Reps okay tax reform bills, keep VAT at 7.5 percent

The house of representatives has considered and adopted the committee on finance’s report on the tax reform bills.

During the plenary on Thursday, James Falake, chairman of the committee on finance, moved a motion for the clause-by-clause consideration of the bills’ report.

The reports were subsequently considered, and the committee’s recommendations were approved.

On October 3, 2024, President Bola Tinubu urged the national assembly to pass the tax reform bills — the Nigeria tax bill, the Tax administration bill, the Joint Revenue Board Establishment Bill, and the Nigeria Revenue Service Bill.

The bills initially faced opposition from the northern governors, who argued that the proposed laws could harm the region’s interests, urging the national assembly to reject the bills and demanding fair and equitable implementation across all regions.

However, in January, the Nigeria Governors’ Forum (NGF) endorsed the bills after agreeing on an “equitable” VAT-sharing formula.

In November 2024, the senate passed the bills for second reading, and in February, the bills scaled the second reading at the green chamber after an extensive debate by lawmakers.

The parliament subsequently held a public hearing on the bills.

THE RECOMMENDATIONS AND ADOPTION

Section 146 of the Nigeria Tax Bill proposed a gradual increase to the value-added tax (VAT) from the current 7.5 percent to 12.5 percent through 2026, 2027, 2028, and 2029, while by 2030, the VAT will be raised to 15 percent.

The proposal was heavily criticised and rejected by stakeholders, including the Trade Union Congress (TUC), during the public hearing.

However, the committee reviewed the section and recommended that VAT should be charged at a rate of 7.5% — the decision was approved by the house.

On the distribution of VAT revenue, the Nigeria Tax Bill proposed 10 percent for the federal government, 50 percent to the states and the federal capital territory, and 35 percent to the local governments.

However, the committee recommended a new distribution of 10 percent to the federal government, 55 percent to the state governments and the federal capital territory (FCT), and 35 percent to the local governments.