Tax Reform Bills scale second reading at Senate

By Tunde Opalana

Controversies surrounding the legislative process of the tax reform bills introduced by President Bola Tinubu was doused as the four bills on Thursday passed second reading at the Senate plenary.

The passage for second reading followed a comprehensive debate on the general principles of the bills consequent upon presentations made by the Senate Leader , Senator Opeyemi Bamidele ( APC Ekiti Central).

After presenting the lead debate, some senators such as; Sani Musa ( APC Niger East), Seriake Dickson ( PDP Bayelsa West ) , Abba Moro ( PDP Benue South) and Senate Whip , Tahir Monguno ( APC Borno North ) spoke in support of the bill .

However, Senator Ali Ndume ( APC Borno South ) , kicked against the reform bills on the grounds of timing and lack of wider consultations.

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The Senate at the session presided over by its President , Godswill Akpabio , accordingly passed the bills for second reading through voice votes .

In the lead debate, Senator Bamidele said the Nigeria’s tax reform bill is a significant move to overhaul the country’s tax system, stressing that the bills aim to simplify the tax landscape, reduce the burden on small business and streamline how taxes are collected.

“In broad terms, the four bills seeks to ensure uniformity in tax revenue administration in Nigeria in accordance with the provisions of the Constitution, eliminate the incidence of double taxation across the country, deploy taxation as a tool to encourage private sector investments in critical industries and boost individual disposal incomes through targeted tax exemptions as captured in the various Bills.

“In the area of tax exemptions, there is a proposal to exempt those whose salaries are not more the minimum wage from P.A.Y.E deductions while small businesses with annual turnover of N50, 000,000 or less are equally exempted from payment of taxes.

“Similarly, there is proposed huge reduction in company income tax from the current 30% to 25% by 2026. As part of deliberate attempt to curtail the incidence of double taxation and multiplicity of taxes and levies, multiple taxes hitherto paid by companies under various tax heads namely 2.5% education tax, 0.25% NASENI tax have been harmonized into a development level of 2% which by 2030 will be applied to fund the newly established student loan scheme which will benefit many Nigerian youths.

“Furthermore, unlike like what is obtainable under the existing tax regime whereby the Federal Government takes a lion share of VAT revenues, it is proposed that the sharing formula should allow State Government share 55% of VAT revenue from the current 15% to 10% sharing formula.

“However, Local Governments share of VAT revenue remains unaffected. Relatedly, basic items consumed by Nigerian households -such as ‘food items, medical services and pharmaceuticals, educational fees, electricity etc are exempted from VAT.

“Again, as part of efforts to ease the administration of income taxes and levies across the Federation, there is a reasonable effort made to consolidate core tax statutes and related tax legislations.

Allaying fears of misrepresentations, the Senate Leader said “contrary to misrepresentations in the public domain regarding the intendment of the Bills under consideration, I wish to state that these Bills contains innovative people -oriented proposals as part of Government’s deliberate fiscal and tax reform measures to cushion the effect of ongoing broader economic policies such as the removal of subsidy on petroleum products, renewed efforts to implement cost -reflective electricity tariffs in the power sector etc on Nigerian citizens.”

He, therefore, said “these Bills should be seen as part of the required legislative intervention to support ongoing fiscal and tax reform measures needed to reposition the Nigerian economy for growth and productivity.

“These Bills should be considered with great sense of patriotism and exercise of the powers of the National Assembly under section 59 of the Constitution regarding imposition of taxes. I therefore urge my distinguished colleagues to support this Bill for second reading.”

Making contributions, Senator Seriake Dickson said he fully supported tax revenue and was aware that some issues have been raised which are legitimate in a country of diverse people, diverse cultures, diverse expectations.

“All those are legitimate observations and fears and expectations. All we’re expected to do is to harness all of these and enact laws in the national interest, which I believe, following our rules, after the second reading at the committee stage, when the public hearing is over,” he said.

He attributed issues raised to lack of adequate consensus building and consultation prior to the introduction of the bills.

Dickson further said “that consultation should have taken place. And I believe between now and at the end of our legislative activities, more consultations will happen. But that does not detract from the essence of the legislations that have been sent to us.

“For example, there is emphasis on derivation according to taxation. And the attempt now is to encourage states to be productive. A situation where states will abandon their core responsibility to create an enabling environment, attract investment, promote economic activities, so that that state can boost its revenues. That’s a good thing. That’s not a bad thing.

“The other area, in fact, according to derivation, when we get to the committee stage, we’ll look at the specific details, but there’s nothing wrong in saying that the telephone calls that are made in Bayelsa or Akwa- Ibom , or Sokoto or Kano, the VATs on those things that are consumed, be calculated and paid to those states.

“And we are told that that is the essence of these bills. And there’s nothing wrong about it. Because VAT is a consumption tax. It’s not a production tax. Those who are in the states who consume services, the VAT accruing to those should be calculated and paid I’m sure when we look at the details, we’ll see whether there’s enough mechanism to guarantee transparency and accuracy in terms of administration.

“Those are some of the things we’ll fine-tune. this is a good move. And there is an effort also to reduce the burden on taxation, burden of taxation on Nigerians. Corporate taxes by the proposal to read the bills.

“There’s a proposal to reduce corporate taxes from next year. Reducing it from the 30% that it is currently to 27, 25 percent. So, that is a good move. And there’s also a move to remove the people at the lowest level in terms of their salaries and so on. To exempt them completely. These are good things in this bill that should be encouraged.

” I use this opportunity to call on all my colleagues to agree that these bills, all four of them, should be passed for second reading to enable our committee and the experts and the general public engage in accordance with our rules.”.

Ali Ndume maintained his opposition to the bills though with modification, acknowledging that reforms are necessary if the country has to move forward.

He highlighted his areas of concerns saying “my problem is, number one, the timing. The timing, as it is today, when you talk about reforms to Nigeria, whether it’s good or bad, they’re misconceived. And as we said, I just want to add to what Senator Dickson said, he talked eloquently and explained so many things.

“There are four things, or three, there. But, as you said, the time for that would be at the public hearing or when we pass it second reading. But let it be on record that my problem with the bills, I’ve said, one, that is the timing.

“Number two, the issue of derivation. The issue of derivation made the reform contagious, contaminated, and contradictory in some cases. Because the constitution has to be amended in order for some of these proposals to be effective. I’m glad we are doing a constitutional review.

“So even if it means reviewing the constitution. This is general principles. As you said, Or as the senators decided. We should not throw away the baby in the bathwater. I would have preferred we remove the baby and throw away the water first. And that is to go with what the governors and NEC proposed.”

Calling for the withdrawal of the bills for further consultations, Ndume said “that these bills should be withdrawn. So that, and they are not saying that the bills should be killed. You withdraw the bill. to the National Assembly again after getting the buy-in of the governors and NEC and even our traditional rulers.

“Mr. President, let’s be honest to ourselves. If we sit down here, work on these bills, assuming as it is now, because the governors have not come out publicly to change their position, the traditional rulers have not sat down publicly to change their position. NEC have not sat down to change their position.

“And for me, as I say, I looked at the bill. The bill contains so many good things, but these two things, derivation and VAT, even though you say it will be addressed at the public session, it’s not something that many of us will agree to it. You started by saying, we are going to negotiate, which is good, and it’s coming from you. But why don’t we negotiate first before we come out to take a position?

” It’s something that looks attractive. It may not necessarily be that. you transfer or you move people from a lower income from VAT and then you increase their taxes, the corporate taxes, the person that is manufacturing that goods will now transfer the VAT cost to it. So it means you gave him the right hand and it was taken or is taken on the left hand.

“Secondly, the corporate tax you are talking about, when you remove the lower income, which is good, but then in the bill it’s a 50 million to billion, 25 percent, they reduce it from 30 percent to 25 percent. If a small person or medium enterprising company makes up to 50 million per year and you are charging him the same percentage with companies that are earning billions and declaring billions of profit.

“Mr. President, the third problem I mentioned is the people through the governors and then and the traditional rulers say that the bills should be withdrawn, make some necessary amendments. And then bring it back and we can pass it in 24 hours. That is my position, Mr. President. Thank you very much.”

Senator Tahir Monguno tackled Ndume’s call for withdrawal of the bills.

“I get to disagree with you that this bill should be withdrawn first and consultation should be held with the Nigerian Governors Forum and traditional rulers.

“We have a procedure which is clearly and ambiguously stated in our rulebook for the process of lawmaking. And the Constitution, in a very clear and unambiguous, it gave us the power to regulate our proceedings, Section 60. And pursuant to Section 60 of the 1999 Constitution as amended, we get these rules to ourselves in order to guide our proceedings.

“And then the process of lawmaking is very clear and unambiguous as per this book. That second reading, it will be now transmitted to the Committee for Public Hearing. In the course of the public hearing, Nigerians of all walks of life, of all groups, will come and aggregate, including the Governors and traditional rulers, are free to come and ventilate their opinion.”

He said Ndume”s suggestion is alien to
process of legislation exercise and therefore “it is fairly academic exercise not worthy of legislative consideration. So, Mr President having said that my contribution on the general on the general principles of the bill is that this bill as it is proposed i am particularly on the issue of reducing the tax burden on Nigerians, removing part on food, medicals, education, pharmaceuticals and electricity were exempted from tax.”

After putting to verbal vote the passage of the bills for second reading, Senate President, Akpabio mandated its committee on Finance , to organise Public hearing on the bill for inputs from those against the bills like the Governors’s forum , National Economic Council ( NEC ) , Northern Elders ‘ Forum ( NEF ) etc and report back within six weeks.