The Nigerian Senate just recently approved the harmonized versions of four significant tax reform bills, marking a pivotal advancement in President Bola Tinubu’s economic reform agenda. These bills, initially presented to the National Assembly in November 2024, aim to modernize Nigeria’s tax system, enhance revenue generation, and improve fiscal efficiency.
A central feature of the reforms is the retention of the Value Added Tax (VAT) rate at 7.5%, contrary to earlier proposals to increase it to 12.5%. The revenue allocation formula was adjusted to grant the federal government 10%, states 55%, and local governments 35% of VAT proceeds.
The bills propose the creation of the Nigeria Revenue Service (NRS), replacing the Federal Inland Revenue Service (FIRS), and the Joint Revenue Board. These institutions are designed to streamline tax collection and administration across federal and state levels.
A new development levy is introduced to replace multiple existing levies, aiming to reduce administrative burdens and consolidate revenue collection efforts. This levy will fund the newly established student loan scheme, benefiting many Nigerian youths.
The reforms establish a Tax Appeal Tribunal to handle disputes and an Office of the Tax Ombud to address taxpayer grievances, promoting transparency and accountability in the tax system.
The legislative process involved reconciling differences between the versions passed by the Senate and the House of Representatives. Senator Mohammed Sani Musa, Chairman of the Senate Committee on Finance, presented the harmonized report, which was subsequently adopted by the Senate. With the Senate’s approval, the harmonized bills have been forwarded to President Tinubu for assent. Once signed into law, these reforms are expected to commence within 90 days.
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