House of Representatives Rejects VAT Increase to 15% in New Tax Reform Bills

By DAYO ADESULU

House of Representatives Maintains VAT at 7.5%, Rejects Proposed Increase to 15% by 2030

The Nigerian House of Representatives has voted to retain the Value Added Tax (VAT) at 7.5%, rejecting a proposed staggered increase to 15% by 2030. This decision was made during a debate on the Tax Reform Bills currently being reviewed at the National Assembly. The rejection of the VAT hike is seen as a significant win for businesses and consumers who feared the economic impact of increased taxation.

The House also dismissed the proposal to reintroduce inheritance tax under the guise of taxation on family income. The move has sparked reactions from various stakeholders, including the Nigerian Chamber of Commerce, Industry, Mines, and Agriculture (NACCIMA), and civil society organizations (CSOs), who continue to scrutinize the broader implications of the tax reform.

Key Amendments in the Tax Reform Bills

Chairman of the House Committee on Finance, Hon. James Faleke, presented the report on the Tax Reform Bills during a plenary session in Abuja. He noted that the committee had conducted an extensive review, incorporating public input to ensure fairness and economic sustainability.

The bills under review include:

• The Nigeria Tax Bill
• The Nigeria Tax Administration Bill
• The Nigeria Revenue Service (Establishment) Bill
• The Joint Revenue Board (Establishment) Bill

Changes in the Nigeria Revenue Service (NRS) Bill

The Nigeria Revenue Service Bill underwent significant amendments, particularly in Section 4, which defines the NRS’s functions. The committee limited the agency’s reach, ensuring that it only focuses on federal-level revenue collection, excluding individual taxpayers in states and the Federal Capital Territory (FCT).

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The composition of the NRS governing board was also adjusted. According to Section 7, six executive directors will now be appointed by the President, each representing a geo-political zone on a rotational basis. Additionally, one representative from each state and the FCT will be included to ensure federal character representation.

Other key changes include:

• New qualifications for the Secretary to the Board (Section 13), requiring candidates to be a lawyer, chartered accountant, or chartered secretary.
• A fixed cost-of-collection rate (Section 28) set at 4% of total revenue, excluding royalties, to be appropriated by the National Assembly.
• Restrictions on borrowing powers (Section 28), mandating approval from both the Federal Executive Council and the National Assembly before loans can be secured.

Amendments to the Joint Revenue Board Bill

The Joint Revenue Board Bill saw adjustments aimed at improving transparency and oversight. Section 25 removed the requirement for Tax Appeal Commissioners to have business management experience, which was deemed unnecessary.

To enhance accountability, Section 43 emphasized the independence of the Tax Ombud’s office, ensuring that its funding comes directly from the Consolidated Revenue Fund rather than gifts or grants, which could introduce biases.

Additionally, new provisions were introduced to ensure strict adherence to the Evidence Act during tax appeal proceedings. Independent funding was also established for the Tax Appeal Tribunal (Section 44) to prevent conflicts of interest with the Federal Inland Revenue Service (FIRS).

Adjustments to the Nigeria Tax Administration Bill

The Nigeria Tax Administration Bill was modified to enhance efficiency and streamline tax processes. Key amendments include:

• Extension of the timeline for issuing taxpayer identification numbers (Tax IDs) from two working days to five (Section 7), allowing for administrative flexibility.
• Reduction in the timeline for companies ceasing operations to file tax returns from six months to three (Section 11) to prevent revenue losses.
• Revisions to the VAT system (Section 22), ensuring taxable supplies are attributed to their place of consumption rather than the location of filing.
• New VAT fiscalisation system (Section 23) to enhance regulatory efficiency.
• Increase in banking transaction reporting thresholds (Section 28) from N25 million to N50 million for individuals and from N100 million to N250 million for corporate entities.

Public Reactions to the Tax Reform Bills

NACCIMA’s Stance

The Nigerian Chamber of Commerce, Industry, Mines, and Agriculture (NACCIMA) has withheld its comments on the amendments, stating that it will await the full details of the approved reforms before making an official statement.

Civil Society Organizations (CSOs) Express Caution

The Movement for Socialist Alternative (MSA), a member of the Joint Action Front (JAF), has urged Nigerians not to celebrate the VAT retention prematurely. MSA General Secretary, Dagga Tolar, warned that the broader tax reform agenda still contains provisions that disproportionately impact the working class.

According to Tolar: “While rejecting the VAT increase is a step in the right direction, the overall Tax Reform Bill still burdens the working population while granting tax holidays to corporations. The economic realities of high inflation, mass unemployment, and low wages remain unchanged.”

MSA has called on the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC) to demand a new minimum wage that matches inflation rates. The organization is also advocating for a one-day warning strike against excessive taxation of workers.

Legislative Process and Next Steps

The House of Representatives will deliberate further on the committee’s report in the coming weeks as part of the legislative process. The proposed amendments aim to balance economic growth with fair taxation policies, ensuring that the country’s revenue system is modernized without overburdening citizens.

With the ongoing discussions, stakeholders continue to monitor the tax reform process to ensure that it aligns with Nigeria’s economic development goals while promoting transparency and efficiency.

Stay tuned for more updates on Nigeria’s tax policies.

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Dayo Adesulu, online editor, SEO expert.