Senate Suspends Action on Tax Reform Bills After Intense Criticism

The Nigerian Senate has suspended further action on the controversial tax reform bills proposed by President Bola Tinubu, following widespread opposition and pressure from various stakeholders.

This decision came after the Senate leadership met with the Presidency to address concerns and contentious issues surrounding the bills.

The tax reform proposals, which include significant changes to the country’s tax laws, were transmitted by President Tinubu to the National Assembly on September 3, 2024, based on the recommendations of the Presidential Committee on Fiscal and Tax Reforms, led by Taiwo Oyedele.

These bills aim to review and revamp existing tax laws in Nigeria.

The bills include:

The Nigeria Tax Bill 2024, which provides the fiscal framework for taxation in the country.

The Tax Administration Bill, which seeks to establish a clear and concise legal framework for all taxes in Nigeria, aimed at reducing disputes.

The Nigeria Revenue Service Establishment Bill, which will repeal the Federal Inland Revenue Service Act and establish the Nigeria Revenue Service.
The Joint Revenue Board Establishment Bill, which seeks to create a tax tribunal and a tax ombudsman.

The bills, however, sparked strong opposition, particularly from northern lawmakers and governors. Senator Ali Ndume led the charge against the reforms, with Governors Babagana Zulum of Borno and Sule Abdullahi of Nasarawa, as well as members of the National Economic Council (NEC), raising concerns about the potential negative impact of the bills on their states.

They called for broader and wider consultations before advancing the bills.

In response to the growing criticism, the Senate, under the leadership of Deputy President Jibrin Barau, announced on Tuesday that it would pause further legislative proceedings on the bills.

A 10-man committee was set up to meet with the Attorney General of the Federation and Minister of Justice, Abubakar Malami, to address the contentious issues and work towards resolving the challenges that have polarized the country.

Barau explained that the Senate had decided to set aside politics, ethnicity, and regionalism to work together on resolving the issues surrounding the tax reform bills.

He emphasized that dialogue and consensus were vital in ensuring national unity and progress.

The Senate’s committee on finance, which had been tasked with further deliberations on the bills, was instructed to halt all actions, including public hearings, until the issues were resolved.

Senator Abbah Moro, the Senate Minority Leader, will head the newly formed committee, which includes Senators Adamu Aliero, Orji Kalu, Seriake Dickson, Titus Zam, Abdullahi Yahaya, Adeola Olamilekan, Sani Musa, and Adetokunbo Abiru.

The committee is scheduled to meet with the Attorney General on Wednesday (today) to address the issues raised and ensure that the tax reforms proceed in a manner that serves the collective interest of the nation.

Barau stated that the Senate recognized its role as a stabilizing force and that it was committed to supporting the executive branch’s efforts in addressing Nigeria’s challenges, including insecurity and economic issues.

He added that no issues should exacerbate the country’s current difficulties, and a collaborative approach would be key in resolving the situation.

One of the primary points of contention is the VAT sharing formula and the Derivative clause. The VAT sharing formula, which determines how value-added tax revenue is distributed among the states, has been particularly contentious.

Some regions, especially those with lower VAT contributions, are concerned that the proposed changes could leave them at a disadvantage.

Critics also allege that the bills are being rushed through the legislature without adequate consultation, with some questioning the timing of the reforms.

The hasty push for the bills has raised suspicions of a “hidden agenda,” leading to further resistance from various political and regional groups.

Taiwo Oyedele, Chairman of the Presidential Committee on Tax Policy and Fiscal Reforms, expressed disappointment over the opposition, stating that the government had anticipated resistance primarily from Lagos and, to a lesser extent, Rivers states.

He emphasized that the reforms align with Nigeria’s Constitution, particularly regarding the need to share taxes based on where they are generated.

The Senate’s decision to suspend further legislative action on the tax reform bills has been met with approval from several political groups, including the Labour Party (LP) and the Coalition of United Political Parties (CUPP).

Obiora Ifoh, the National Publicity Secretary of the Labour Party, commended the Senate for its decision to pause and consult further.

He stated that democracy thrives on discussions, consultations, and listening to the electorate’s concerns. Ifoh also stressed that this move would allow for more comprehensive public enlightenment before any final decisions are made.

The CUPP also hailed the Senate’s decision, with the National Secretary, Chief Peter Ameh, noting that suspending the bills would enable further consultations and ensure the tax reforms reflect the views of all Nigerians. Ameh emphasized that the move demonstrated the Senate’s commitment to inclusivity and accountability in governance.

On Arise Television’s Morning Show, Taiwo Oyedele responded to the pushback, stating that the government was focused on protecting the interests of states that were opposing the reforms.

He reiterated that the VAT derivation clause was sensitive because it deviated from the traditional oil and gas derivation system, as VAT is based on consumption, not production.

Oyedele defended the timing of the bills, stressing that the proposed reforms were not contrary to the Constitution and were essential to modernizing Nigeria’s tax system.

He argued that tax generation should reflect where taxes are generated, ensuring that states contributing more to national revenue receive a fair share.

As the committee prepares to meet with the Attorney General and review the contentious issues, all eyes are on how the Senate will proceed with the tax reform bills.

The suspension has opened the door for further public consultation, which may result in revisions to the bills before they can move forward in the legislative process.

The ongoing deliberations and the Senate’s commitment to ensuring a fair, inclusive approach to tax reform will likely continue to shape the national discourse on this critical issue.