Tinubu Moves to Harmonise Nation’s Tax Regimes

Deji Elumoye writes that the move last week by President Bola Tinubu to constitue a panel of experts on tax reforms is aimed at harmonising tax regimes in the country.

President Bola Tinubu did not waste any time before hitting the ground running upon his inauguration on May 29, 2023 as he pronounced the end of age-long fuel subsidy in the country.

Few days after, he also announced the harmonisation of the foreign exchange system through a rate that has now merged both the official and black market rates into one unified forex.

By last week, the Tinubu administration again took another step towards addressing issue of multiple taxes being paid by individuals and corporate bodies.

This was in consonance with the President’s pledge during the campaigns which saw to his being elected during the February 25, 2023 presidential poll. Tinubu had in his campaign document promised to reform tax in the Nation’s economic system.

According to the campaign promise, Tinubu had under the Tax Reform subheading declared that “during times of economic weakness, increasing taxation is counterproductive. Higher taxes drain an already weakened private sector, inviting possible economic contraction and higher unemployment We shall review the corporate tax system. This will be enhanced by the use of technology and effective policies”.

President Tinubu last Wednesday, therefore, began the process towards reforming the tax system as he signed four Executive Orders deferring and suspending the commencement of certain taxes paid by individuals and companies in the country.

This move by the President was aimed at reducing tax burdens on Nigerians and their businesses, and addressing concerns raised by manufacturers and other stakeholders, regarding recent tax changes.

Special Adviser to the President on Special Duties, Communications and Strategy, Mr Dele Alake, made this known last Thursday while speaking with newsmen in the company of Special Adviser to the President on Revenue, Mr Zacc Adedeji; a member of the Presidential Advisory Council on Finance and other Related Matters, Ms Doris Aniettie; and Adenike Laoye, from the Office of the Chief of Staff to the President.

According to the team, the move became necessary as a response to the need for clarity and adequate notice for tax adjustments, as specified in the 2017 National Tax Policy.

Shedding more light on the latest economic move by the President, Alake said the first executive order is The Finance Act (Effective Date Variation) Order, 2023, which has now deferred the commencement date of the changes contained in the Act from May 23, 2023 to September 1, 2023 to ensure adherence to the 90 days minimum advance notice for tax changes as contained in the 2017 National Tax Policy.The second order, he stated, is the Customs, Excise Tariff (Variation) Amendment Order, 2023 which has also shifted the commencement date of the tax changes from March 27, 2023 to August 1, 2023 and also in line with the National Tax Policy.

Thirdly, Alake said the President had given an Order suspending the 5% Excise Tax on telecommunication services as well as the Excise Duties escalation on locally manufactured products.Fourthly, he stressed that the President has ordered the suspension of the newly introduced Green Tax by way of Excise Tax on Single Use Plastics, including plastic containers and bottles.

He added that the President also ordered the suspension of Import Tax Adjustment levy on certain vehicles.According to him, President Tinubu’s intention is to listen to the concerns of the Nigerian people and alleviate the negative impacts of the tax adjustments, rather than exacerbate the challenges faced by citizens.

Alake said: “The President wishes to reiterate his commitment to reviewing complaints about multiple taxation, local and anti-business inhibitions. The federal government sees business owners, local and foreign investors as critical engines in its focus on achieving higher GDP growth and appreciable reduction in unemployment rate through job creation.

“The government will, therefore, continue to give requisite stimulus by way of friendly policies to allow businesses to flourish in the country. President Bola Tinubu wishes to assure Nigerians by whose mandate he is in power that there will not be further tax raise without robust and wide consultations undertaken within the context of a coherent fiscal policy framework,” he added.

According to him, some of the problems identified with the tax changes include the 2017 National Tax Policy approved by the President Muhammadu Buhari administration, prescribing a minimum of 90 days notice from government to tax-payers before any tax changes can take effect.

“This global practice is done with a view to giving taxpayers and businesses reasonable time to adjust to the new tax regime. However, both the Finance Act 2023 and the Customs, Excise Tariff Order 2023 did not give the required minimum notice period, thus putting businesses in violation of the new tax regime even before the changes were gazetted.

“As a result of this, many of the affected businesses are already contending with the rising costs, falling margins and capacity underutilization due to the various macroeconomic headwinds as well as the impact of the Naira redesign policy”.

Alake also noted the Excise Tax increases on tobacco products and alcoholic beverages from 2022 to 2024, which had already been approved, are also being implemented.

The Special Adviser maintained that a further escalation of the approved rates by the current administration presents an image of policy inconsistency and creates an atmosphere of uncertainty for businesses operating in Nigeria.

His words: “The Excise Tax of 5% on telecommunication services has generated heated controversy. There is also a lack of clarity regarding the status of this tax, just as players in the sector also complain about the imposition of multiple taxes on their operations.

“We have also seen that the Green Taxes, including the Single Use Plastics tax and the Import Adjustment Levy on certain categories of vehicles require more consultation and a holistic approach to the country’s net zero plan in a manner that does not impact the economy negatively.

Commenting on whether the President’s action would affect the Petroleum Tax and if new taxes would be introduced, the Special Adviser to the President on Revenue, Mr Adedeji, said that the intent of the President was to lighten tax burdens, harmonise and manage already existing taxes in the best interest of Nigerians.

He said: “As you rightly said that there’s plan or possibly proposal for Petroleum Tax, if you look at the current price templates, that has already been included, so this suspension has nothing to do with that. So the pricing structure that you have for PMS today, all those have been included, there’s no new taxes that we’re bringing in.

“Like my colleague has said, one of the key focus of this administration is to harmonise our taxes, the way we collect it. Mr. President actually wants to simplify and make it friendly to business, the way we operate taxes in Nigeria. As we know, when we talk about the revenue management, it’s not only in tax collection, the starting point is our economic policy because our aim is not to tax poverty.

“Our aim is not to tax production. Our aim is to increase our productive activities, capacity to produce, then we can tax our consumption and that is the direction of our economic planning and then we want to increase the trust that we have in the government. If you have observe what has happened in the last months that we’ve been here, we’ve kept our words, part of what we are doing today, just to increase this trust that we’re here to do what’s best for the country.

“Lastly is that we have robust plan to improve our collection management, the compliance management, because that is what is needed. So we’re not going to impose new taxes, it’s the one that have that we’ll improve the collection, the management and the efficient use of those resources.

“That is the pledge and promise of Mr. President, which we’re here to make sure comes to reality”.

President Tinubu the following day last Friday constituted a Presidential Committee on Fiscal Policy and Tax Reforms in line with his promise to remove all barriers impeding business growth in Nigeria.

Special Adviser to the President on Special Duties, Communications and Strategy, Mr Dele Alake, in a release  stated that the committee which will be chaired by Fiscal Policy Partner and Africa Tax Leader at PriceWaterhouseCoopers (PwC), Mr. Taiwo Oyedele will comprise experts from both the private and public sectors and have responsibility for the various aspects of tax law reform, fiscal policy design and coordination, harmonization of taxes, and revenue administration. The release quoted the Special Adviser to the President on Revenue, Mr. Adelabu Zacch Adedeji, as explaining that President Tinubu recognizes the importance of a sound fiscal policy environment and an effective taxation system for the functioning of the government and the economy.

According to him: ‘’Nigeria ranks very low on the global ease of paying taxes while the country’s Tax to GDP ratio is one of the lowest in the world and well below the African average.

‘’This has led to an overreliance on borrowing to finance public spending which in turn limits the fiscal space as debt service costs consume a greater portion of government revenue, annually resulting in a vicious cycle of inadequate funding for socio-economic development.

‘’While some incremental progress has been recorded over the years, the outcomes have not been transformative enough to change the narrative”.

Adedeji outlined the key challenges in Nigeria’s tax system to include multiple taxes and revenue collection agencies, fragmented and complex tax system, low tax morale, high prevalence of tax evasion, high cost of revenue administration, lack of coordination between fiscal and economic policies, and poor accountability in the utilization of tax revenue.

The establishment of this committee reflects President Tinubu’s commitment to addressing these challenges and bringing about transformative reforms in fiscal policy and taxation.

The committee’s primary objective is to enhance revenue collection efficiency, ensure transparent reporting, and promote the effective utilization of tax and other revenues to boost citizens’ tax morale, foster a healthy tax culture, and drive voluntary compliance.

These efforts will not only improve Nigeria’s revenue profile but also create a more conducive and internationally-competitive business environment.

‘’Our aim is to transform the tax system to support sustainable development and achieve a minimum of 18% Tax to GDP ratio within the next three years without stifling investment or economic growth.

‘’It should be noted that this committee will not only advise the government on necessary reforms, but will also drive the implementation of such recommendations in support of the comprehensive fiscal policy and tax reform agenda of the current administration,’’ Adedeji added.