How Kwankwaso’s 2023 manifesto supports Tinubu’s tax reform

The manifesto released by the 2023 presidential candidate of the New Nigeria People’s Party (NNPP), Rabiu Kwankwaso, has shown alignment with the tax reform proposed by President Bola Tinubu.

This is amid his current stance against the Tax Reform Bills, which have passed a second reading in the Senate after they were presented by the President.

In a recent post on X, Kwankwaso said now is not the right time to review Value Added Tax (VAT) or introduce any new taxes, citing the economic challenges faced by Nigerians. He then advised Tinubu to reconsider his stance on the bills and follow the path of his predecessors, former Presidents Olusegun Obasanjo and Goodluck Jonathan, who withdrew critical bills “in the interest of Nigerians.”

However, checks by our correspondent on the manifesto released by Kwankwaso before the 2023 election revealed that he was pushing for a similar tax reform. According to him, a Kwankwaso administration will “review tax regime” and “overhaul the current system of VAT monitoring by the Federal Inland Revenue Service (FIRS).”

He lamented that Nigeria’s Gross Domestic Product (GDP) is “shockingly low” and in need of “radical actions” for improvement in non-oil revenue.

Giving the basis for his tax reform, Kwankwaso, a former governor of Kano State, said there is evidence to suggest that when tax rates are too high, tax evasion increases and collection efficiency drops.

He said some organisations, such as banks and telecommunication firms, have a tax rate of 33.75%, which he intends to cut to 25% as Company Income Tax (CIT).

This is similar to Tinubu’s tax reform, which proposes to cut company tax to 27.5% in the 2025 year of assessment and review it down to 25% from the 2026 year of assessment.

While some firms will have their company tax reduced to 25% in Kwankwaso’s reform, others will have different unstated rates, unlike Tinubu’s reform, which will see a 0% tax rate for small companies.

According to Kwankwaso, the CIT is currently 30% and amounts to 33.75% with the addition of 2.5% education tax, 1% of National Information Technology Development Agency (NITDA) tax, and 0.25% of National Agency for Science and Engineering Infrastructure (NASENI) tax. Kwankwaso’s plan to reduce CIT to 25% will be to the detriment of education, NITDA, and NASENI because it will stop the practice of introducing CIT for certain sectors and agencies.

His position agrees with Tinubu’s reform, according to Presidential Spokesman Bayo Onanuga, who revealed that the current CIT has been a burden for companies, making Nigeria uncompetitive for investment and preventing many businesses from growing or continuing their operations.

While dismissing claims that the affected agencies will be scrapped because of the Tax Reform Bills, Onanuga said the timeframe of the bills offers ample opportunity for the affected agencies to explore other funding sources in addition to budgetary allocations, in line with the constitution and international best practices.

“Imposing a separate tax to fund an agency is an aberration that has yet to yield results despite the huge burden on businesses. The tax bill seeks to address this problem,” he said.

Tinubu’s reform, however, leaves room for the agencies to survive pending when they find other sources of funds. The reform shows that a Development Levy will be imposed on the assessable profits of all companies chargeable to tax under chapters two and three of the Act, other than small companies and non-resident companies. For 2025 and 2026 years of assessment, the levy will be 4% and will reduce to 3% for 2027, 2028, and 2029 years of assessment. The sum collected during those years of assessment will be shared between NASENI, TETFUND, NITDA, and the Student Education Loan Fund (SELF).

However, from 2030 and thereafter, the development levy will be 2% and shall be solely for SELF.

While Kwankwaso’s stand against the bills may seem genuine, especially in the face of economic challenges, the purpose of the bills, which is to revamp the economy, as also aimed by his manifesto, is being overlooked by the former governor.

His call, and those of many others for the suspension of the bills, have been brushed aside by the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, who spoke at a TownHall Meeting on Tax Reform Bills organised by Channels Television.

According to Oyedele, the best time to implement the reform was years ago, and the next best time is now.