President Bola Tinubu has instructed the Attorney-General of the Federation, Lateef Fagbemi SAN, to collaborate with the National Assembly in addressing valid concerns raised about the proposed Tax Reform Bills currently under consideration. This was disclosed in a statement released on Tuesday, December 3, 2024, by Mohammed Idris, Minister of Information and National Orientation.
The presidency welcomed the vibrant national debate surrounding the bills and emphasized their potential to drive economic growth and equitable development.
Tax Reforms Aimed at Empowerment
According to the statement, the proposed legislation is designed to provide relief to millions of Nigerians while empowering Nigeria’s 36 states and 774 local governments for sustainable growth. Minister Idris underscored that the reforms are part of President Tinubu’s broader fiscal agenda to decentralize resources, ensuring they benefit state and local governments and, ultimately, the Nigerian people.
“The federal government has no hidden agenda or sinister motive behind the reform process,” Idris assured, dismissing allegations that the bills were being rushed. He emphasized the government’s openness to meaningful contributions that address potential shortcomings in the legislation.
President Tinubu has directed the Federal Ministry of Justice and other relevant officials to work closely with lawmakers to resolve any legitimate concerns before the bills are passed.
Strengthening Local Governments and Accountability
Idris highlighted the significance of a 2023 Supreme Court judgment granting financial autonomy to local governments, which complements the tax reform bills. Together, these measures are expected to enhance local governance, generate additional revenue without increasing the tax burden on citizens, and promote accountability in public resource management.
“Increased revenues from these reforms will be invested in critical sectors such as healthcare, education, transportation, and digital infrastructure,” Idris stated, adding that the administration is committed to addressing resource leaks that have undermined public finances for decades.
The minister urged commentators to approach the debate with respect and understanding, acknowledging the diversity of opinions about the proposed reforms.
Background and Controversies
The Tax Reform Bills propose a derivation-based model for Value Added Tax (VAT) revenue allocation, which has sparked intense debate. The National Economic Council (NEC), comprising Nigeria’s 36 state governors and chaired by Vice President Kashim Shettima, had recommended withdrawing the bills. However, President Tinubu rejected this proposal, insisting that the legislative process take its course.
The bills have faced opposition from northern governors and traditional rulers, who argue that the proposed changes to VAT revenue distribution may disadvantage their region. Currently, VAT revenue is allocated based on a formula that includes equality (50%), population (30%), and derivation (20%). Critics of the reforms claim that shifting to a derivation-based model would unfairly penalize less economically active states.
Despite the controversy, Taiwo Oyedele, Chair of the Presidential Fiscal Policy and Tax Reforms Committee, has supported the reforms, emphasizing that they address inequities in the existing VAT distribution system.
Next Steps
The Tax Reform Bills, which have already passed their second reading in the Senate, aim to align VAT revenue allocation with economic realities while strengthening Nigeria’s federal structure. The government has reaffirmed its commitment to reforms that benefit all Nigerians and drive sustainable development.
