Senate Passes Two Tax Reform Bills

The Nigerian Senate has passed four key tax reform bills aimed at overhauling the nation’s taxation system. These bills, presented by President Bola Tinubu, were approved after a closed-door session and are now set to proceed to the House of Representatives for further consideration.

Key Provisions of the Tax Reform Bills

1. Nigeria Tax Bill 2024: This bill seeks to harmonize major taxes into a single legislative framework, simplify the tax process, and propose exemptions for low-income earners. 
2. Tax Administration Bill: Aims to establish standards for tax administration, promote the use of technology, and streamline tax collection processes. 
3. Nigeria Revenue Service Establishment Bill: Proposes the creation of a new revenue service to improve tax collection and coordination among agencies. 
4. Joint Revenue Board Establishment Bill: Intends to enhance collaboration among tax authorities and establish a Tax Ombudsman to protect small businesses. 

Notable Proposals

1. Corporate Tax Reduction: The bills propose reducing the corporate tax rate from 30% to 25% by 2026, aiming to encourage business growth. 
2. VAT Revenue Sharing: The proposed reform seeks to increase the states’ share of Value Added Tax (VAT) revenue from 15% to 55%, while the federal government’s share would decrease to 10%. 
3. Tax Exemptions for Low-Income Earners: Individuals earning no more than the minimum wage would be exempt from Pay As You Earn (PAYE) deductions. 
4. Simplification of Development Levies: Multiple taxes previously paid by companies, such as the education tax and NASENI tax, would be harmonized into a single development levy of 2%.
   

Legislative Process

Following the Senate’s approval, the bills are now awaiting consideration in the House of Representatives. The House had previously passed the bills after a third reading, and they now await concurrence from the Senate .

The passage of these bills marks a significant step in Nigeria’s efforts to reform its tax system, aiming to enhance revenue generation, simplify compliance, and support business growth.