The proposed Tax Reform Bills introduced by President Bola Tinubu have sparked intense debate across Nigeria, with socio-cultural groups and regional stakeholders expressing diverse views on their potential impact.
The controversy stems from opposition, particularly from Northern stakeholders, who argue that the proposed Value Added Tax (VAT) sharing formula could disproportionately benefit states like Lagos while disadvantaging others.
The Tax Reform Bills emerged from President Tinubu’s inauguration of the Presidential Fiscal Policy and Tax Reform Committee (PFPTRC) in July 2024. This committee proposed replacing the National Tax Policy with a more robust framework titled the National Fiscal Policy on Fair Taxation, Responsible Borrowing, and Sustainable Spending.
The resulting legislative package includes the Nigeria Tax Bill 2024, the Tax Administration Bill, the Nigeria Revenue Service Establishment Bill, and the Joint Revenue Board Establishment Bill, all currently before the National Assembly.
At the heart of the controversy is the proposed VAT distribution formula, which allocates 60% of revenue based on derivation. Critics, particularly Northern elites, argue this arrangement would favor states with significant corporate activity, such as Lagos, to the detriment of others.
The opposition gained momentum on October 29, when Northern governors and traditional rulers rejected the bills. Subsequently, the National Economic Council (NEC) recommended on November 1 that the president withdraw the bills, though President Tinubu has insisted on allowing the legislative process to proceed.
The Tax Reform Bills have since passed a second reading in the Senate, prompting reactions from various socio-cultural groups. Afenifere, Ohanaeze Ndigbo, and the Arewa Youths Forum (AYF) have all weighed in, reflecting the broader regional divides.
The AYF, led by President General Yerima Shettima, voiced concerns over the perceived inequitable distribution of resources. According to Shettima, the North contributes significantly to the national GDP through agriculture and other sectors but receives less in terms of infrastructure and public services.
He emphasized that imposing additional taxes without addressing these disparities could exacerbate poverty and unemployment in the region, especially within the informal economy. Shettima also criticized the lack of consultation with Northern youth during the formulation of the bills, calling for greater inclusivity and transparency in decision-making.
Conversely, Ohanaeze Ndigbo has expressed support for the Tax Reform Bills, emphasizing their potential to stimulate small and medium enterprises (SMEs) and eliminate double taxation. Factional Secretary-General Okechukwu Isiguzoro highlighted the economic benefits for the Igbo people, who are known for their entrepreneurial spirit.
Isiguzoro urged Southern lawmakers to rally behind the bills, dismissing Northern opposition as an attempt to maintain an inequitable status quo. He stressed that the reforms would create a fairer business environment, attracting local and foreign investments.
Afenifere also endorsed the proposed tax framework, with National Publicity Secretary Jare Ajayi asserting that derivation-based revenue sharing would not disadvantage Northern states. Ajayi argued that every state could benefit by leveraging its population and economic activities.
He reiterated the need for restructuring to empower states and regions to control their resources, fostering healthy competition and economic development.
The Tax Reform Bills remain a polarizing issue, with proponents highlighting their potential to create equity and stimulate growth, while critics fear they could deepen existing regional disparities.
As the legislative process continues, stakeholders across the country are calling for broader consultations and amendments to ensure the reforms achieve their intended goals.
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