UPDATED: Senate passes tax reform bills

The Senate, on Wednesday, passed two of the four tax reform bills proposed by President Bola Tinubu.

The two bills passed were the Nigeria Revenue Service Establishment Bill and the Nigerian Tax Administration Bill.

The bills were passed after the senators reviewed the report of an ad-hoc committee chaired by Niger East Senator Sani Musa. The committee was constituted to address controversies and disputes surrounding the proposed reforms. On Wednesday, the contents of the bills were debated and considered at the Committee of the Whole.

The Senate President, Godswill Akpabio, announced passage of the bill after a majority of the senators supported it through voice votes.

Mr Akpabio said the Senate will set up a committee to harmonise its decision on the bills with the version passed by the House of Representatives in March. Once harmonised, the unified bills will be transmitted to President Tinubu for assent.

The senate president said the remaining two bills, the Joint Revenue Board Establishment Bill and Nigeria Tax Bill, would be passed on Thursday.

Recommendations

On the distribution of VAT revenue, the Nigeria Tax Administration Bill proposed 15 per cent for the federal government, 50 per cent for the states and the Federal Capital Territory (FCT), and 35 per cent for the local governments.

However, the committee recommended a new distribution of 10 per cent to the federal government, 55 per cent to the states and the FCT, and 35 per cent to the local governments.

For the distribution of the VAT revenue meant for states, the committee recommended that 50 per cent should be shared equally among all the states, 20 per cent should be shared based on the population of each state and 30 per cent based on the place of consumption of the goods and services from where the VAT was raised.

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For distribution of VAT meant for local governments, the committee recommended that 70 per cent should be shared equally among all the local governments and 30 per cent should be shared based on the population of each local government.

The committee also amended Clause 107 of the Nigeria Tax Administration Bill which prescribed that anybody who fails to remit tax deducted at source or self-account shall on conviction be liable to a term of imprisonment not exceeding three years.

The committee also recommended the creation of a Nigerian Revenue Service (NRS) to replace the Federal Inland Revenue Service (FIRS) as the body responsible for federal tax collection.

READ ALSO: Senate begins final debate on Tinubu’s tax reform bill

On the proposed structure of the agency, the committee proposed the appointment of a board chairperson who will be appointed by the Nigerian president. There shall also be an executive vice chairperson who will serve as the head of the agency, subject to Senate confirmation. There shall also be a secretary who must be a lawyer, chartered accountant or chartered secretary, with at least the rank of Deputy Director.

In addition, there shall be six executive directors, each representing a geopolitical zone, appointed on a rotational and alphabetical basis. The executive chairperson, vice chairperson, and any executive director must not be from the same state.

Additionally, the service must submit its annual report within three months of the end of the preceding year.

Debate

During the clause-by-clause consideration, the Bayelsa West Senator, Seriake Dickson, and his Sokoto South counterpart, Aminu Tambuwal, repeatedly raised observations on some sections of the bills.

For instance, Mr Dickson objected to the inclusion of state and local government VAT sharing formulas, arguing that states and LGs should determine their own revenue sharing methods.

The senate president, however, countered that VAT is a federal tax and must be centrally shared to maintain fiscal balance across tiers of government.

On his part, Mr Tambuwal proposed that VAT be collected based on the point of consumption rather than point of supply, a motion that received majority support and was adopted.

After the debate on the bills, the senate president put the passage to vote and the majority of the senators supported it through voice votes.

Mr Akpabio subsequently approved and passed the bills.

With two of the four tax reform bills passed, the Senate will reconvene on Thursday to deliberate on the remaining two. Once all bills are harmonised and approved, they will be transmitted to President Tinubu for his assent.