Tinubu’s tax reform bills, the rich and State Governors by Kazeem Akintunde
If you are a resident of Lagos and you have not been to Ikeja GRA of recent, please you need to pay a visit. The entire landscape has been turned into a giant construction site. The millionaires of yesteryears that have property in that sprawling neighbourhood are now being quietly displaced by the billionaires of today’s world, the wealth of many of whom one can’t easily explain the source.
Although a good number of those who built most of those properties are long dead, those who inherited the ‘colonial houses’ have no issue selling them to the highest bidder. Imagine inheriting a bungalow from your late dad, built in the 1970s with less than N1m and you are offered between N700m and N1 billion to sell the same property.
Many in such situation are gladly selling and moving out. Now, the new owners are demolishing those structures and erecting state-of-the-art mansions worth several billions of Naira. Others are putting up five-star hotels and malls within the Ikeja GRA. One of such mansions was recently commissioned by a former member of the Lagos State House of Assembly. The new edifice was built within six months, and it has been described by many as a palace meant for Kings due to its opulence and grandeur.
But ask the owner how much he pays as tax in a year or the source of his wealth and that is when you will start hearing stories that touch the heart. Such lines as “talk to my lawyers”, or my lawyers will get in touch with you” are their standard statements. Although the Lagos State Government is making money from what is happening in Ikeja GRA, it is insignificant and that is where the Tinubu’s Tax Reform Bill comes in.
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I ‘cut’ my journalism teeth at New Horizon Newspaper; a tabloid owned and published by the Lagos State Government in the 90s before its name was later changed to Eko Today by the Buba Marwa administration. Our office was at 1a Reverend Ogunbiyi, GRA, Ikeja. In essence, the property was owned by the Lagos State Government. I left the organization in the year 2000 and few years later, the State Government rested the publication. Go to the same address and see what is on the property today. Don’t ask me if the Lagos State Government owns the property now or whether it was sold, allocated or hijacked by those at the helm of affairs in the state.
Babajide Sanwo-Olu, the current Governor of Lagos State and his team in the land Bureau would be in a better position to answer your inquiry, but what is certain is that the property now belongs to private individual. What has now been erected on the property was built within a year. Ask those who own the property how much tax they pay in a year, and statements like “I know my rights” would start flying.
In Nigeria, the rich get richer, while the poor gets poorer. And this is so because the rich, whether the money is earned legitimately or fraudulently, have mastered the art of evading paying taxes. Where they cannot completely evade the process, they pay peanuts into the coffers of government and they continue to enjoy their largely ill-gotten wealth. This is where many advanced countries in the world are different from Nigeria. You cannot evade the long claws of the government when it comes to payment of taxes. You should be ready to pay a huge amount of money when you choose to live large.
This is why President Bola Tinubu is having issues with his Tax Reform Bills. Those that are up against the bills are his fellow rich politicians and state governors who are very much interested in maintaining the status-quo.
Tinubu became the President at a time when the treasury has been completely looted and the future of the country no longer certain due to huge debt stock. With failure staring him in the face, he has had to look inwards to determine where the money to run his government would come from and one of the strategies is to go after those in his class – the rich. They simply have to pay taxes that are commensurate with what they own.
Few weeks after being sworn-in, Tinubu appointed Taiwo Oyedele as Head of a Presidential Fiscal Policy and Tax Reforms Committee. The committee was charged with the responsibility of addressing the various discrepancies in our tax administration. After a rigorous exercise, the Oyedele Committee came up with a comprehensive tax reform proposal that would significantly alter the way we administer, collect and manage taxes in Nigeria.
His committee report was later consolidated into four tax reform bills which were submitted to the National Assembly to work on.
These include the Nigeria Tax Bill, which aims to eliminate unintended multiple taxation and make Nigeria’s economy more competitive by simplifying tax obligations for businesses and individuals nationwide. Secondly, the Nigeria Tax Administration Bill, which proposes new rules governing the administration of all taxes in the country. Its objective is to harmonise tax administrative processes across federal, state and local jurisdictions to ease taxpayers’ compliance in all parts of the country. Thirdly, the Nigeria Revenue Service (Establishment) Bill, which seeks to rename the Federal Inland Revenue Service as the Nigeria Revenue Service to better reflect the mandate of the Service as the revenue agency for the entire federation, not just the Federal Government, and lastly, the Joint Revenue Board Establishment Bill, which proposes the creation of a Joint Revenue Board to replace the Joint Tax Board, covering federal and all states’ tax authorities. The fourth bill also suggests the establishment of the Office of Tax Ombudsman under the Joint Revenue Board, serving as a complaint resolution body for taxpayers.
Northern governors were the first to kick against the proposal, arguing that the new bills were not in the best interest of the North. What riled the Northern governors was a provision in one of the bills which proposes a derivation-based model for Value Added Tax distribution in the country. Muhammed Yahaya, Governor of Gombe State, in a communique after the northern governors held a meeting on October 28, noted that the proposition negates the interest of the North and other sub-nationals. The forum said that the bill portends massive job losses and more economic turmoil for the region. Their colleagues from the South also joined the fray, demanding the total withdrawal of the Tax Reform Bills from the National Assembly. The governors, speaking during the last National Economic Council, asked President Tinubu to withdraw the Reform Bills from the National Assembly “for more comprehensive consultations”.
Oyo State Governor, Seyi Makinde, said that the council members agreed that it was necessary to allow for consensus building and understanding of the bills among Nigerians.
Now, Tinubu and his media aides are trying to push back, with the assurance to the governors that the tax reforms bills would be a win-win for all, and that those who feel aggrieved should make use of the opportunity offered by the National Assembly’s public hearing to make inputs on the bills. His media aides, Bayo Onanuga and Dada Olusegun, have also made several interventions on the tax reform bills, describing them as what the country needs right now to turn the economy around.
Dada, in his intervention, said individuals earning N800,000 or less would be exempted from paying income tax, while only those earning N50million and above would get to pay 25 per cent as personal income tax. Again, small businesses whose turnover is N50 million or less would also be exempted from paying income tax. What this means is that up to 90% of businesses in Nigeria will be exempted from paying income tax.
Also, the harmonisation of 2.5% education tax, 1% NITDA tax and 0.25% NASENI tax that many firms pay in addition to their company income tax annually will be collapsed into a single development levy of 2% that will be used exclusively to fund student loans from 2030. This would further reduce the total tax burden of some companies from around 33.75% of their earnings to just 27% of their earnings.
The bill also reviewed VAT revenue sharing formula where states now take 55% of the revenue instead of 50%, while the federal government’s share of VAT revenue shrinks from the current 15% to 10%. The share of LGAs remain the same. However, there will be a progressive increase in VAT rate from the current 7.5% to 10% in 2025; 12.5% between 2026-2029 and 15% from 2030. Again, many basic items consumed by the poor from VAT such as food items, medical services and pharmaceuticals, educational fees, electricity etc. would be exempted from VAT.
The Nigeria Tax Administration Bill on the other hand, is the bill that sets out how the tax authorities will administer the taxes, which include assessment, collection of, and accounting for the various tax revenues they collect. The bill also outlines the powers and functions of the tax authorities, which taxes are reserved exclusively for the NRS to collect, and which ones are reserved for the states amongst other miscellaneous provisions relevant to the effective administration of tax in Nigeria.
Some of the major provisions of the Nigeria Tax Administration Bill include how to draw the rich into the tax net. The bill puts in place mechanism to ensure that individual customers of financial institutions whose cumulative transactions in a month amount to N25 million or more, and corporate customers whose cumulative transactions in a month amount to N100 million or more do not evade taxes by mandating financial institutions to give the tax authority a list of such individuals or corporate customers with their addresses.
Also, there would be a new VAT derivation model where 60% of VAT revenue standing to the credit of the states are shared on the basis of derivation, while 20% is shared based on population sizes, and the other 20% is shared equally among the states. Most importantly, VAT revenue for the purpose of the new derivation model will no longer be attributed to the place of remittance (which is usually the headquarters of companies) but attributed to the actual locations across the states where the consumption of goods and services took place.
This is the portion of the bill that is giving northern governors headache. The VAT lollipop is about to be yanked from their mouths and they are already resisting it. But they cannot continue to generate less into the VAT coffers whilst taking more from it. In a delicate democracy like ours, where the interest of all should be protected, Tinubu has asked the governors to make their inputs into the bills at the National Assembly and allow the lawmakers to make laws that would radically reorganise our tax administration in the country.
The nouveau-riches that are not in the tax net or paying peanut as taxes should start sweating. You cannot shove it down our throats on social media that you live in a N2billion mansion and still don’t want to pay commensurate taxes on those types of properties.
See you next week.
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