Senate moves forward with tax reform bills as critics call for caution

• Dickson backs reform, advocates equity for oil-producing states
• Withdraw bills, beware of backlash, SME burden, Ndume warns
• Munguno okays proposal, opposes withdrawal for further consultations
• House to hold special session on bills Tuesday

The Senate advanced President Bola Tinubu’s ambitious tax reform bills yesterday, touting their potential to ease burdens on vulnerable Nigerians and strengthen fiscal federalism.

However, sharp divisions emerged, with critics decrying insufficient consultations and possible harm to small businesses. The contrasting views reflect a nation grappling with the promise of economic overhaul amid deep-seated concerns.

The Senate approved the bills for second reading, following a one-hour closed session where lawmakers agreed to debate the general principles of the proposed legislation.

Leading the debate after the session, Senate Leader Opeyemi Bamidele said the reforms, if passed into law, would bring a paradigm shift to Nigeria’s tax administration and benefit citizens.

Senator Seriake Dickson, representing Bayelsa West, commended the executive for introducing the landmark legislation, arguing that it could entrench fiscal federalism.

However, Senator Ali Ndume of Borno South called for the withdrawal of the bills to allow for further consultation and engagement with critical stakeholders who remain opposed to the reforms.

Senate Chief Whip, Tahir Monguno countered Ndume’s position, suggesting that dissenting stakeholders could present their views during the public hearing stage of the legislative process.

Senate President, Godswill Akpabio, who presided over the plenary, put the bills to a voice vote, and the lawmakers overwhelmingly approved their passage for second reading.

He directed the Senate Committee on Finance to organise a public hearing to gather input from groups such as the Governors’ Forum, National Economic Council (NEC), and Northern Elders’ Forum (NEF).

The committee is expected to report back within six weeks. The four reform bills, presented by Senator Bamidele, are part of the Tinubu administration’s push to overhaul Nigeria’s tax system and address fiscal challenges.

DICKSON strongly supported the proposed tax reform bills, describing them as crucial for achieving fiscal federalism. Contributing to the debate, he highlighted the importance of governments relying on tax revenues for sustainable governance.

While acknowledging concerns about insufficient consultations with stakeholders such as governors and traditional rulers, Dickson insisted on preserving the bills’ objectives. He commended provisions encouraging states to boost revenue through investment and economic activity.

A major concern raised was the derivation principle, especially in oil-producing states. He advocated for pay-as-you-earn (PAYE) taxes of oil workers to be credited to the states where they work rather than where corporate offices are located, calling this adjustment necessary for equitable revenue allocation.

He also supported allocating Value Added Tax (VAT) to states where goods and services are consumed, noting that this would benefit states like Bayelsa, Akwa Ibom, Sokoto, and Kano.

Praising reductions in corporate tax rates from 30 per cent to 25 per cent and exemptions for lower-income earners from PAYE taxes, Dickson described these measures as critical for easing the tax burden on vulnerable Nigerians.

He acknowledged stakeholder reservations about limited consultation but expressed optimism that these concerns would be addressed through dialogue. He argued that the reforms align with fiscal federalism by empowering states and reducing dependence on federal allocations. Dickson urged colleagues to approve the bills for further scrutiny and public engagement at the committee stage.

Ndume raised concerns over the proposed tax reform bills, calling for broader consensus and questioning the timing of their introduction. While supporting tax reform in principle, he highlighted issues relating to derivation, Value Added Tax (VAT), and the impact on small and medium enterprises (SMEs).

Ndume warned that introducing the reforms now could spark public backlash and urged a strategic approach. He advocated temporarily withdrawing the bills to allow consultations with state governors, the National Economic Council (NEC), and traditional rulers. According to him, reforms backed by these stakeholders would be more effective and could be passed swiftly.

He also argued that some proposals, particularly derivation and VAT, require constitutional amendments. Supporting Senator Seriake Dickson’s stance on revenue derivation, he stressed the need for clarity and negotiation before passage.

Ndume criticised provisions applying a uniform reduced corporate tax rate of 25 per cent to companies with turnovers ranging from N50 million to billions, arguing that SMEs, particularly in industrial hubs like Nnewi, should not bear the same tax burden as large corporations.

He also warned that reducing VAT for lower-income groups while increasing corporate taxes could lead manufacturers to pass on higher costs to consumers, undermining the reforms’ benefits.

Ndume called on the Senate to reconsider the bills, incorporate stakeholders’ input, and reintroduce them for swift passage. MUNGUNO endorsed the proposed tax reform bills, urging adherence to the legislative process and praising measures aimed at reducing Nigerians’ tax burden.

He disagreed with Ndume’s call to withdraw the bills for consultation with the Nigerian Governors’ Forum and traditional rulers. Citing Section 60 of the Constitution, he emphasised that the National Assembly has the authority to regulate its proceedings. He noted that public hearings during the committee stage provide a platform for governors, traditional rulers, and other stakeholders to express their views.

“The legislative process is clear. After the second reading, the bills proceed to public hearings, where diverse perspectives can be considered. Suggesting withdrawal now is unnecessary,” he argued.

Munguno praised the bills for focusing on alleviating the tax burden on low-income earners and exempting essential goods and services like food, medicine, education, and electricity from VAT. He also commended the exemption of individuals earning below the minimum wage from the PAYE tax.

He supported reducing corporate income tax from 30 per cent to 25 per cent, describing it as a strategy to stimulate job creation and economic growth. “This will incentivise companies to hire more Nigerians, boosting the economy and ensuring fairness,” he said.

Munguno urged his colleagues to proceed with the legislative process, stressing the importance of engaging stakeholders within the constitutional framework. Akpabio highlighted concerns over Nigeria’s convoluted tax system, focusing on the burden of multiple taxation by local governments, particularly on interstate travellers.

He described how redundant tax demands at checkpoints, including permits for tyres and exhausts in states like Edo, Anambra, and Abia, lead to harassment, extortion, and delays, impeding free movement and economic activities.

The Senate President emphasised the need for comprehensive tax reforms to streamline the collection process, eliminate overlapping levies, and reduce citizens’ stress while promoting compliance without fear. He assured stakeholders that the proposed legislation would undergo thorough scrutiny during the public hearing phase, involving experts, traditional leaders, governors, and other key players to ensure inclusive reforms.

“Let us allow these bills to proceed to the second reading so they can be reviewed, debated, and improved upon during the public hearing,” Akpabio urged.
He called on his colleagues to support the legislative process, reiterating the Senate’s commitment to enacting laws that ease the tax burden and foster economic growth.

Akpabio underlined the importance of addressing Nigeria’s chaotic tax environment, stressing that well-structured reforms would benefit all Nigerians and enhance economic activities.

MEANWHILE, the House of Representatives, after over two hours of a closed-door meeting yesterday, resolved to extend consultations on the Tax Reform Bills.
Deputy Speaker Benjamin Kalu, who presided over the session, announced that the House would hold a special session on Tuesday to deliberate on the bills and decide their fate.

Kalu disclosed that the extended consultations would allow lawmakers to engage resource persons for further insights.

“We will have a special session over the tax bill on Tuesday. This conversation will continue until Tuesday, when we invite these resource persons to engage with us. Thereafter, we will decide which way to go,” he said.