The Arewa Consultative Forum (ACF), National Association of Chamber of Commerce, Industry, Mines and Agriculture (NACCIMA), Corporate Affairs Commission (CAC) and other stakeholders have reechoed their concerns about some provisions contained in the four Tax Reform Bills before the National Assembly.
They made their cases during their separate presentations at the resumed public hearing on the bills by the House of Representatives Committee on Finance on Thursday.
In its presentation delivered by a former Minister of Finance, Yerima Lawal Ngama, the forum said the proposed tax reforms should be well planned, properly communicated, strategically implemented after an ample dialogue and political consensus on their provisions.
The forum added that “Besides raising adequate revenue for the government, the reforms must balance efficiency with distribution issues that is with some desirable standards of horizontal equity and vertical progressiveness and redistribution”.
It also expressed reservations on some sections of the bill and proffered recommendations for possible amendments.
On the Nigeria Tax Bill (NTB), the ACF said while the bill seeks to consolidate and create a unified legal framework and a centralised tax system under the proposed Nigeria Revenue Service (NRS) that will replace the Federal Inland Revenue Service (FIRS), it also repeals 11 tax statuses.
While speaking on the contentious issue, the body said increasing VAT rates will have adverse effect on both individuals and a much broader sense on the economy.
“The negative effect of inflation will not stop on VATable goods and services only, it will also affect non-VATable goods and services bought and sold in the same market.
“With the devastation brought about to the purchasing power of Nigerians, as a result of petroleum products and other energy products and services, subsidy removal, increasing VAT rate gradually would further worsen the slow pace of the economy and the purchasing power of the people,” it added.
The ACF said it was unable to appreciate the wisdom behind the plan to replace TETFUND, NITDA and NASENI.
It, therefore, recommended that the institutions especially TETFUND and NITDA should not be tampered with or scrapped.
“The provisions of Section 59 of the Nigeria Tax Bill, 2024 should be re-couched to share funds collected as Development Levy among the TETFUND, NITDA and Nigeria Education Loan Fund (NELFUND),” the forum added.
On its part, the National Association of Chamber of Commerce, Industry, Mines and Agriculture (NACCIMA) in its presentation delivered by Dele Oye called for the removal of the Sections of the Tax Bill that undermine the existing exemptions for Free Trade Zones (FTZs).
The association said, “The proposed amendments within the Nigeria Tax Bill 2024 threaten the existing framework that has successfully drawn significant foreign investments and fostered economic growth. We urge the Committee to evaluate these concerns and take immediate action to preserve the integrity and attractiveness of Nigeria’s Free Trade Zones for both current and prospective investors.
“Section 62 contains provisions granting the Federal Inland Revenue Service (FIRS) the authority to revoke mineral and mining licences, which encroaches upon the jurisdiction traditionally held by ministers and is an unusual power grab.
“Section 63 imparts supreme investigative authority to tax officers for any violations of tax laws, overshadowing the roles of state and local governments.
“Section 141 HB.1756 asserts the bill’s precedence over other laws in Nigeria, including provisions in Sections 57 and 203(4) HB 1759 and 202(4) HB 1759 stating that, ‘this Act shall take precedence over any other law on tax. ‘Such language may create an adversarial environment and weaken existing legal frameworks”.
Similarly, the Corporate Affairs Commission (CAC) said while it appreciated the intent of the four Bills, it observed some anomalies that needed to be made clear as regards to the contents of the bills.
It stressed the need to widen the scope of the definition of “Small Businesses’ in Section 203 of the Nigeria Tax Bill to exclude companies with MDA and foreign membership as contained in Section 394 of the Companies and Allied Matters Act 2020.
It also seeks more clarification on ‘Passive Income as contained in Section 6 of the Nigeria Tax Administration Bill while seeking more clarity on the appointment of Chairman and composition of the Board as contained in the Nigeria Revenue Service Establishment Bill.
A nongovernmental organisation, budgIT, also made suggestions on the way forward as regards the bills.
In its presentation, the League of Northern Democrats also recommended the retention of TETFUND, NITDA and NASENI and suggested the transfer of 2% Consolidated Development Levy to NELFund.
The League also recommended an amendment to Section 77 and Section 143 of the Tax Administration Bill.
It stated, “Section 77: Notwithstanding any formula that may be prescribed by any other law, the total revenue accruing by virtue of the operation of Chapter six of the Nigeria Tax Act shall be distributed as follows; (a)10% to the federal government; (b) 55% to the state governments and the Federal Capital Territory and (c)35% to the local governments”.
Meanwhile, the Chairman, Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele has said that inheritance tax is not reintroduced in the tax reform bills before the National Assembly.
He stated this while making clarifications on the issue at the continuation of the public hearing on the bills by the House of Representatives Committee on Finance on Thursday.
He said, “The section of the law that is being interpreted as introducing inheritance tax is section 4 subsection 3, of the Nigerian tax bill. Now this section is talking about family income.
“If as an individual, you own a property and you rent it out, you pay tax on your rent. But a family can also own a house and rent it out. Should they not pay tax? If we say they should not pay tax, I guarantee you, all the houses in Nigeria will turn to family houses, and nobody will pay the tax.
“Income is different from inheritance. Inheritance is to do with assets, wealth, and cash. In accounting, when you say income, income is external to the family. It comes in from the outside. So this provision is not even new. It has been in our tax laws since independence.
“As we speak today, this provision is in the Personal Income Tax Act, Section 2, subsection 5. If you have family income, you can tell us it belongs to the father or the son. The father or the son will pay the tax. But if you earn family income and you cannot attribute it to any member of the family, then you would impose tax on that family.
“In fact, there’s a tax on villages. There’s a tax on communities. You can have a community town hall, and you’re renting it out. You need to pay tax. So this provision is not new. Also, it is not in any way introducing inheritance tax.
“Otherwise, this law was already in place when in 1979, the military introduced inheritance tax. If this was sufficient, they would not have introduced another law to impose inheritance tax.
“And in 1996, that capital transfer tax that imposed inheritance tax was repealed. And we have not in any way, directly or indirectly, attempted to bring it back. And by the way, this is the income of the state, not the federal government. Why would we want to do that?”
Speaking on the operations of Free Trade Zones, the Chairman of the Federal Inland Revenue Service (FIRS), Zach Adedeji, said a responsible country would not allow manufacturers in free zones which have a different tax system, to get their products into Custom areas and shortchange others that are paying tax.
He said there was no law that permitted a free zone entity to sell to the custom territory competing with people who are paying taxes.
Adedeji said, “No responsible government will open its eyes and allow some people that have not read the law or they have read it halfway to now say they want to have litigation, they want to go out of the country. What is their total investment that they want to use to destroy those people that are in the Custom area that we are collecting taxes from, and then you produce and you rush it, you dump it into the Custom area to destroy the country. A responsible country will not be like that. We will not be like that.”
He also dismissed a claim by NACCIMA that 70 investors have withdrawn their investments from the Free Zones due to unfavourable policies, Oyedele said this was false.
He said, “There is what we call cash in circulation. That’s the currency you have in your pockets and in your wallet. In Nigeria, it’s about four trillion naira. It’s meant to be outside the banking system. That’s what they used to pay for molue or to buy pure water.
“The most supply in Nigeria is over N100 trillion. And it’s still there. The value of digital transactions last year was N1.08 quadrillion. So nobody’s withdrawing money to run from Nigeria”.