Presidential Committee Consults Widely On Tax Reform Bills, Says Chairman

Oyedele, who spoke at an interactive session on the tax reform bill organised by the House of Representatives, also explained the idea of increasing the derivation was to give all states equal and fair opportunity and not to give any state any advantage.

He explained that the bills were not aimed to undermine any region of the country, adding that the current VAT policy requires all companies to pay VAT from their headquarters which he said confer undue advantage on some states.

He said the Presidential Committee interfaces with all shades of Nigerians, adding that the committee received submissions from all the 36 states of the Federation and the Federal Capital.

At the end of a meeting of the National Economic Council, governors of the state had asked the President to withdraw the tax reform bills to allow for more consultation in the interest of the while leaders of three North also kicked against the passage of the bills by the National Assembly.

He said one of the proposed laws aimed to bring all tax laws into one while harmonising all the taxes which he argued has stunted the growth of the nation’s economy.

Speaking specifically on the payment and sharing of VAT resources, he explained that currently, under Section 40 of the current VAT Act law, VAT revenue is allocated 15 percent to the Federal Government, 50 percent to the States and FCT, and 35 percent to Local Governments

He said further that the proposed law seeking a reduction of the federal government’s share of VAT while proposing that companies paying VAT should now make their return based on where the services being taxed were carried out.

He said: “For example, the current law requires that MTN makes its VAT return from its head office in Lagos. But what we are proposing is that such a return should be made based on the location where the calls were made. That will allow smooth computation of the derivation. “

He said further that the various states believe that VAT should be collected by them which explains why states like Lagos and Rovers have enacted their own VAT laws, saying the VAT policy cannot work well if the states are allowed to collect VAT.

Oyedele said currently, Nigeria has eight sources of revenue which include “Personal Income Tax, property tax, stamp duties, value added tax and land. These five are mostly being collected by states while the other three are shared among federal, state, and local governments. These are corporate income tax, customs duties, and petroleum and solid minerals revenue.

“The sad news is that every single one of these eight is significantly underperforming, while the good news is that every single one of those eight is yet an opportunity to change the narrative”.

He explained that the nation’s budget was very small while expressing regret that the country could not raise enough money to finance its small budget despite its size.

He said: “Our budget is small. What is even smaller is our revenue. The entire revenue that was generated in 2023 is about N17.5 trillion which is less than 20 billion dollars. What that means is that our small budget is financed by borrowing because we cannot even raise enough money to finance a small budget.

“The truth is that the 36 states and FCT collected N1.6 trillion as personal income tax in 2023, while South Africa collected about 50.5 trillion naira equivalent of personal income tax that same year. What South Africa collected as personal income tax in one year alone is more than our entire revenue multiplied by two.

“Even Kenya which is a small country compared to Nigeria generated 5.8 trillion naira in personal income tax alone, which is almost four times what Nigeria collected, yet our population is four times the size of their population.

“In 2023, Nigeria collected N3.2 trillion from Customs. In that same year, Kenya collected 8.9 trillion naira. If you look at the value of what we import and what Kenya imports, they imported 23 billion dollars worth of imports, while Nigeria imported 66 billion dollars worth of imports.

“We imported almost three times what Kenya imported and collected one-third of what Kenya collected. Something is not adding up and we must fix those problems if we must move forward as a country.

“The tax system lacks proper structure. We have obsolete laws which we are still amending. We have laws, but we are not respecting the laws.

“We have about 60 official tax laws which we have approved in Nigeria as a country. What other countries have approved is less than 10. The solution to our problems can never be to keep introducing new taxes. Rather, it is to get rid of the multiple taxes and maximise collection. As high as the number is, the unofficial ones are even more.