The House of Representatives has approved a new tax reform bill that introduces several exemptions and changes aimed at reshaping Nigeria’s tax system. Once implemented, the bill will exempt military personnel, pension funds, religious organizations, profit-oriented schools, trade unions, and cooperative societies from paying taxes.
Additionally, the Tertiary Education Trust Fund (TETFund) will receive 50% of revenues generated from the development levy included in the newly passed legislation.
How the Bill Was Passed
The bill’s approval followed extensive deliberations, including a three-day public hearing and an eight-day retreat. The House’s Special Ad-hoc Committee on Finance played a crucial role in finalizing the recommendations. With the House now completing its review, the Senate is expected to deliberate on its version of the bill soon. The House is also set to conduct a third reading and final passage during its next plenary session.
Speaker’s Role in Securing Support
Speaker Abbas Tajudeen played a strategic role in ensuring the smooth passage of the bill. He encouraged lawmakers to consult their constituents and held multiple meetings to unify opinions before the bill’s second reading.
A source from the House leadership stated, “The Speaker actively engaged with lawmakers and the public to highlight the benefits of these reforms, ensuring widespread support before final deliberations.”
Key Provisions of the Tax Reform Bill
- Tax Exemptions: Military personnel, pension funds, religious bodies, and cooperative societies will no longer be required to pay taxes on their income.
- Tax Identification Numbers (TINs): Every taxable person and company will be issued a Tax ID. If a tax authority refuses to provide one, it must give a valid reason within five working days.
- Self-Assessment Tax Returns: All companies, including those with tax exemptions, must file a tax return at least once a year.
- VAT Returns: Businesses must submit Value Added Tax (VAT) returns every month, regardless of whether they conducted economic activities.
- Penalties for Non-Compliance:
- Failure to process a taxable supply through the fiscal system will attract a penalty of ₦200,000 plus 100% of the tax due.
- Companies failing to remit collected tax will face fines or imprisonment of up to three years.
- Non-payment of mineral royalties within 30 days will result in a 10% penalty and additional interest charges.
- Transparency in Financial Reporting: Banks, insurance firms, and stockbroking companies must submit reports of financial transactions exceeding ₦50 million (for individuals) or ₦250 million (for corporations) to the tax authorities.
- Presidential Exemptions: The President has the power to exempt companies from income tax, but such exemptions must be published in the official Gazette with justifiable reasons.
- Deductions from Government Agencies: Any unremitted revenue from Ministries, Departments, or Agencies (MDAs) will be deducted from their budgetary allocations.
- Taxation on Large Transactions: Any transaction exceeding ₦50 million (for individuals) or ₦250 million (for corporations) must be reported to the tax authorities.
- Introduction of National Single Window Portal: This platform will simplify tax payments, import/export processes, and revenue collection.
Reactions to the Bill
During the public hearing, some stakeholders called for the abolition of the development levy. However, the Committee recommended retaining it at 4% of assessable profits for companies, excluding small businesses and non-resident companies. The revenue from this levy will be distributed among various sectors, including education, defense, and social security.
Chairman of the House Committee on Finance, James Abiodun Faleke, emphasized, “These reforms aim to strengthen revenue generation while preventing unnecessary tax waivers and loopholes.”
With these sweeping changes, the tax reform bill is set to revolutionize Nigeria’s tax system, ensuring better compliance, increased revenue generation, and financial stability for the government.
