Without a doubt, there is a growing mistrust between the government and the governed. This lack of trust permeates every facet of our lives; from the conduct of elections to government policies including the raging debates on the four tax reform bills. For good and bad actions, citizens are suspicious, hence is so much talk about rebuilding trust for the government to become credible and trustworthy.

The writers of the new tax reform bills could never have imagined the dimensions of the debates. They had good and justifiable economic reasons for their propositions in their innermost minds. The bills would no doubt advance Nigeria towards financial federalism which is desirable to the practice of true federalism. According to the Committee’s Chairperson Taiwo Oyedele, they set out to “streamline the legion of taxes imposed on businesses and individuals” But they may have ended up with obfuscated public perception with the bills enmeshed in murky waters of politics, even religious bigotry.

The political class, understand that the tax reform bills pose a more overarching threat to President Tinubu’s second-term ambition than the unpalatable removal of fuel subsidy with its attendant hardship and damage to individuals’ economies. The bills are interpreted from different selfish points of view. The South against the North; is the President’s home state of Lagos versus the Northern region. The latest is the religious dimension that one of the bills imposes taxes on inheritance which is against the Shariah practice. This, if true, makes nonsense of the Muslim-Muslim ticket of the Presidency.

Firing the first salvo against the bills in an audacious manner was the governor of Borno State, Prof Babagana Zulum who declared: “We rejected the tax reform bill; it will bring backwardness to the North, and not only to the North, but also to the South East, South-South, and South West. Oyo, Osun, Ekiti, and Ondo will also have problems; it will only benefit Lagos,”

He argued further in a cheeky manner that they were informed that the proposed bill could put Lagos at a disadvantage; if that is the case, we do not wish for any such disadvantages to affect Lagos State, he teased. He then urged President Tinubu to revisit the Tax reform bills because he received 60% of his votes from the northern region. He should not pay attention to voices suggesting that the northern population does not support him; that perception is inaccurate. He said what they want is for him to withdraw the Tax reform bills. That request is a mixed blend of economics and politics.

His request was followed by another by one Hon Ahmed Jaha member representing Damboa/Gwoza/Chibok Federal Constituency, Borno State who said “I heard somebody saying that we are doing this because of you Northerners, I was disappointed because why would you be insisting on doing something in my favour that I don’t want.” Then, the news went viral that 48 House of Representative Members from the North East Rejects President Tinubu’s Tax Reform Bill.

Divergent arguments have surfaced about the bills. Some say it is balanced, fair and equitable to all interests. Some feel it will help the North to learn how to develop and annex their natural resources. Lagos State, under this current VAT arrangement, enjoys the most advantage above all states. With the new bill, the huge Lagos advantage will decline. For progress to be made, Nigeria needs changes, radical ones at that to reverse the old unitary ways of doing things by moving towards true federalism. The country cannot continue to do the same thing and expect different results.

The Four Tax Bills
The tax reform bills before the National Assembly are aimed at economic transformation to empower Nigerians and facilitate inclusive economic growth. The bills are expected to go through legislative procedure which includes a public hearing. The bills are the –
1) Nigeria Tax Bill – which harmonises all the major taxes such as corporate income tax, personal income tax, VAT etc
2) Nigeria Tax Administration Bill – which provides a framework for tax management covering taxpayer identification, registration, assessment, collection, enforcement, etc
3) Nigeria Revenue Service (Establishment) Bill – which seeks to replace the FIRS with the NRS to perform a broader role of revenue administration in Nigeria and drive collaboration with subnational governments and MDAs.
4) Joint Revenue Board (Establishment) Bill – which aims to transform the JTB into JRB with an expanded mandate and enhanced role for cooperation and tax harmonisation. The bill also sets up the office of the tax ombudsman to protect taxpayers and advocate for tax simplification.

Some of the Issues and the Sharing Formula
According to Hon Leke Abejide, APC Kogi State, “They came to me today and told me the bill (Tax Reform Bills) is against inheritance, which is against Islamic law”. Many Nigerians are confused about this and are worried about the application of Islamic laws on national financial policies in a secular state.

Nigeria’s current National Tax Distribution system is as follows:
All taxes generated by the states are sent to FG through the Federal Inland Revenue Service (FIRS) monthly. The FG then redistributes these funds based on d VAT distribution rules.
The FG uses a formula to calculate each state’s share of the 50%. For example, if ₦100M is generated:
– FG takes 15% (₦15M)
– States share 50% (₦50M)
– LGs share 35% (₦35M).
Equality
From the total generated taxes, 50% (₦50M) is allocated to states and the FCT. Under Equality sharing, 50% of this ₦50M (₦25M) is distributed equally among all the states. All States benefit from Equality sharing:
Population
After the first half (Equality sharing), the second half is divided between Population and Derivation. For Population, 30% of the ₦50M (₦15M) is shared based on each state’s population size. States with larger populations receive more money than those with smaller ones. Beneficiaries of this formula are mostly Northern states and Lagos. At this point, 80% of the funds allocated to states would have been shared. It benefits primarily the North and Lagos.
Derivation
Only 20% remains to be shared from the ₦50M allocated to states. Under the Derivation formula, states that contributed more taxes receive more, while those that contributed less get less—regardless of population size. States that benefit the most from Derivation are those with major company HQs, industrial, and economic hubs, like Lagos and Rivers. The rest, which gained heavily from the previous two formulas (Population and Equality), may care less about this.

The Changes in the New Tax Reform Bills
The Federal Government reduced its allocation by 5% and added it to the states, increasing their share to 35%. Local government allocations remain the same.
For States Sharing:
– Equality has been lowered to 20% from 50%.
– Population has been reduced to 20% from 30%.
– Derivation, previously the lowest at 20%, has been increased to 60%, making it the highest, surpassing both Equality and Population sharing.
Altogether, the bills offer a comprehensive overhaul of the nation’s tax framework to drive economic growth, support Nigerian households, and position the country as a competitive economy within the community of nations. These reforms reflect a commitment to equity, efficiency, and sustainable development.

Key Highlights and Intentions of the Bills
According to Taiwo Oyedele, the key highlights of the Bills include:
1. Empowering the Youths with Digital Economy Opportunities: Changes to income tax laws that will attract remote work opportunities in the global business process outsourcing (BPO) sector, enabling Nigerian youths to thrive in the digital economy.
2. Boosting Exports: Goods, services, and intellectual property exports will benefit from zero-rated VAT and other incentives to enhance Nigeria’s global trade competitiveness.
3. Support for Small Businesses: Tax exemptions, including 0% corporate income tax, VAT, and withholding tax, will apply to small businesses with an annual turnover of N50 million or less.
4. Relief for Workers and Households: Minimum wage earners will be exempt from PAYE (personal income tax), while over 90% of workers across the private and public sectors will see a reduced tax burden. Essential items such as food, education, and healthcare will enjoy 0% VAT, while rent, public transportation, and renewable energy will be exempted, providing relief for low-income households that spend nearly 100% of their income on these necessities.
5. Simplifying and Rationalising Taxes: Over 50 nuisance taxes are to be repealed, with remaining levies harmonised into a few number of taxes. Corporate income tax rates will reduce from 30% to 25% over the next two years, and earmarked taxes on companies will be replaced with a streamlined single levy.
6. Enhancing Business Competitiveness: Businesses will benefit from input VAT credits on assets and services, eliminating the minimum tax on loss-making and low-margin companies. This will lower production costs and stimulate investment.
7. Fairer Tax System for All: A redesigned tax framework will ensure progressive personal income tax, VAT, and capital gains tax while safeguarding low-income earners. Taxes on foreign currency-denominated transactions will be payable in naira, easing compliance for businesses and reducing pressure on the exchange rate.
8. Equity Among States: VAT revenue will be distributed among states based on an equitable model to reward economic contributions, rather than the current model which is skewed in favour of states with head office locations where VAT remittances are usually made.
9. Taxpayer Advocacy and Transparency: The introduction of the Tax Ombudsman to improve the tax system by protecting vulnerable taxpayers and advocating for fairness.
10. A New National Fiscal Policy: A strategic framework for fair taxation, responsible borrowing, and sustainable spending will be established to guide the fiscal system.
These tax reforms aim to alleviate the rising cost of living, foster economic equity, and create a business-friendly environment to attract local and foreign investments. All tiers and arms of government are committed to driving inclusive growth and ensuring that all Nigerians benefit from a prosperous economy.

U-Turns, Consultations Before Ratification
The Senate initially suspended legislative action on the bills at a session president over by the Deputy Senate President, Senator Barau Jibrin from Kano State but in another 24 hours this was refuted by the Senate President, Senator Godswill Akpabio from Akwa Ibom State. The Senate reaffirmed its commitment to advancing the Tax Reform Bills, stressing that no aspect of the legislative process is suspended or withdrawn.

Senate President, Senator Godswill Akpabio stated during plenary on Thursday that the upper chamber remains focused on its mandate to represent Nigerians’ interests and will not be intimidated by external pressures.

Dismissing any attempts to pressure the chamber, the Senate President also stated that, “the Senate cannot be bullied. Any reform that we are convinced serves the interest of Nigerians will proceed. These bills contain provisions that are in the best interest of the public.”

The Chairman of the Committee refuted allegations that the bills were being rushed “This is not rushing at all. We consulted. We had one session with the governors’ forum. We consulted the governors. They won’t say we didn’t consult them. They are saying we need to consult more, which we agree with because consultation will never end. Even after passing the bills, you must continue to consult. We had two sessions with the National Economic Council. We had almost a whole day with the finance commissioners from all over Nigeria.”

It is yet to be seen how this would end. The President and the Federal Executive Council want the bills passed with possible amendments. The National Assembly is divided on the issue, but knowing the temperament of that arm of government, the bills would be passed with stepped-up pressure from the Executive.