Tinubu’s proposed tax reforms resonate with northern businesses – Report

Despite sectional misgivings, the deepening of ethnic fault lines, and widespread mistrust in his reforms, Nigeria’s President Bola Tinubu’s push for a new tax regime may provide lifelines to businesses in the country’s north, according to a new report.

Officials have argued that Nigeria’s tax system needs to be reformed, asserting that it has, over time, become complex, stifling business growth and yielding low revenue.

In October, Tinubu introduced four tax reform bills to the National Assembly: the Nigeria Tax Bill 2024, the Tax Administration Bill, the Nigeria Revenue Service Establishment Bill, and the Joint Revenue Board Establishment Bill.

If passed into law, the bills will centralise the collection of taxes and levies, streamline and reduce the number of taxes from more than 50 to just a few, and ensure fiscal federalism.

“Nigeria runs a complex tax system that has led to multiple taxation, with up to 98% of the informal economy paying some form of daily tax, sometimes up to three times a day,” said Lagos-based consultancy firm SBM Intelligence in a report.

However, parts of the bills have sparked conversations, some laced with ethnic sentiments.

The Senate has since halted hearings on the bills until the new year, providing time for essential political engagements and negotiations to secure their passage.

While some southern lawmakers have supported Tinubu’s push for reform, northern legislators are less enthusiastic about the propositions, especially regarding how value-added tax (VAT)—set to increase from 7.5% to 15% by 2027—is shared among the federal, state, and local governments.

The current sharing formula favours the population of states, while the reform will prioritise how much states contribute to the VAT purse.

Although largely ignored by northern politicians opposing the bills, companies will pay VAT in states where the goods and services are consumed—not where the companies are headquartered.

Another concern from the North is the removal of VAT from agricultural items, which would be zero-rated under the bill. The North accounts for roughly 70% of the country’s agricultural output.

Experts argued that this “loss” would be offset by VAT that would otherwise go to the location of the headquarters. Disinformation, pushed by those against the reform, is also in play.

For instance, several social media accounts have claimed that the reform was designed to impoverish northern Nigeria.

There were also claims that one of the bills would impose a 24% tax on inheritance, contrary to the provisions of Sharia law, which is popular in the North.

However, the SBM report showed that on-the-ground reception of the bill in the region is more positive than critics are letting on.

“Our findings revealed that most respondents were aware of the proposed reforms and generally viewed them favourably, particularly regarding the potential benefits for their businesses,” said the report.

However, there were concerns about the gradual hike of VAT from 7.5% to 15% by 2027, which could worsen inflationary pressures.

Despite this, SBM said respondents it spoke to were more bullish about the bills and believed that the reforms could spark an economic revival in northern Nigeria.

“I think the bills have the prospects to stimulate the economy if rightfully implemented. This bill tends to push states to work for their revenue and create reasonably competitive industries,” a Bauchi resident, Yakubu Samaila, told SBM.

Taiwo Oyedele, chair of Tinubu’s tax reforms committee, insisted that the reforms will ensure transparency and effective governance.

“Section 26 (of the Nigeria Revenue Service Establishment Bill) requires the tax authority to submit a report of its activities periodically to the finance minister, including audited accounts,” Oyedele wrote on X on December 8.

“In turn, the minister is required to present the report to the Federal Executive Council and the National Assembly.”