Northern Lawmakers Express New Concerns Regarding Tax Reform Bills

Members of the House of Representatives from the northern part of the country have raised fresh concerns over the four tax reform bills currently under consideration in the National Assembly.

They spoke at an interactive session organised by the House of Representatives with the members of the Presidential Committee on Fiscal Policy and Tax Reforms on Monday.

The bills, particularly the proposed amendment to the distribution of Value Added Tax (VAT) revenue, have sparked widespread debate.

The bills are: The Nigeria Tax Bill 2024, which is expected to provide the fiscal framework for taxation in the country; and the Tax Administration Bill, which will provide a clear and concise legal framework for all taxes in the country and reduce disputes.

The others are: the Nigeria Revenue Service Establishment Bill, which will repeal the Federal Inland Revenue Service (FIRS) Act and establish the Nigeria Revenue Service (NRS), and the Joint Revenue Board Establishment Bill, which will create a tax tribunal and a tax ombudsman.

The National Economic Council (NEC) and state governors have urged President Bola Ahmed Tinubu to withdraw the bills for further consultations.

Also, northern leaders, including traditional rulers and lawmakers, have expressed their opposition, saying the proposed reforms are skewed against the region.

Despite this, President Tinubu has maintained that the legislative process should proceed, emphasising that ongoing deliberations allow for inputs and amendments without the need to withdraw the bills.

During the session yesterday, lawmakers, including Rep. Yusuf Adamu Gagdi (APC, Plateau), Rep. Ahmed Jaha Babawo (APC, Borno), Rep. Zainab Gimba (APC, Borno), and Rep. Zakariah Dauda Nyampah (PDP, Adamawa), expressed concerns about the bills’ potential impacts on the North.

They argued that the region’s economy, already weakened by insecurity and poor productivity, could suffer further under the proposed amendments.

But the presidential tax reform team allayed the fears, saying the current VAT distribution favours few states and is unfair to others.

‘North’s economy plagued by insecurity’

The northern lawmakers raised concerns that the socio-economic vulnerabilities faced by states in the region, largely driven by insecurity, have not been adequately considered in the proposed tax reform bills.

The lawmakers called for a balanced approach to the tax reform process, one that considers the region’s security challenges and ensures fair treatment for all states.

Rep. Gagdi said insecurity has disrupted the previously vibrant economies of many northern states and questioned how conflict-displaced citizens in the North could benefit from VAT proceeds tied to consumption and other import-related taxes.

He noted that industries, factories, and other means of production in these areas have been severely impacted, with large portions of the productive population displaced or rendered less effective due to challenges such as Boko Haram insurgency and banditry.

Rep. Jaha said the timing of the proposed tax amendments is inappropriate given the current security situation in the North, which has significantly affected its economy.

He expressed reservations about the derivation-based revenue-sharing formula, which he said would unfairly disadvantage economically fragile states.

“There are regions, especially in the North, that are not economically viable due to security challenges. The proposed VAT allocation formula would treat these states unfairly,” Jaha said.

Rep. Gimba emphasised the plight of states like Borno, where insurgency has significantly hindered economic activities.

She called for a more equitable VAT-sharing formula that would account for the unique challenges faced by such states.

Similarly, Rep. Nyampah called for careful consideration of the controversial provisions in the reform bills that could adversely affect northern states, both individually and collectively.

We’ll prioritise constituents’ wishes – Senator Kawu Sumaila

The Senator representing Kano South, Abdurahman Kawu Sumaila, has assured that lawmakers, particularly those from the northern region, will align their decisions with the wishes of their constituents regarding the bills.

Speaking with Daily Trust on Monday, Senator Sumaila emphasised that the views of the people, as communicated through regional leaders, would guide their actions.

“We are studying the bill as usual and liaising with our constituents and relevant stakeholders to understand their feelings and views. It is the peoples’ views and will that will prevail in the end. This is what will happen,” he said.

When asked about his stance on the position advanced by northern governors and traditional leaders, Senator Sumaila said there was nothing unusual in the ongoing process. He highlighted that such deliberations are standard for all bills, although he acknowledged the heightened importance of this particular legislation.

“This bill will come to a debate in parliament, and we will debate it. We will not do anything against the interest of our people. We will ensure our actions align with their thinking. Nigeria is our constituency, and we will do justice to it, Insha’Allah. I am not far from the thinking of my constituency,” he added.

We’ll be guided by national interest – Doguwa

The Leader of the Northern Regional Caucus in the House of Representatives, Rep. Alhassan Ado Doguwa, has assured that lawmakers from the region will prioritise national interest in deliberating on the proposed tax reform bills.

Speaking to reporters after an interactive session on the bills, Doguwa emphasised the importance of a meticulous and inclusive legislative process.

He stressed that the caucus would ensure justice for Nigerians by carefully examining the bills before their passage.

“These proposed bills are fundamentally about fiscal federalism, focusing on the equitable sharing of resources among federating units and key government institutions,” Doguwa said.

He further explained that lawmakers would avoid rushing the legislative process to prevent enacting laws that fail to address the nation’s economic realities effectively.

“National interest will be our guiding principle. We will thoroughly study the bills clause by clause to ensure they serve the people and align with the country’s overarching needs.

“We will continue consultations at the state and regional levels to raise awareness among our members and other stakeholders. Ultimately, the law will reflect the collective good of the people,” he added.

Current VAT distribution favours few states, unfair to others – FIRS boss

The Chairman of the Federal Inland Revenue Service (FIRS), Dr. Zacch Adedeji, has criticised the current allocation of Value Added Tax (VAT) proceeds, which channels 70 per cent of the revenue to Lagos, Rivers, and the Federal Capital Territory (FCT).

He described this arrangement as unfair to the remaining 34 states.

Adedeji disclosed that Lagos alone received 42 per cent of October’s VAT proceeds, while Rivers, Oyo, and the FCT received 16 per cent, 5.2 per cent, and 10 per cent, respectively.

“This structure does not reflect Nigeria’s collective interest. VAT is derived from consumption, and 70 per cent of consumption occurs outside these states,” he said, noting that many revenue-generating companies are headquartered in Lagos and Rivers, skewing VAT distribution.

To illustrate the imbalance, Adedeji cited MTN, Nigeria’s leading mobile telecommunications provider, which contributes the highest VAT revenue to Lagos, despite offering services nationwide.

He highlighted the disparity in VAT allocations, revealing that states like Borno and Bauchi receive as little as 0.32 per cent and 0.4 per cent of proceeds, respectively.

“Every time I sign off VAT proceeds, it doesn’t feel like this structure represents our national values. This is why the president, in his wisdom, has proposed changes to ensure fairness,” Adedeji remarked.

The FIRS boss assured lawmakers that the proposed reforms aim to distribute VAT proceeds more equitably, focusing on consumption, rather than the location of corporate headquarters.

“Under this bill, all states—irrespective of their economic situations—would benefit. It’s about ensuring a fairer structure that aligns with the national interest,” he added.

Similarly, the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, clarified that the proposed tax reform bills are designed to create equal opportunities for all states without favouring any region.

Speaking on VAT distribution, Oyedele explained that the current policy requires companies to remit VAT from their headquarters, disproportionately benefiting states where these headquarters are located.

He emphasised that the reforms aim to address this inequity.

“Under the current VAT Act, revenue is allocated as follows: 15 per cent to the Federal Government, 50% to states and the FCT, and 35 per cent to local governments.

“The proposed law seeks to reduce the federal government’s share and ensure companies remit VAT based on where taxable services are delivered,” Oyedele said.

He noted that the reforms are not intended to impact negatively on any region but to foster fairness and align VAT revenue allocation with economic activity across the country.

Regarding Nigeria’s broader fiscal structure, Oyedele highlighted the nation’s eight main revenue sources: personal income tax, property tax, stamp duties, value-added tax (VAT), and land-related taxes (primarily collected by states), alongside corporate income tax, customs duties, and petroleum and solid minerals revenue (shared among the federal, state, and local governments).

He lamented the underperformance of all these revenue streams but expressed optimism about their untapped potential.

“The unfortunate reality is that every one of these revenue sources is underperforming. However, the good news is that they all represent opportunities for significant improvement,” he said.

Oyedele also pointed out the inadequacy of Nigeria’s budget relative to its size, stressing the need for reforms to enhance revenue generation and financing capabilities.

The proposed reforms, he said, aim to recalibrate the fiscal framework, reduce imbalances, and promote sustainable economic growth for the benefit of all Nigerians.