A recent survey by SBM Intelligence has revealed a mix of optimism and apprehension among Nigerians regarding the proposed tax reform bills, even as some raised concerns over a proposed gradual increase in Value Added Tax (VAT).
The survey, conducted across eight states representing Nigeria’s geopolitical zones, aimed to gauge public sentiment on the tax reform proposals, their urgency, and the implications for businesses and governance.
Respondents spanned both formal and informal sectors, providing diverse perspectives on the reforms.
While the bills aim to simplify Nigeria’s tax system and enhance state-level revenue generation, some respondents believe the bills could push Northern governors to improve internally generated revenue (IGR).
What the respondents are saying
According to the SBM Intelligence report, Munir Hamza, a Kano-based business owner, supported the bills, stating that they could incentivize Northern states to focus on revenue generation rather than relying on federal allocations.
“If the bills are passed, it will enable governors to adjust their expenditure and find more means to generate revenue. The government should ignore the opposition and do the needful,” Hamza said.
- Meanwhile, Judith Asogwa, a civil servant and hair vendor from Abuja, noted that the reforms could simplify Nigeria’s complex tax system and improve accountability.
- She highlighted the proposed merging of tax laws and the transformation of the Federal Inland Revenue Service (FIRS) into the Nigeria Revenue Service (NRS) as steps toward reducing confusion for taxpayers.
“This will simplify the tax system, making it easier to manage and understand. Northern states should focus on improving IGR instead of relying on federal allocations and the quota system,” she said.
Concern over proposed hike in VAT
While respondents generally viewed the reforms as having the potential to boost economic growth and industrial competitiveness, many expressed unease about the planned increase in VAT from 7.5% to 15% by 2027.
- Bauchi-based respondent, Yakubu Samaila, criticized the proposed VAT hike, citing fears of increased inflation and reduced living standards.
- He also raised concerns about the government’s historical mismanagement of funds.
- “Increasing VAT and income tax for any income class without fixing the economy will only further impoverish already struggling Nigerians. People are wary of agreeing to pay more tax because the money might not be put to judicious use,” he said.
- Deborah Innocent, a nurse from Rivers State, shared similar concerns, warning that higher taxes could lead to price hikes for goods and services by public and private companies.
Expert views
The report also included insights from financial experts, who shared different concerns on the tax reform bills.
Abiodun, a Lagos-based tax consultant noted that the real problem the North has with the bill was that, in his view, they do not want to be shortchanged and that pursuant to the Constitution, the VAT ought to be administered by the states.
“Currently, VAT is filed by the company headquarters, which are usually located in Lagos. The largest payers of VAT e.g. MTN, Dangote and Airtel, are all located in Lagos, whilst the consumption is happening in other states.
“The proposed bill is strictly based on place of consumption rather than Headquarters location.”
- He said another concern from the North is the removal of VAT from agricultural items as they would be zero-rated under the bill.
- The North accounts for roughly 70% of the country’s agricultural output.
- He, however, noted that this loss would be replaced with VAT that would otherwise go to the location of the headquarters.
Speaking to SBM, Muda Yusuf, the former director general of the Lagos Chamber of Commerce and Industry, said many sections of the tax reform bill are quite technical, making them unintelligible for many average Nigerians.
“The Nigerian economy is highly informal. The man in Alaba who makes over N100 million does not know what is called Company Income Tax and may not even have an audited account. The reduction of CITA from 30% to 25% is a welcomed idea.
“However, the increase in VAT from 7.5% to 10% is a bad idea,” he said.
- A recurring theme among respondents was the need for increased public engagement and education about the reforms. Suggestions included leveraging diverse media channels and local dialects to explain the benefits and implications of the proposed changes.
- Respondents emphasized that for the reforms to gain public support, the government must address concerns about VAT revenue sharing and contentious clauses in the bills.
What you should know
The tax reform bills have become controversial since it was introduced with different interests kicking against its provisions.
For instance, the Northern Governors Forum expressed their opposition to the bill, urging legislators from the region to resist any legislation that undermines the interests of Northerners nationwide.
- Additionally, the National Economic Council (NEC), which comprises the 36 state governors and is chaired by the Vice President, called for the withdrawal of the bills to allow for proper consultations before proceeding to the National Assembly.
- However, President Tinubu disregarded the recommendations from both the Northern Governors Forum and the NEC, stating that the process is legislative and that inputs can be incorporated during public hearings.
- Meanwhile, the Nigerian Senate on December 4, suspended hearings on the bills until the new year, providing time for essential political engagements and negotiations to secure its passage.