what is President Tinubu,s Tax Reform Bill about?

President Bola Ahmed Tinubu’s tax reform bill is part of a broader initiative to overhaul Nigeria’s outdated and fragmented tax system. The reforms are rooted in the recommendations of the Presidential Committee on Fiscal Policy and Tax Reforms, chaired by tax expert Taiwo Oyedele. The primary goals of the bill are to simplify the tax structure, improve revenue generation, reduce the tax burden on businesses, and boost economic growth.

Key Objectives of Tinubu’s Tax Reform Bill:

1. Simplification of Nigeria’s Tax System

   • The current tax system is seen as too complex, with overlapping taxes at federal, state, and local levels.

   • The reform aims to streamline and harmonize taxes to make them easier to understand, comply with, and enforce.

2. Elimination of Multiple Taxation

   • Many businesses, especially small and medium enterprises (SMEs), suffer from multiple taxes imposed by various authorities.

   • The bill seeks to curb duplication and harassment by unifying tax collection and clarifying the roles of each level of government.

3. Boost in Government Revenue Without Overburdening Citizens

   • Instead of raising tax rates, the goal is to increase compliance and broaden the tax base (i.e., get more people and businesses to pay taxes).

4. Digitization and Automation of Tax Processes

   • Introduces modern digital platforms for registration, filing, and payment, reducing manual bottlenecks and corruption.

5. Support for Businesses and Investment

   • The bill includes incentives for key sectors such as agriculture, manufacturing, tech startups, and export-driven businesses.

   • This is aimed at improving Nigeria’s business climate and attracting foreign direct investment (FDI).

6. Establishment of a Unified National Tax Code

   • A new legal framework is being created to consolidate tax laws and align them with international best practices.

7. State and Local Government Engagement

   • Encourages state governments to improve efficiency and reduce reliance on federal allocations through better local tax administration.

8. Focus on Equity and Fairness

   • The reform seeks to ensure that high-income earners and large corporations contribute more, while low-income earners are protected.

Specific Areas Likely Covered in the Bill:

• Amendment of existing tax laws (like VAT Act, Personal Income Tax Act, Companies Income Tax Act).

• Creation of a Tax Reform Implementation Council.

• Revised penalties for tax evasion and fraudulent reporting.

• Removal of redundant or “nuisance” taxes (e.g., levies with little revenue benefit but high compliance costs).

In Summary:

Tinubu’s tax reform bill is designed to create a simpler, fairer, and more efficient tax system that promotes economic growth, encourages compliance, and strengthens Nigeria’s fiscal foundation. It reflects a shift from oil dependence toward a sustainable, non-oil revenue model.

See a breakdown of how this reform could impact ordinary Nigerians or business owners

1. VAT Act (Value Added Tax Act)

What it is:
This law governs the collection of Value Added Tax (VAT)—a consumption tax paid on goods and services at every point of sale.

Who pays:
Consumers (you and me), but businesses collect it on behalf of the government.

Key points:

• Current rate: 7.5% (as of 2020).

• Charged on goods/services except those exempted (e.g., basic food items, education, healthcare).

• Collected by the Federal Inland Revenue Service (FIRS).

• Businesses with turnover above ₦25 million must register and remit VAT monthly.

Example:
When you buy a product worth ₦10,000, you may pay ₦10,750 (₦750 is VAT). The seller remits that ₦750 to FIRS.

2. Personal Income Tax Act (PITA)

What it is:
This law regulates the taxation of individuals’ income in Nigeria.

Who pays:
All individuals (residents) who earn income, including employees, sole proprietors, freelancers, and landlords.

Key points:

• Taxed on wages, salaries, rent, dividends, business income, etc.

• Progressive rates from 7% to 24%, depending on income level.

• Administered by state tax authorities (e.g., LIRS in Lagos, RIRS in Rivers).

• Employers must deduct and remit PAYE (Pay-As-You-Earn) monthly.

Example:
If you earn ₦3 million annually, you’ll pay a percentage based on Nigeria’s tax brackets—more income, higher tax.

3. Companies Income Tax Act (CITA)

What it is:
This law governs taxation on profits made by companies in Nigeria (not individuals).

Who pays:
Registered companies (except those in the oil & gas upstream sector, which are taxed under a different act).

Key points:

• Rate:

  • 30% for large companies (₦100m+ annual turnover),

  • 20% for medium companies (₦25m–₦100m),

  • 0% for small companies (below ₦25m turnover).

• Filed annually with the FIRS.

• Penalties for late filing or non-payment.

• Allows deductions for business expenses, depreciation, and donations (within limits).

Example:
If a company makes ₦150 million profit, it pays ₦45 million as company income tax (30%).

Summary Table: