The Senior Special Assistant to the Presidency on Media and Publicity, Temitope Ajayi, addressed ongoing concerns over the controversial Tax Reform Bills on Wednesday, stressing their potential to significantly boost the financial autonomy and economic power of state governments.
This followed President Bola Tinubu’s directive to the National Assembly and the Ministry of Justice to address criticisms surrounding the bills, which have faced opposition, especially from northern governors.
Ajayi acknowledged the criticisms, including claims that the bills could disadvantage certain regions, particularly the north, and place additional burdens on Nigerian citizens. However, he argued that these concerns were often rooted in a misunderstanding of the bills’ objectives and provisions.
He emphasized that the government was open to refining the legislation and working collaboratively with the National Assembly and the Ministry of Justice to resolve legitimate concerns.
Reaffirming the government’s commitment to the reform process, Ajayi outlined ten key ways the Tax Reform Bills are designed to empower state governments and boost their wealth:
- Increased VAT Revenue: States will receive a 5% share of the federal government’s current 15% VAT allocation, directly increasing their revenue.
- Exclusive Income from E-Money Transfer Levy: States will gain exclusive control over the revenue generated from the Electronic Money Transfer levy, providing a new and stable source of income.
- Updated Stamp Duty Laws: The repeal of outdated stamp duty laws will introduce a simplified and more effective framework, increasing state revenues through better compliance and enforcement.
- Taxation of Limited Liability Partnerships: New provisions will allow states to tax Limited Liability Partnerships, expanding the tax base and enhancing state revenue generation.
- Bond Tax Exemptions: State government bonds will enjoy tax exemptions similar to those afforded to federal government bonds, fostering state-level investment.
- Fairer VAT Distribution: The reform introduces a more equitable VAT distribution model, ensuring that states receive a larger and fairer share of VAT revenue based on their economic contributions.
- Integrated Tax Administration: The reforms will provide states with improved tax intelligence, capacity-building programs, and expanded coverage for the Tax Appeal Tribunal, enhancing tax administration at the state level.
- Automatic Tax Deductions: A system will be implemented where the Accountant General will automatically deduct unremitted taxes from accounts and remit them directly to the states, ensuring more efficient revenue collection.
- Autonomy for State Revenue Services: The reforms will promote fiscal federalism by giving state revenue services more autonomy, empowering them to manage their tax systems more effectively.
- Taxation of Lottery and Gaming: A new legal framework will allow states to effectively tax lottery and gaming activities, creating another significant source of state revenue.
Ajayi stressed that these reforms are part of a broader strategy to streamline Nigeria’s tax system, promote economic growth, and reduce dependency on federal allocations. He pointed out that while the reforms will provide states with more financial resources, the challenge will lie in the ability of state governments to harness these opportunities through investments in infrastructure, manpower, and governance.
Minister of Information Mohammed Idris also reiterated the government’s willingness to incorporate meaningful input during the legislative process to ensure that the reforms benefit all Nigerians and contribute to the nation’s long-term economic stability.
Ajayi concluded that the ultimate goal of the tax reforms is to encourage states to become self-sustaining economic hubs, reducing the centralization of power and revenue, and fostering a more balanced and prosperous federation.