Reps pass tax reforms bills through second reading

Members of the House of Representatives, during Wednesday’s plenary, expressed overwhelming support for the passage of the tax reform bills initiated by President Bola Tinubu.

Some lawmakers who spoke during the debate on the general principles of the bills applauded the upward review of the share of revenue accruing to subnational governments.

Most lawmakers also expressed strong support for the proposed Value Added Tax (VAT) sharing formula of 50% equity, 20% population, and 30% association, as recommended by the Nigeria Governors’ Forum (NGF).

Acknowledging the present administration’s efforts to improve the country’s revenue drive, the lawmakers called for stiff penalties for erring tax managers, tax evaders, and companies that submit different financial accounts to the Corporate Affairs Commission (CAC) to evade taxes. They emphasized the need to introduce stringent penalties to serve as a deterrent to tax evasion.

Additionally, they advocated for the digitization of audited accounts in the new bill to curb the rampant issuance of frivolous financial statements and audited accounts by companies.

To address public concerns about dwindling revenue generation, a cross-section of lawmakers advised against the Executive’s issuance of exemption orders.

In his address, the Chairman of the House Committee on Water Resources, Hon. Abubakar Fulata, observed that, except for the bill dealing with tax administration, three other proposed bills lack interpretation clauses.

On the proposed phase-out of certain institutions, Hon. Fulata stated: “As the Chairman of the House Committee on University Education, I acknowledge the remarkable work TETFUND is doing in the education sector. Therefore, my position is that these agencies—TETFUND, NITDA, and NASENI—should be retained.”

Hon. Fulata also urged the House to delete Section 38 of the Taxation Act, which he argued leads to double taxation. He emphasized the need for the Executive to formally present over 40 Acts before they are repealed to allow for legislative scrutiny, stating, “About 40 Acts are being repealed and phased out by these bills, Mr. Speaker.”

He further noted, “As a Muslim, we do not tolerate inheritance tax. You cannot take from the wealth of an orphan and give it away to another person, Mr. Speaker. Finally, I propose that the VAT sharing formula should be based on 50% equity, 20% population, and 30% association, Mr. Speaker.”

Hon. Cyril Hart, speaking on Section 85, which focuses on providing production credits for gas producers, argued: “Thirty percent of the fiscal gas price will be given as credits. Mr. Speaker, are you aware that today, the non-oil sector contributes about 90% of our GDP, while the oil sector contributes only 5%? However, the irony is that this 5% from the oil sector constitutes 60% of our budgetary revenue.

“Moreover, it contributes 90% of our foreign exchange. Therefore, we must take steps to ramp up production, which is what Section 85 seeks to address. We need foreign exchange from gas production, and we also need gas for power.”

Labour Party Caucus Leader, Hon. George Ozodinobi, described the proposed tax bill amendments as “a subtle restructuring of this great nation and, at the same time, a kind of handshake across the Niger to our people.”

Hon. Nnolim Nnaji underscored the need to ensure judicious use of the funds expected to be generated through tax reform legislation. He emphasized that the funds should be directed toward essential public utilities, particularly electricity, as Nigeria still struggles with constant power supply. He also advocated for increased funding for healthcare.

“My concern is more about the utilization of these funds. We are on the path to generating significant revenue, but I urge the Executive and State Governments, especially Mr. President, to ensure that these funds are properly utilized to address our basic needs,” he stated.

Speaking on company taxes, he added: “Every country’s tax policy influences investor confidence. We should ensure our corporate tax structure attracts investors rather than discouraging them. We have long talked about attracting investors, so we must make sure our tax policies promote investment in Nigeria.”

Supporting the call for safety nets for companies declaring losses, lawmakers noted that any company that reports losses for two consecutive years should be deleted from the Corporate Affairs Commission’s registry.

Hon. Sada Soli argued that the proposed bill would “enhance efficiency, ensure compliance, and harmonize tax collection across the three tiers of government.” However, he pointed out inconsistencies and challenges the bill might pose to tax administration, stating that it does not address key issues such as derivation, artificial transactions, and tax planning.

“Mr. Speaker, there is concern over equity in Section 77, which proposes a 60% derivation share to states. The committee must examine this issue to ensure fairness, especially for less competitive states,” he said.

Chairman of the House Committee on Defence, Hon. Babajimi Benson, noted that state governors had addressed most concerns regarding derivation and the continued existence of TETFUND, NITDA, and NASENI.

“I don’t think there are any major misgivings about this anymore. The governors have spoken as true democrats and patriots. When I examine the tax bill, I see that it is very state-centric.

“It increases the revenue share for states, reduces the Federal Government’s share from 15% to 10%, and grants states an additional 5%. It also allows states to collect stamp duties and enhances their overall tax collection. Above all, we must remember that Nigeria’s tax laws date back to the 1930s, and we must modernize them,” he added.

Following the extensive debate, the bill was referred to the House Committee on Finance, chaired by Hon. Abiodun James Faleke, for further legislative action.