Nigeria’s Tax Reforms Bill: Navigating Economic  Recovery Amidst Policy Challenges

The proposed Tax Reform Bills recently transmitted to Nigeria’s National Assembly by President Bola Ahmed Tinubu has pushed the country’s tax landscape into the spotlight, further underscoring the administration’s commitment to overhauling Nigeria’s complex tax system.

Before now, the Nigerian government and international bodies had described the Nigerian tax system as one riddled with inefficiency, low compliance rates, and a narrow tax base. To drive the tax reforms, President Tinubu submitted four bills to the National Assembly for consideration.

These bills are the Nigeria Tax Bill (NTB) 2024; the Nigeria Tax Administration Bill (NTAB); 2024, the Nigeria Revenue Service Establishment Bill (NRSEB) 2024, and the Joint Revenue Board Establishment Bill (JRBEB).

The bills hope to address the challenges of multi-layered taxation, consolidating various legal frameworks relating to taxation and expanding the country’s tax base. They are also intended to generate sustainable revenue streams for national development, address complexities of the current tax system, and enhance tax compliance.

Nigeria’s tax-to-GDP ratio is below the sub-Saharan Africa average, while the country’s tax revenue, of about 6-7% of GDP, lags far behind regional counterparts like Ghana and South Africa.

Previous policies, such as the Finance Acts of 2019 and 2020, among others, attempted to address these challenges by introducing measures like Value Added Tax (VAT) as well as increasing and tightening compliance mechanisms. However, these efforts met resistance from stakeholders, who cited poor communication, implementation gaps, and concerns about overburdening an already taxed populace as reasons for opposing the policies.

Like the previous efforts, the new Tax Reform Bills sparked considerable debate. Critics argue that its timing, amidst rising inflation and economic hardship, could exacerbate the plight of Nigerians. For instance, while the bills emphasize the need for a broader tax net to capture the informal sector, stakeholders in the MSME sectors have questioned the capacity of the government to implement this without alienating small businesses or driving economic activities into chaos.

For a government seeking to achieve a $1 trillion economy by 2030, debates over the potential impact of the policy on Foreign Direct Investment (FDI) are gaining traction as some stakeholders worry that aggressive tax reforms could make the country less attractive to investors.

At the center of these reforms is the implementing agency, the Federal Inland Revenue Service (FIRS), whose strong commitment to transforming tax administration in recent times suggests a clear direction for a reform that will be good for all.

Since the assumption of President Bola Ahmed Tinubu’s government, the FIRS has implemented strategies to modernise operations, including the adoption of technology, and simplification of tax payment processes through the application of technology-driven methods and measures to build taxpayer trust.

The FIRS leadership has set ambitious revenue targets, such as the N19.4 trillion collection goals that have already been surpassed for 2024.

The Chairman’s initiatives have led to the streamlining of the deduction of Value Added Tax (VAT) and withholding tax directly at payment points, which has reduced delays and ensured consistency. The removal of bottlenecks and middlemen in Ministries, Departments, and Agencies (MDAs), has also ensured direct payment to contractors.

These measures would undoubtedly enhance accountability and transparency in Nigeria’s public sector fund management.

The Federal Inland Revenue Service is actively engaging with the public and legislative stakeholders to clarify the intent and scope of the tax reforms, emphasising their alignment with President Tinubu’s Renewed Hope Agenda for economic revival and growth.

The success of the Tax Reform Bills hinges on striking a balance between increasing revenue and ensuring fairness to all stakeholders. For the reforms to gain public trust, the government must address long-standing issues such as the perception of wasteful spending, bloated political appointees at local, state, and federal levels, as well as weak accountability.

Revenues collected must translate into visible improvements in public infrastructure, healthcare, education, and other areas where many Nigerians perceive as disadvantaged. The tax policy must equally address the concerns of stakeholders about its impact on existing structures and regulatory overlaps.

The government and the FIRS must nonetheless, continue to engage in transparent dialogue with stakeholders as exemplified by the Minister of Information and National Orientation, Mohammed Idris.

Indeed, the Minister’s recent dialogue and public engagements with businesses, civil society, and academia to build consensus on measures that would streamline processes, improve transparency, and bolster revenue generation is for the good of all.

As the process of considering the bills continues in the National Assembly, Nigerians, and leading stakeholders must also seize the opportunity to fully participate in the public hearings to make value-adding inputs to the reform bills.

Undoubtedly, Nigeria is on track to attain its set objectives of accelerated economic growth and development through holistic, enforceable, and sustainable Tax Reforms.