Nigeria’s House of Representatives has adopted Tinubu’s Tax Reform Bills as a working document, ensuring the Value Added Tax (VAT) remains steady at 7.5%.
The decision, announced by Speaker Tajudeen Abbas, followed an extensive review by the House Finance Committee, chaired by James Faleke, who presented the report to lawmakers on Thursday.
This adoption marks a significant step toward harmonizing tax administration while addressing contentious issues raised by stakeholders.
Faleke confirmed that the VAT rate, a focal point of debate, will not increase from its current 7.5%, despite earlier proposals in the Nigeria Tax Bill, 2024, to gradually raise it to 12.5% by 2026-2029 and 15% by 2030.
The committee’s recommendation to maintain the rate came after widespread criticism, notably from the Trade Union Congress (TUC) during public hearings, and a thorough reassessment of the bill’s clauses.
Additionally, the committee proposed that VAT be consumption-based, a shift aimed at ensuring fairness in its application across Nigeria’s diverse economic regions.
A cornerstone of the reform is the repeal of the Federal Inland Revenue Service (FIRS), to be replaced by the Nigeria Revenue Service (NRS). The NRS will take on the critical role of collecting revenues for the Federal Government, with Faleke expressing confidence that it will streamline tax processes and enhance administrative efficiency.
The Tax Reform Bills encompass four key pieces of legislation: the Joint Revenue Board of Nigeria (Establishment) Bill, 2024; two iterations of the Nigeria Revenue Service (Establishment) Bill, 2024; and the Nigeria Tax Bill, 2024, reflecting a comprehensive overhaul of the country’s fiscal framework.
The adoption process was notably inclusive, with Speaker Abbas highlighting the unprecedented unity among lawmakers. “All the 36 states, including the Federal Capital Territory, have their representatives in the sub-committee. This is the first time such a report is getting hundred percent approval by almost all members,” he stated.
Abbas praised the Finance Committee’s efforts, describing the report as a testament to Nigeria’s collective resolve to refine its tax system.
The journey to this point has been contentious. Initially tabled by President Bola Tinubu on October 3, 2024, the bills faced resistance from northern governors, who feared the reforms could disadvantage their region.
However, a turning point came in January when the Nothern Governors’ Forum (NGF) endorsed the bills following negotiations that secured an “equitable” VAT-sharing formula. Further input from economic and financial stakeholders during a two-day Senate public hearing on February 24 and 25 helped refine the legislation, culminating in Thursday’s adoption by the House.
While the decision to retain the 7.5% VAT rate has quelled some concerns, the establishment of the NRS and the consumption-based VAT model signal a transformative shift in Nigeria’s tax policy.
