Tax reform bills propose new sharing formula, states to take 55%

The Senate on Thursday resumed the debate on the Tax Reform Bills.

The bills are a set of four legislative proposals to increase Value-Added Tax (VAT) distributable to state governments to 55 percent while reducing the federal government’s share to 10 percent.

These far-reaching initiatives were contained in the lead debate on the Tax Reforms Bills by the Senate Leader, Opeyemi Bamidele, at the plenary in Abuja.

Bamidele said the new legislative regimes also proposed zero VAT on exports and essential consumptions by the masses.

He reeled out far-reaching proposals contained in the bills.

According to him, the proposals aim at simplifying the tax landscape, reducing the burden on small businesses, and streamlining how taxes are collected.

On tax exemptions, the Senate leader pointed out that those whose salaries are not more than the minimum wage from Pay As You Earn (PAYE) deductions would be exempted from the tax regime.

He added that small businesses with an annual turnover of N50 million or less are equally exempted from payment of taxes to encourage job creation, deepen ease of doing business, and stimulate more investments.

Bamidele explained that there was a proposed huge reduction in company income tax from the current 30 percent to 25 percent that would last at least two years.

He said: “As part of a deliberate attempt to curtail the incidence of double taxation and multiplicity of taxes and levies.

“And multiple taxes hitherto paid by companies under various tax heads namely, 2.5 percent education tax, 0.25 percent NASENI tax have been harmonised.

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“They have been harmonised into a development level of 2 percent which by 2030, will be applied to fund the newly established student loan scheme which will benefit many Nigerian youths.

“Unlike what is obtainable under the existing tax regime whereby the Federal Government takes a lion’s share of VAT revenues…

“It is proposed that the sharing formula should allow the state government to share 55 percent of VAT revenue from the current 15 percent to 10 percent sharing formula.

“However, Local Governments’ share of VAT revenue remains unaffected. Relatedly, basic items consumed by Nigerian households such as food items, medical services and pharmaceuticals, educational fees, electricity, etc. are exempted from VAT.”

In his contribution, former Senate Chief Whip, Ali Ndume, claimed that his problem with the bills was about timing and the issue of derivation.

He added that the 1999 Constitution must be amended before the Tax Reform Bills should take effect and called for its immediate withdrawal.

Ndume said: “I am not against the reform, my problem is timing and the issue of derivation makes the reform contagious. The 1999 Constitution has to be amended before the bills can be effective.”

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