficient revenue collection system.
President Tinubu’s administration has emphasized the importance of diversifying the country’s revenue sources, especially given the nation’s reliance on oil exports, which have been subject to fluctuations in global prices. By increasing non-oil tax revenues, the government hopes to create a more sustainable fiscal environment for Nigeria’s economic development.
Among the key reforms in the new tax bills is the proposed change to the Value Added Tax (VAT). One of the more contentious aspects of the proposed reform is the planned increase in the VAT rate, which has been a point of contention. Critics argue that an increase in VAT could place a heavier burden on the average Nigerian, especially in a country already struggling with high inflation and poverty levels. However, proponents of the reform argue that the move is necessary to increase government revenue, which would be used to fund key developmental projects and improve infrastructure.
Another key aspect of the tax reform is the introduction of an inheritance tax, which would apply to the transfer of wealth and assets from deceased individuals to their heirs. This proposal has generated significant debate, with many questioning the fairness of taxing inheritances, particularly in a country where wealth inequality remains a pressing issue. Supporters of the inheritance tax argue that it is a way to address wealth concentration in the hands of a few, while others see it as an additional financial burden on families already grappling with economic hardship.
In addition to VAT and inheritance tax, the tax reforms also aim to address issues related to corporate tax rates, the digital economy, and the taxation of multinational companies. The bills propose stricter enforcement measures to combat tax evasion, with the goal of improving compliance and ensuring that all individuals and businesses contribute their fair share to the national coffers.
With the House of Representatives’ approval, the next step is for the bills to be passed by the Senate. Once both chambers of the National Assembly approve the bills, they will be sent to President Tinubu for his assent, after which they will become law.
While the House’s passage of the bills represents a significant step forward, the Senate’s approval is still awaited, and lawmakers in the Senate may introduce amendments or suggest changes to the proposed reforms. Given the controversial nature of some aspects of the reforms, including the increase in VAT and the inheritance tax, the Senate is likely to carefully review the bills before making its final decision.
If passed, the reforms are expected to have a far-reaching impact on Nigeria’s tax system. The government has assured the public that the new tax measures will be carefully implemented to ensure that they do not unduly burden the average Nigerian. There have also been assurances that the funds generated from the new taxes will be used for infrastructure development, social welfare programs, and other key initiatives aimed at improving the lives of citizens.
Nigeria’s tax system has long been criticized for being inefficient and poorly enforced, with a large portion of the population remaining outside the formal tax net. According to recent statistics, Nigeria has one of the lowest tax-to-GDP ratios in the world, with many businesses and individuals avoiding taxes due to weak enforcement mechanisms and widespread corruption.
The country’s over-reliance on oil revenue has further complicated the situation. Oil exports have traditionally been the main source of government income, but with global oil prices volatile and fluctuating, Nigeria has been looking for alternative revenue sources. Tax reform has therefore become a crucial part of the government’s plan to diversify revenue sources and reduce the country’s dependence on oil.
The proposed reforms are also part of a broader effort to address the challenges of poverty and inequality in the country. Nigeria is one of the poorest countries in the world, with over 40% of its population living in extreme poverty. By modernizing the tax system and improving government revenue, the government hopes to generate the funds needed to invest in infrastructure, healthcare, education, and other key areas that will improve the quality of life for Nigerians.
While many experts have welcomed the proposed reforms as a step in the right direction, there are concerns about the impact of the new taxes on ordinary Nigerians. The proposed VAT increase, in particular, has been met with criticism, with many arguing that it could lead to higher prices for goods and services, further burdening the average consumer. Nigeria has been struggling with high inflation, and any additional increase in the cost of living could exacerbate the economic hardship many Nigerians are already facing.
There are also concerns about the administration’s ability to implement the new tax measures effectively, given the country’s history of poor tax collection and enforcement. Critics worry that without proper implementation, the reforms could lead to more inefficiency and increased corruption within the system.
Despite these concerns, the passage of the tax reform bills by the House of Representatives is seen as a positive development in the ongoing efforts to address Nigeria’s economic challenges. As the bills move to the Senate for approval, all eyes will be on the lawmakers to see how they handle the contentious aspects of the reforms and whether they will make any changes before sending the bills to President Tinubu for his assent.
