Mixed Reactions: The Debate over Tinubu Tax Reform Bill

By Keem Abdul

Only two things, as the old saying goes, are certain in this life: death… and taxes.

And yet no public policy issue, in virtually every jurisdiction on this planet, is as vexed as taxes – whether to raise or lower them, what and whom to tax or not to tax, when and where to offer tax-based incentives such as waivers, exemptions and holidays, and so forth. In jurisdictions where the tax net is at its most comprehensive, and loopholes (where they exist) are few and far between, the issue is even more fraught. In these jurisdictions, taxes have decided elections, caused wholesale revisions of relevant laws, and even precipitated revolutions.

Since his days as Lagos State Governor, President Bola Tinubu had always tended towards a fiscal template driven by taxation as a driver of economic productivity, as opposed to one driven by rent-seeking and royalties (in Nigeria’s case, from the sale of crude oil, its economic mainstay, and the distribution of the proceeds). It was no surprise then that, upon his ascension to the Presidency, his administration has been intentional in its quest to overhaul, or at least the country’s tax profile. The appointment of Taiwo Oyedele, formerly a taxation expert with the consulting firm of PriceWaterCooprs (PwC) – and a frequent critic of the tax policies of successive administrations at both national and subnational levels – as chairman of the Presidential Fiscal and Tax Reform Committee, was an early indication of the President’s intentions in this regard.

It is no news that the latest policy move of the administration in respect of tax administration, namely, the proposed Tax Reform Bill, and the federal government’s efforts to guide it through the National Assembly, have generated strong reactions from certain quarters. Though it was touted by the Senate Leader, Sen. Opeyemi Bamidele, as “a significant move to overhaul the country’s tax system …” whose aim is to “simplify the tax landscape, reduce the burden on small businesses, and streamline tax collection,” not everyone is buying it.

The tax reform package, as presented to the National Assembly, has four main bills: the Nigeria Tax Bill, the Nigeria Tax Administration Bill, the Nigeria Revenue Service (Establishment) Bill, and the Joint Revenue Board (Establishment) Bill. Each bill aims to address specific aspects of tax administration, compliance, and enforcement in Nigeria. According to the Presidency, the objectives of these bills are to ensure uniformity in tax revenue administration; eliminate double taxation; encourage private sector investment in critical industries; and boost disposable incomes through targeted tax exemptions based on personal income (eg, individuals earning N800,000 or less, as well as SMEs with turnovers under N50 million) would be exempted from income and other tax; and improve tax collection through technology.

The bills advanced to their Second Reading in the Senate last Thursday in spite of reservations by a number of lawmakers, mostly from the northern constituencies in the chamners, who expressed their grouse about stakeholder consultations (or the lack thereof) and especially the derivation principle in respect of the Value Added Tax (VAT), which is really the main bone of contention; the relevant provision (Section 77) seeks to make changes to the way VAT is redistributed to states; passage of this bill would see a transition to a consumption-based VAT distribution model with emphasis on derivation, rather than equality or population. That provision, some Northern stakeholders say, would enable a state like Lagos – already the country’s commercial hub, generating over half of the country’s VAT revenue – to consolidate its financial dominance, while making the North, a mostly agrarian region with low indices of production and consumption, and heavily dependent on federal allocations, lose vital resources critical for its development.

Amid pressure from northern Governors and 73 northern lawmakers, therefore, the House of Representatives has indefinitely suspended the debate on the bill, while the Senate Committee on Finance has been asked to review the bills and report back within six weeks.

At the heart of the opposition by the influential Northern leaders – among them Governor Babagana Zulum of Borno State, former Vice-President Atiku Abubakar and former Sokoto State Governor Aminu Tambuwal – is the fear that the Tinubu tax reforms would exacerbate the already wide socio-economic disparities between the Northern and Southern sections of the country. The bill’s potential impact on the North, already struggling with economic and security challenges and high poverty rates, they say, would be devastating. In a statement, Atiku expressed concern about the uneven development across Nigeria’s federating units, and stressed the need for a fiscal system that ensures justice and equity. The system the Tinubu bill aims to bring about, he said, would favour a few states while unfairly penalising others. On his part, Gov. Zulum criticised the speed with which the bill had progressed through the legislative process, drawing comparisons to the Petroleum Industry Bill, which took nearly two decades to pass. “Why the rush?” He asked rhetorically. If the cocktail of bills is passed into law, he alleged, only one of the 36 states, namely, Lagos, will be the major beneficiary.

But contrary to Atiku’s assertion that Nigerians were ‘united‘ in their call for the revision or outright withdrawal of the controversial bill, it has received the full-throated support of Ohanaeze Ndigbo, the apex socio-cultural organisation in the S/East, which joined its counterparts in the S/West, S/South and N/Central geopolitical zones in their respective endorsements. According to the body, the bills represent a transformative opportunity for the rejuvenation of SMEs, especially as regards the elimination of double taxation, and the enhancement of the fortunes of Nigerian workers, and has called on federal legislators from these zones to support it. Also, a few lone voices in the North have bucked the wave of opposition by highlighting the ways in which that region also stands to benefit from its passage. Deputy Senate President, Barau Jibril even opined the bill is being deliberately misconstrued for political reasons, and that those criticising the tax bills had not even read them!

Indeed, it must be said that the position of the Northern leaders on this issue – and especially their latter-day call for ‘equity and fairness’ and ‘fiscal federalism‘ (principles they had strenuously opposed in the past ) smacks of disingenuousness, at best, and outright hypocrisy, at worst. Since the advent of the ‘oil boom’ of the 1970s, the oligarchs of the North have always scoffed at the long-standing call by stakeholders in oil-producing regions for resource control – even as they see nothing wrong in a state such as Zamfara now exerting a measure of such control over the gold being mined in its domain, and the proceeds from its sales!

Truth is that the principle of derivation has been in place for a while now – especially as far as crude oil revenues are concerned. And so far, it has served as an alternative (a poor alternative, to be sure) to resource control, which remains the ideal. And the North has been fine with it. So why the opposition to Section 77 of the Tax Reform Bill, which follows THE EXACT SAME PRINCIPLE of derivation, this time on industrial goods and their consumption? The current Minister of the Federal Capital Territory, Nyesom Wike, made this point a few years back when he was still Rivers State Governor; he questioned the North’s insistence on being included in the distribution of VAT on beer and other alcoholic beverages while banning the consumption of these drinks in their domains. You cannot eat your cake, he was saying in effect, and have it.

Which is why the Northern oligarchs, and their henchmen in the NASS, must drop their opposition to the bill forthwith – and instead explore its many benefits as listed above. As leaders like Sen. Barau have stated, Northern Governors and other policymakers must see the bill as a challenge to begin the difficult but necessary work of engaging in bipartisan coalitions to demand fiscal federalism that balances derivation with overall national development. They must come together, not to continue insisting on population as a basis for the distribution of VAT and other tax revenues, but to lobby for compensation mechanisms that offset potential revenue losses, and to explore Public-Private Partnerships (PPPs) to reduce their heavy reliance on federal allocations. They must invest in agro-processing zones and renewable energy initiatives to boost the Gross Domestic Product (GDP) and internally-generated revenue (IGR) of their region.

Continued opposition to President Tinubu’s transformative tax reforms is tantamount to deliberately erecting a dam on the flow of progress by interests which want Nigeria to remain the way it is – and it does nobody (certainly not the masses of the North, whom they claim to champion) any good. If derivation (in the distribution of crude revenues) was good for the goose, then derivation (in VAT) should be good for the gander.

• Keem Abdul, publisher and writer, hails from Lagos. He can be reached via +2348038795377 or Akeemabdul2023@gmail.com