Open letter to the President Tinubu on tax reform bills

Open letter to the President on tax reform bills:: Need for Oyedele-led committee to hold sessions in key Northern locations

Your Excellency, there is no iota of doubt that the Tax Reform Bills that could be aptly christened as BILL OF THE YEAR 2024, has generated unexpected and unprecedented interests from key stakeholders across the country, with particular reference to the leaders of thoughts, political class, traditional rulers, socio-cultural groups, of northern descent who have all ferociously expressed their animosity and grievances towards the bill.

Sir, it’s already in public domain that the key stakeholders in the north have voiced concerns over the bill’s socio-economic impact on the entire northern region, already struggling with economic challenges, high poverty rates, and security challenges, deprivation and hunger.

At the heart of the opposition is their strong belief that the proposed tax reforms would disproportionately burden and challenge northern states, further widening the gulf between Nigeria’s wealthier, sufficiently endowed & prosperous South, and it’s economically fragile and very disadvantaged North.

Even though, spirited efforts have been made by the leadership of Presidential Tax Committee, and even, the Executive Chairman, FIRS, as well as other tax practitioners to convince them otherwise, including the explanations rendered by leadership of national assembly, the northern stakeholders have continue to stoically maintain their stand.

And, regrettably, all the states in the region and their caucuses at the national assembly, and most unfortunate, their governors, irrespective of PARTY AFFLIATIONS have remained resolute in their demands that the bill should be withdrawn, a development that has temporarily halted the deliberation of the bill at the plenary sessions both in the Upper and Lower Chambers of the national assembly.     

Your Excellency, must the country therefore sacrifice this fiscally transformational & beneficial, very progressive, potentially prosperous and rewarding, as well as economically-changing bill on the altar of northern vehement opposition?  If we do, future generations will never forgive the present administration for cheapening out.

On the other hand, the north is a major and critical political force that no government would afford to toil with. Any government playing around with them would do so at its own peril. Where do we start from?

Is it their population that has been given them cutting-edge at each electoral cycle over decades? Is it the level of their political wizardry and sophistication? And, more importantly, is it their uncommon and unusual solidarity that they always deploy to stand by any interest that concerns the region, irrespective of political, religious and ideological belief?

Not even Your Excellency, with awesome, fearsome, as well as impressive political antecedents and knowledge of the strength & clout of each region and their capacity and wherewithal to achieve!   

Your Excellency, the centerpiece of their grouse and opposition to the bill remains: 

• That the bill is antithetical to Islamic Injunctions, as the Tax Reform Act is aimed at effecting CHARGE ON INHERITANCE when it becomes operational. Inheritance is one subject every northern holds dearly. But, their view that Bill is aimed at effecting charge on Inheritance is quite a misconception and misinterpretation of what the Bill is purposed to achieve.  

• That, the contents of the bill are against the interests of the North and other sub-nationals, especially the proposed amendment to the distribution of Value Added Tax (VAT) to Derivation-based Model, which indicates that the states receiving VAT collections will be retaining significant proportion of the revenues, a model that they feared, would have significant negative effect on the entire northern economy and her people, as according to them, the model will disproportionately benefits states where corporate organizations have their corporate head offices, rather than where the goods and services are been consumed.   
• That the proposed new tax legislation seeks to provide Value Added Tax (VAT) exemptions to oil and gas exports, crude petroleum oil and feed gas for all processed gas, as well as goods purchased for use in humanitarian donor-funded projects.
• They also asserted that the president created distrust among northerners by allegedly excluding their kinsmen from his economic and tax teams.
•  While not attempting to oppose the policies or programs that aimed at fostering national growth & development, Northern Governors’ Forum calls for equity and fairness in implementing all national policies and programs to ensure that no geopolitical zone is short-changed or marginalized.

Your Excellency, while the Upper Chamber are in process of engaging Minister of Justice & AGF in interactive session aimed at clearing all the doubts with respect to the grey areas of the bill, and Lower Chamber has also temporarily suspended plenary sessions on it, with a view to allowing for wider consultation, the Oyedele Committee should be mandated to deploy this windows of about two/three weeks to hold sessions at key northern locations-Kano, Kaduna, Bauchi, Maiduguri and even Katsina, as well as Jos with a view to bring all the stakeholders on the same page with aims & objectives of the government as far as bill is concerned.

The areas of focus by the Presidential Tax Committee should be:

• Comprehensive clarification to the northerners that the bill has nothing whatsoever to do with the inheritance tax and that the Chapter 2, part 1 section 4, Sub section 3 of the National Tax Bill that the northern scholars are making reference to, are been referenced in error.

• Another portion of the bill that the committee is expected to provide illumination, is the segment that declares an equitable basis for VAT revenue sharing to ensure that states without many headquarter companies are fairly treated and rewarded for their economic contributions.

Oyedele committee should be able to sufficiently bring it to the notice of its audience that the existing VAT revenue sharing arrangement largely favour Lagos and Rivers as the two states housed many of company’s headquarters, and that the proposed arrangement by the new Tax Reform Bill that seeks revenue sharing by consumption would surely favour some of the states in the north on account of their high consumption level consequent upon the huge population in the region.

For instance on the basis of Nigerian Bureau of Statistics for MTN in the 1st Quarter of 2023, Lagos, Ogun, Kano, Kaduna, Oyo, Delta, Osun, Edo had 26.8 million, 13.5 million, 12.4 million, 7.3 million, 6.2 million, 6.8 million, 5.4 million and 6.5 million of subscribers respectively. 

The committee should be able to emphasize in the proposed tax reform, each state will be henceforth be credited with the portion of VAT that accrued in that state on the basis of the subscribers usage of the network, unlike in the existing arrangement that Lagos is paid the whole VAT proceeds because the headquarters of MTN situates in Lagos.   Technically, what this suggests is that VAT collected from 12.4 million and 7.3 million subscribers will automatically accrue to Kano and Kaduna states respectively.

• And of course, how on earth the North not excited with the Tax Reform Bill that seeks to exempt from PAYE (Pay As You Earn) for minimum wage earners and reduced tax burden for over 90% of all workers in the private and public sectors, when about 75% of northern population of 140 million people that presently ravaged by poverty, deprivation, hunger and continually being harassed by insecurity are firmly in this group? This is strongest point that Oyedele committee is expected to dwell on, in its interaction at those northern key locations in the north.

There are other commendable initiatives seek to be achieved by the Tax Reform Bill that the committee is expected stress in its interaction with the north as follows:     

There is Tax exemptions for small businesses with annual turnover of N50 million or less, including withholding tax, value added tax, and 0% corporate income tax rate.

There is VAT at 0% for food, education, healthcare, and exemption for rent, public transportation, fuel products and renewable energy. These items constitute an average of 82% of household consumption and nearly 100% for low income households to ameliorate the rising cost of living for the masses.

The Bill also seek changes to the income tax laws to facilitate remote work opportunities for Nigerians in Nigeria within the global business process outsourcing. This will empower teeming northern youths and other youths across the country to play a key role in the digital economy space.

The bill seeks for reduction of corporate income tax rate from 30% to 25% over the next 2 years and elimination of earmarked taxes on companies to be replaced with a harmonized single levy at a reduced rate.

The Tax Reform Bill equally purposed to eliminate minimum tax on loss-making companies and those with low profit margins. Presently, quite a number of companies in the north and across are in this category consequent of very tough business operational environment. Will this not excite the north?  

Innovative idea in the bill includes Grant of input VAT credit to businesses on assets and services to improve investment competitiveness and reduce the cost of goods and services.

Finally, this writer sincerely commend Your Excellency for allowing the veritable platform for all stakeholders to ventilate their views, anger and misgiving on the Bill.

But, there is need to deploy all resources and explore windows of opportunities to reach to the north right there in their domains, with a view to bringing them onto the same pedestal with other stakeholders, as far as the bill is concerned.  

Your Excellency, it’s then we can see Halleluyah and Hossanah!.

Ibere ki i se onise, a feni to ba fi ori ti I de opin!

Kola AMZAT (FCA, FCIB)

Lagos based Financial & Management Consultants,

09077509348.