Unlocking the Benefits of Tax Reforms in Nigeria

Last week, the eight edition of the Blakey’s National Tax Conference series focused on the Tax Reform Bills currently before the National Assembly, suggesting how  best to unlock the benefits for the good of all, writes Goddy Egene

The Tax Reform Bills, which are executive bills presented by President Bola Tinubu, to  the National Assembly, have generated a lot of controversies. There have  been  calls, especially by northern politicians, that the bills be withdrawn to allow for further engagements due  the controversies  they have  generated.
But the Chairman, Presidential Advisory Committee on Fiscal Policy and Tax Reform, Mr. Taiwo Oyedele,  said the bills would not be withdrawn.
He said that allegation that the Tax Reform Committee didn’t consult the state governors during its engagement process was not  correct, saying, however,  that  more consultation may be required.
According to Oyedele, now that the bills appeared to have generated renewed interests from stakeholders who hitherto showed no interest, the committee was prepared to repeat the engagement process that had taken place before.
The Senate has already mandated its committee to work with  the Finance Ministry and other relevant  bodies on the bills before further action would be taken on them.
However, some private sector operators are also making their own contributions  to ensure that  the bills  are properly dissected   before  being passed into laws that will benefits all and sundry.
One such organisations is Okwduli Ijezie & Co, a firm of chartered accountants, tax and management consultants that has been organising national tax conference pro bono since last year.  Last  Thursday, the firm held the eight edition of the  national tax conference, which focused on  the tax reform bills.
Speaking at the conference in Lagos, the Chief Executive Officer of company, Chief  Okwudili Blakey Ijezie said the   Tax Reform Bills 2024 marked a significant milestone in Nigeria’s fiscal landscape.
“These proposed bills aim to reshape the country’s tax system, promoting economic growth, and simplifying taxation,” he declared.
Looking at the key aspects of the bills, he said: “The bills propose raising the Value-Added Tax (VAT) from 7.5 per cent to 10 per cent by 2025, with further increases to 12.5 per cent from 2026 to 2029, and 15 from   2030 onwards. Certain supplies will be exempt from VAT, including oil and gas exports, crude petroleum oil, and feed gas. Other exempt items include baby products, locally manufactured sanitary products, and military hardware. The bills outline tax rates for companies, with small firms taxed at 0 per cent. All other companies will face a tax rate of 27.5 per cent in 2025, reducing to 25 per cent from 2026.”
He pointed  out that a development levy of four  per cent will be imposed on companies’ assessable profits, excluding small and non-resident companies, noting that t he levy will fund the Student Education Loan Fund.
 “A five per cent excise duty will be imposed on revenue from lottery and gaming trade or business. Additionally, a five per cent excise duty will be imposed on telecommunications services,” he added.
Explaining the rationale behind the tax reforms, Ijezie said by simplifying the tax system and reducing compliance costs, the reforms aim to promote economic growth and encourage investment.
“The reforms seek to increase government revenue by broadening the tax base and improving tax administration. By exempting essential goods and services from VAT, the reforms aim to reduce the burden of taxation on low-income households and promote greater equality.”

Challenges and Opportunities
According to him, the tax reforms present both challenges and opportunities.
In terms challenges, the reforms may face resistance from certain stakeholders, and there may be challenges in implementing the new tax regime. On the other hand, the reforms offer opportunities for Nigeria to promote economic growth, increase government revenue, and reduce poverty and inequality,” he said.

Benefits of Tax Reforms
However, Ijezie explained that the tax reforms has  many benefits.
“Tax reforms can lead to increased government revenue, which can be used to fund public goods and services. A reformed tax system can lead to improved tax administration, reducing the burden on taxpayers and increasing compliance. Simplified tax laws can make it easier for individuals and businesses to comply with tax regulations. A reformed tax system can help reduce tax evasion, ensuring that all individuals and businesses contribute their fair share. A reformed tax system can make Nigeria more attractive to foreign investors, leading to increased economic growth and development.
“Tax reforms can lead to increased economic activity, resulting in job creation and reduced unemployment.
“It can promote transparency and accountability in government, ensuring that tax revenue is used effectively.
Also, tax reforms can lead to a reduced tax burden on individuals and businesses, increasing their disposable income and promoting economic growth. Increased government revenue from tax reforms can be used to fund infrastructure development projects, such as roads, bridges, and public transportation and  make Nigeria more competitive in the global economy, attracting foreign investment and promoting economic growth.”
He added that simplified tax regulations can enhance trade and commerce by reducing the burden on taxpayers and increasing compliance.
“Competitive tax policies can attract foreign investment, leading to increased economic growth and development. Transparent tax systems can improve business confidence by reducing the risk of tax evasion and avoidance,” he added.
Ijezie noted that increased government revenue from tax reforms can be used to fund social welfare programmes.
“Tax reforms can encourage domestic investment by reducing the tax burden on individuals and businesses. Tax incentives can promote economic diversification by encouraging investment in key sectors. Tax reforms can improve tax compliance by SMEs by simplifying tax laws and reducing the burden on taxpayers.
It  can reduce the tax burden on micro-businesses, increasing their disposable income and promoting economic growth and  increase access to credit facilities for taxpayers, enabling them to access funds for investment and economic growth.

Recommendations for Effective Tax Reforms
To ensure the successful implementation of the tax reforms, Ijezie  recommended  the suspension of  the VAT rate increase.
“In light of the economic challenges caused by the stopping of fuel subsidy on May 29, 2023, and the massive devaluation of Naira since July 2023, I recommend suspending the VAT rate increase to 2026. This will provide relief to individuals and businesses, allowing them to adjust to the new economic reality,” he said.
“To address concerns that the new tax regime may disproportionately affect certain regions, I recommend phasing the derivation sharing formula. This will ensure a smoother transition and mitigate any potential negative impacts on affected regions. A simpler tax system can reduce compliance costs and make it easier for individuals and businesses to understand their tax obligations.
“Tax reforms should aim to promote economic growth by encouraging investment, innovation, and entrepreneurship.  Tax reforms should ensure that the tax burden is distributed fairly and equitably among different segments of society.”
According to Ijezie, it is essential to engage in public consultation and engagement to ensure that the tax reforms reflect the needs and concerns of various stakeholders.
“By implementing these recommendations, we can ensure that the tax reforms promote economic growth, reduce poverty and inequality, and simplify the tax system.
“The Tax Reform Bills 2024 offer a unique opportunity for Nigeria to reform its tax system and promote economic growth. As we move forward, it is essential that we consider the potential impact of these reforms on businesses, individuals, and the economy as a whole. By working together, we can unlock the benefits of the new tax regime and create a brighter future for Nigeria,” he declared