Tax Reform Bills: Nigerians Earning Below ₦‎1m Annually Exempted From Income Tax

Abuja — Barring last-minute changes, the Senate will pass the controversial Tax Reform Bills today, exempting those earning below N1 million per annum from the tax net.

Vanguard gathered that most lawmakers who were initially opposed to the bills have changed their position following clarifications given by the Federal Government’s tax executives including the Director-General, Budget Office, Tanimu Yakubu; the Executive Chairman, Federal Inland Revenue Service, FIRS, Zacch Adedeji; and the Chairman, Presidential Committee on Fiscal Policy and Tax Reforms, Mr Taiwo Oyedele.

The tax executives, who appeared before the legislators, yesterday said among others that the bills were to tax prosperity and not poverty and that those earning less than One Million Naira a year would be exempted from income tax. They also said sharing of Value Added Tax, VAT, which favours states like Lagos, will be reviewed and made more equitable

Deputy President of the Senate, Senator Barau Jibrin (APC, Kano North) said when he presided over yesterday’s plenary session that debate on the tax bills will continue today.

Vanguard gathered that the bill will be listed as first reading, followed by an executive session by the Senators, and then expeditiously moved to second reading and passage.
Recall that prior to the rushed break, the Senate had on Wednesday, October 30, 2024, listed the tax reform bills in the Order Paper for first reading, but stood it down along with other items for the screening and confirmation of Amb. Bianca Odinaka Odumegu-Ojukwu and six others as ministers- designate appointed by President Bola Tinubu.

The tax reform bills were however not listed in the Order Paper the following day (Thursday, October 31, 2024) for any legislative action before the legislators embarked on a three-week recess.

Anger, disquiet

Earlier yesterday, anger and shouting matches enveloped the plenary midway as the controversial Tax Reform Bill suddenly came up for debate as it was not before the commencement of plenary stated as one of the items for business of the day.
The session witnessed an intense confrontation as tempers rose over the sudden introduction of the Tax Reform Bill, a move that sparked a shouting match among lawmakers.
Trouble started when the Senate leader, Senator Opeyemi Bamidele (APC, Ekiti Central) came up with a point of order after senators had finished with six items on presentation of bills for first reading and consideration of bills where two debated bills scaled second reading and were referred to relevant committees for further consideration.

Bamidele cited Order 12(1) of the Senate Standing Order as amended to allow the Senate bring in knowledgeable and tax experts into the hallowed chamber to explain to them the tax reform bills that have been introduced by President Tinubu that are presently before the parliament. According to the Senate leader, the section was to allow the Director-General, Budget Office, Tanimu Yakubu; Executive Chairman, Federal Inland Revenue Service, FIRS, Zacch Adedeji; and Chairman, Presidential Committee on Fiscal Policy and Tax Reforms, Mr Taiwo Oyedele, speak to the lawmakers.

The Senate Leader’s submission was corroborated by Senator Jibrin Barau, who approved that the visitors be allowed into the Chamber by the Sergeant-At-Arms.

Ningi, Ndume kick

However, in a swift reaction, former Deputy Senate leader, Abdul Ningi (PDP, Bauchi Central), raised objections, citing Order 12 of the Senate Standing Rules.
Ningi said there was no provision that allows non-Senators to enter the chamber while in session, as the order excluded categories of government officials being invited to enter the chamber for any form of presentation.
Deputy President of the Senate, Barau Jibrin, who presided, ruled Ningi out of order, stating that the experts were invited to allow for open discussion on the matter.

As soon as Ningi took his seat, another loud voice shouting ‘point of order’ was heard. This time, the former Senate Leader, Senator Ali Ndume (APC, Borno South) told Barau that as the presiding officer he had the gavel, but he, Ndume, has his voice.

An angry Ndume drew attention of the chamber to the relevant provision in Senate Rules, arguing that visitors are forbidden to speak to the Chamber if their subject matter was not captured on the Order Paper for legislative debate. Ndume insisted that the matter was too important to be manipulated and the Senate should not in any way play around the Tax Reform Bill as Nigerians had spoken.

He said: “This is a very important matter. We should not in any way try to use the position of the Senate because the Order Paper is clear. I have no problem having them to come to explain whatsoever but we must follow known procedures.
“That is, if today it has to be taken, then there must be a supplementary Order Paper that will reflect this. It is not a matter that you will just come and tell us after we are doing business of the day.

“Mr President, you can have your way, but I will have my say. You can use your gavel and I will use my voice. Tax Reform Bill is very sensitive, our people have been agitated over this matter, When you say it is a matter of urgent national importance, yes, but even those matters are normally referred to another legislative day if there are so inconvenient.

“Please I beg you in the name of God, this matter is very important to not only us but also Nigerians that we represent and we swore by Bible and Holy Quran that we will represent the interest of the people. Nigerians have spoken, the Governors, the National Economic Council.”

To further knock off any point of order on prevention of the economic experts from entering the Senate chambers for presentation on the tax reform bills, the Senate Leader cited order 1(b) which gives the Senate the power through resolution at any sitting, to regulate itself .

We’re within our rules —Barau

Reacting, Senator Barau, who insisted that whatever the Senate was doing was within its rules, said that the “Chamber had no time for rhetoric,” saying: “You have made your point. Now we are not here for rhetoric. We are here for facts.”

At this point the Chamber went rowdy while the Deputy Senate President tried to restore order.
Ndume then responded: “Is it because you are sitting there that you are saying a Senator is speaking in rhetoric, you can rule me out of order.”

Ndume, who was infuriated by the arrangement, cited Order 38 to insist that business of the day in the Senate should be based on items listed on the order paper adding, “Mr President, let us follow the laid-down procedure in our Order Paper before admitting the invited economic experts into the chamber.
“You can have your way and use the gavel but I will have my say by using my voice. The matter at hand is very important and Nigerians are very interested in it.”

Ndume was eventually ruled out of order and the visitors were allowed into the chamber to speak on the proposed Tax Reform Bill.

Experts’ presentation

After the fireworks, the economic experts, one after the other, made presentations on the tax reform bills which considerably changed the mindsets of many of the Senators on them.
In his presentation, Taiwo Oyedele dazzled the senators.

Reform not to tax the poor

Oyedele’s Committee came up with the reform bills. He said the reform was not planned to tax poverty but prosperity and most importantly, to correct lopsided tax gain derivation.

He said : “The committee proposes four major bills aimed at overhauling the tax system. The Nigerian Tax Bill seeks to harmonize major taxes into one legislation, simplifies tax processes, and proposes exemptions for low-income earners
.
“The Tax Administration Bill aims at establishing standards for tax administration, promotes the use of technology, and aims to streamline tax collection.
“Nigerian Revenue Service Establishment Bill proposes the establishment of a new revenue service to improve tax collection and coordination among agencies while the Joint Revenue Board Establishment Bill aims to enhance collaboration among tax authorities and create a Tax Ombudsman to protect small businesses.

“Key proposals of the tax reform bills are elimination of minimum tax for loss-making companies; Introduction of a 15% effective tax rate on profits for large companies; removal of VAT on essential goods and services; and increased tax thresholds for personal income tax to exempt low-income earners.”

VAT revenue sharing

On the contentious revenue sharing formula from VAT, Oyedele explained: “The current VAT sharing formula is deemed unfair, favouring states with major corporate headquarters. The proposal includes a more equitable distribution based on consumption within states as against current sharing formula which lopsidedly favours Lagos State, being host to headquarters of corporate organizations.”

Exempting those earning less than N1m from income tax

According to him, the proposed tax reform bills would exempt any Nigerian not earning above N1million per year from personal income tax .
“Today, we are taxing people that earn N30,000 a month. That’s N1,000 a day. How can anybody survive earning N30,000 a month? Even if they live alone, they will do transport, they will buy food, they will pay rent, they will pay for electricity. They cannot survive. So we are proposing in the bill before you that anybody earning N800,000 naira a year, including an extra N200,000 for rent, about N1 million a year, should not pay personal income tax. By the way, this threshold is not even the highest in Africa. It’s still lower than many small African countries,” he said.

In all, the team told the federal lawmakers that the tax reform bills are four different pieces of legislation that seek to bring everything about taxation and administration of tax in Nigeria under four different pieces of legislation.

The bills are the Nigeria Tax Bill; the Nigeria Tax Administration Bill; the Nigeria Revenue Service Establishment Bill and the Joint Revenue Board Establishment Bill.

They explained that the bills contain all major taxes imposed on individuals and companies and that it is just like a compendium of taxes charged in Nigeria.

They said contrary to what some mischievous persons are pushing out, they are meant to radically transform tax administration in Nigeria for greater efficiency, adding that the bills will update archaic tax laws and simplify Nigeria’s complicated tax ecosystem.

Apart from these, they said the tax reforms clearly favour low income earners and small businesses, which will be exempted from paying income taxes and the bills are simply pro-poor, pro-growth and pro-efficiency.

They, therefore, urged the senators to support its passage in order to move the country forward.

Recall that on September 3, 2024, President Tinubu transmitted four tax reform bills to the National Assembly for consideration, following the recommendations of the Presidential Committee on Fiscal and Tax Reforms headed by Taiwo Oyedele for the review of existing tax laws.

The bills include the Nigeria Tax Bill 2024, which is expected to provide the fiscal framework for taxation in the country, and the Tax Administration Bill, which will provide a clear and concise legal framework for all taxes in the country and reduce disputes.

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

Also recall that the same day, both the Senate and the House of Representatives embarked on the hurried recess, the National Economic Council, NEC,) chaired by Vice President Kashim Shettima, resolved that the tax reform bills should be withdrawn from the National Assembly by President Tinubu for wider consultation.

President Tinubu on October 31, 2024, responded to the request that the bills should be allowed to pass through the required legislative processes at both chambers, which according to him, would give concerned Nigerians the opportunity to get details on the bills and make their inputs, particularly at the stage of Public hearing.