Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, said that the Committee has explained that the idea of increasing the derivation in the Tax Reform Bill currently before the National Assembly was to give all states equal and fair opportunity and not to give any state any advantage.
He explained that the bills were not aimed to undermine any region of the country, adding that the current VAT policy requires all companies to pay VAT from their headquarters which he said confer undue advantage on some states.
consulted the Nigeria Governors Forum, the Nigeria Economic Council, Civil Society Organizations, and a wide range of Nigerians before arriving at tax reform bills currently before the National Assembly.
Oyedele, who spoke at an interactive session on the tax reform bill organised by the House of Representatives, also said the Presidential Committee interfaces with all shades of Nigerians, adding that the committee received submissions from all the 36 states of the Federation and the Federal Capital.
Speaking specifically on the payment and sharing of VAT resources, he explained that currently, under Section 40 of the current VAT Act law, VAT revenue is allocated 15 percent to the Federal Government, 50 percent to the States and FCT, and 35 percent to Local Governments
He said: “The current law requires that MTN makes its VAT return from its head office in Lagos. But what we are proposing is that such a return should be made based on the location where the calls were made. That will allow smooth computation of the derivation.
“Our budget is small. What is even smaller is our revenue. The entire revenue that was generated in 2023 is about N17.5tn which is less than $20bn. What that means is that our small budget is financed by borrowing because we cannot even raise enough money to finance a small budget.
“The truth is that the 36 states and FCT collected N1.6tn as personal income tax in 2023, while South Africa collected about N50.5tn equivalent of personal income tax that same year. What South Africa collected as personal income tax in one year alone is more than our entire revenue multiplied by two.
“Even Kenya which is a small country compared to Nigeria generated N5.8tn in personal income tax alone, which is almost four times what Nigeria collected, yet our population is four times the size of their population.
“In 2023, Nigeria collected N3.2tn from Customs. In that same year, Kenya collected N8.9tn. If you look at the value of what we import and what Kenya imports, they imported $23bn worth of imports, while Nigeria imported $66bn worth of imports.”
He said Nigeria’s tax system lacks structure, with an obsolete laws that needed to be amended.
“The tax system lacks proper structure. We have obsolete laws which we are still amending. We have laws, but we are not respecting the laws.
“We have about 60 official tax laws which we have approved in Nigeria as a country. What other countries have approved is less than 10. The solution to our problems can never be to keep introducing new taxes. Rather, it is to get rid of the multiple taxes and maximise collection. As high as the number is, the unofficial ones are even more,” he added.