The League of Northern Democrats (LND), a bipartisan political group founded to promote northern agenda, has advised that the Tax Reform Bills before the National Assembly, should align with constitutional provisions, as well as respect the religious and cultural practices, particularly on inheritance taxation.
The league had two weeks ago, set up a technical committee to study the bill and to come out with a position to be advanced by the body.
Chairman of the committee Senator Bala Na’Allah, said the four tax reform bills were “inelegantly crafted,” adding that they followed South African model.
Na’Allah noted that the Tax Administration Bill intends to provide for uniform procedures for a consistent and efficient administration of tax laws in the country in order to facilitate tax compliance and optimise tax revenue collection.
He however stated that there is lack of clarity on Section 77, and expressed concerns on the effectiveness and appropriateness of the corporate governance of state Inland Revenue Service as provided for by sections 82, 84, 87, and 90 of the Tax Administration Bill.
According to him, Section 77 of the Tax Administration Bill states that “Notwithstanding any formula that may be prescribed by any other law, the net revenue accruing by virtue of then operation of chapter six of the Nigeria Tax Act shall be distributed” based on 10 percent the Federal Government; 55 percent to the state governments and the Federal Capital Territory; and 35 percent to the Local Governments.
Na’Allah noted that the section makes a provision that 60 percent of the amount standing to the credit of states and local governments shall be distributed among them on the basis of derivation.
He stated that the committee’s analysis of the October 2024 Federal Government allocation showed a disproportionate application of the existing formula for the derivation portion of value added tax (VAT) proceeds.
The committee Chairman further disclosed that the distribution of the derivation allocation of October 2024 VAT collection to the 774 local governments in the country showed that all the states belonged to a cluster apart from two, Rivers and Lagos States.
“This development is not unconnected with the interpretation of derivation by the tax authority. These two states host most of the head offices of companies that remit VAT centrally,” he added.
According to him, in the South West with 137 local governments, Lagos State with only 20 local governments collected 88.2 percent of the zonal total, while the remaining 11.8 percent was shared by the 117 local governments in the other five states in the zone.
“While in the South-South, Rivers State collected 82.1 percent and the remaining five states shared the balance of 17.9 percent of the allocation to the zone.
“Looking at the share of each zone …the South West received the most (this was the sum of 31.27 billion) while the South East zone received the least (this was the sum of N903.28 million).
“Indeed, the allocation to all the 95 local governments in the South East was less the share of only one local government in Lagos State that received N915.08 million.
“Of all the states, Imo received the least allocation of N20.57 million for all of its 27 local governments,” Na’Allah disclosed.
He also observed that Section 143 of the bill failed to provide the interpretation for derivation, adding that there is nowhere else in the bill where derivation was clarified.
Former Minister of State for Finance Dr. Yerima Ngama, said nearly 80 percent of the VAT paid in the country is not more than 10 huge corporations.
This, he added, was because most of these corporations were all non-existent by 1993 when VAT was first introduced in Nigeria to replace sales tax.
“This means that they are basically the creation of government policies, specifically during the Obasanjo administration.
“We therefore believe that if the correct government and successive ones will formulate similar policies that would double or even triple such huge corporations especially in agriculture, animal husbandry, mining, etc., we will build the economy, triple our VAT earnings and lessen the burden on the poor in the country.
“Very importantly also, Northern Nigeria will substantially increase its production capacity and reduce its endemic poverty,” he stated.
Chairman of League of Northern Democrats, Senator Ibrahim Shekarau, explained that while tax reform is long overdue, but said some key points such as equity in distribution, feasibility in implementation and impactful on the informal sector.
”The proposed tax reform initiative of the president is a bold attempt to address Nigeria’s long-standing challenges with fiscal inefficiency, a narrow tax base and inequities in revenue generation and allocation.
“Collectively, the four bills seek to broaden the tax base, simplify compliance, improve revenue collection and strengthen fiscal federalism.
“These reforms, if properly implemented, have the potential to transform Nigeria’s economy, unlocking opportunities for growth and development,” Shakarau added.
