A jubilant Taiwo Oyedele, the Chairman Presidential Committee on Fiscal Policy and Tax Reforms, disclosed gleefully on his X handle, Thursday, “The Senate, today, passed the two remaining tax bills, that is, the Nigeria Tax Bill and the Joint Revenue Board (Establishment) Bill. This follows the passage of the other two bills yesterday, that is, the Nigeria Revenue Service (Establishment) Bill and the Nigeria Tax Administration Bill. 

“Consequently, all four tax reform bills have now been considered for a third reading and passed by both the House of Representatives and the Senate. 

“The next step is for the conference committee, which the National Assembly has set up to harmonise areas of difference between the two versions of the bills as passed by the House of Representatives and the Senate before transmission to Mr. President for assent.”

Finally, Senate Passes Bills

After a tortuous ride and encounters with controversy and criticism from different parts of the country, interest groups, and politicians, the Nigerian Senate has finally ratified the tax reform bills into law.

The Senate began the ratification process of approving the contentious bill into law yesterday, at a plenary session presided over by Senate President Godswill Akpabio, in which two bills, after much deliberation and debate, the Nigeria Revenue Service Establishment Bill and the Joint Revenue Board Establishment Bill, were passed following a review of the report of the committee established to address tax reform.

The Senate continued today with the legislative process of passing the remaining two bills, the Nigeria Tax Bill 2024 and the Joint Revenue Board Establishment Bill, after full consideration by the Senate committee. Senator Akpabio announced the passage of the bill after the majority of the senators supported the process through voice votes.

The bills which had earlier been passed by the House of Representatives were followed by a similar suit with the upper chamber today, as the Senate also promised to align their approved documents with the documents of approval with the other chamber of the legislature before submitting to the president, who will give the final assent to the reform law.

The tax reform bills became a major subject of discussion among the stakeholders in the country after their submission to the National Assembly by President Bola Tinubu on September 3rd, 2024, to review and reform the existing tax law in the country. In his letter to the lawmakers, the president asked them to consider the bill based on the recommendations of his committee on fiscal and tax reform.

The bills are the Nigeria Tax Bill 2024, which aims to reform the nation’s taxation policy; the Tax Administration Bill, which aims to establish a clear and simple legal framework and settle all of the nation’s ongoing tax disputes; the Nigeria Revenue Service Establishment Bill, which seeks to scrap the existing Federal Inland Revenue Service Act and establish the Nigerian Revenue Service; and the Joint Revenue Board Establishment Bill, which would create a tax tribunal.

In the bill, there was a proposition to change the Value Added Tax (VAT) sharing formula by reducing the federal government’s share from 15 per cent to 10 per cent but increasing the state derivation sharing from 20 per cent to 60 per cent on generation and consumption.

The development attracted stiff opposition from many states and lawmakers, who argued that the bill could endanger economic viability in the northern region of the country. They also expressed their concerns that the bill might impoverish the northern region, which is currently not contributing much due to economic fragility embattling the region, as the sharing formula might create a dichotomy between the north and the south.

Despite the opposition across the country, President Tinubu, in his media chat in December 2024, insisted that the reform has come to stay, stating he was open to dialogue from stakeholders to review some of the sections of the bills.

In light of the deliberation and dialogues, the lawmakers later organised several public hearings to address the popular reservations many Nigerians have about the bills, especially in the sections that concern VAT revenue sharing reform.

At the meeting, instead of the earlier suggestion of 15 percent for the federal government, 50 percent for the states and the Federal Capital Territory (FCT), and 35 percent for local governments in sharing VAT revenue, the senate committee proposed a new plan of 10 percent for the federal government, 55 percent for the states and the FCT, and 35 percent for local governments.

The committee suggested that 50% of the VAT revenue intended for states be distributed equally among all states, 20% be distributed according to each state’s population, and 30% be distributed according to the location where the goods and services from which the VAT was raised were consumed.

Additionally, the Senate committee suggested that 70% be distributed equally among all local governments and 30% be distributed according to each local government’s population. The committee also suggested that the Federal Inland Revenue Service (FIRS) be replaced as the agency in charge of collecting federal taxes by the Nigerian Revenue Service (NRS).