Reps pass amended knotty tax bills, retain 7.5% VAT
• Tinubu’s tax reform awaits Senate’s concurrence
• Labour, civil society groups reject proposal
After a groundswell of opposition, the House of Representatives yesterday approved significant amendments to the four tax reform bills sent to it for consideration in October last year by President Bola Tinubu as his administration seeks to overhaul the country’s tax system.
Despite some considerable watering down to the initial bill, labour groups and their civil society allies have rejected aspects of the bills, saying most of the sections of the bills will further impoverish the Nigerian people. The bills are the Nigeria Tax Bill, Nigeria Tax Administration Bill, Nigeria Revenue Service Establishment Bill and Joint Revenue Board Establishment Bill.
Nigeria, Africa’s most populous country, has one of the world’s lowest tax-to-GDP ratios, at 10.8 per cent, forcing the government to rely on borrowing to fund the budget. After ending costly energy subsidies and twice devaluing the naira in his first year in office, President Tinubu shifted his focus to reforming the tax system to boost revenue and efficiency.
The new tax system seeks to raise value-added tax (VAT) to 12.5 per cent by 2026, streamline tax collection, and overhaul revenue-sharing between federal and state governments. However, the lawmakers retained VAT at 7.5%, rejecting the original proposal, and excluded minimum wage earners from income tax to ease the tax burden on lower-income earners.
The amendments approved by the lower chamber at the plenary session on Thursday presided over by Speaker, Abbas Tajudeen, addressed contentious issues such as inheritance tax, VAT distribution formula and also the clause on continuous funding of TETFUND, NASENI and NITDA from the development levies fund.
This was after a clause-to-clause consideration of the bills as presented by the Chairman of the Committee on Finance, James Abiodun Faleke. Key among the clauses considered and adopted include a VAT distribution formula based on 50 per cent equality; 20 per cent population and 30 per cent consumption as earlier proposed by the Nigerian Governors’ Forum (NGF).
Section 77 of the Nigeria Tax Administration Bill as amended says: “Notwithstanding any formula that may be prescribed by any other law, the net revenue accruing by the operation of Chapter Six of the Nigeria Tax Act shall be distributed as follows:
(a) 10 per cent to the Federal Government;
(b) 55 per cent to the State Governments and the Federal Capital Territory and (c) 35 per cent to the local governments.
“The amount of the VAT revenue standing to the credit of states and local governments shall be distributed among them on the following basis: Equally – 50 per cent, Population – 20 per cent and Consumption – 30 per cent.”
“For this section, consumption is determined by the place of consumption, irrespective of where the return is filed.” The House rejected the proposal for incremental review of VAT rates and approved that the current 7.5 per cent VAT rate be sustained. This was one of the most debated issues during the public hearing where there was a proposed increase in VAT from 7.5 per cent to 15 per cent by 2030.
The House also deleted the use of the controversial word, “ecclesiastical” from one of the clauses and replaced it with “religious”. The lawmakers further imposed stiff penalties, including a N2 million fine and a maximum three-year jail term for individuals or corporate entities found guilty of attempting to bribe or unduly influence tax officials.
Another key amendment to the bills sent by the President was the restriction placed on the President’s and Governors’ powers to grant tax waivers. The House approved that any such exemptions must now be approved by the National Assembly or State Houses of Assembly.
Similarly, the Accountant-General of the Federation must now seek legislative approval before deducting unremitted revenue from government agencies according to the approved legislation.
Recall that concerns had arisen regarding the potential reintroduction of inheritance tax. The lawmakers have however removed provisions that could have been interpreted as introducing an inheritance tax, clarifying that income from inherited assets before distribution will not be taxed.
Section 4 of the Nigeria Tax Bill, 2025 was amended to read: “Income of a family recognised under any law or custom in Nigeria as family income in which the several interests of individual members of the family cannot be separately determined, excluding income on inherited assets before distribution.”
The House also approved the exemption of military salaries from income tax, saying this is to acknowledge the sacrifices by the military personnel. The Green Chamber okayed the recommendation that agencies such as TETFUND, NITDA, and NASENI continue to receive funding, extending the benefits of the four per cent development levy fund to additional agencies.
For military personnel income, section 164 of the Nigeria Tax Bill read: “Emoluments of any person serving as other rank and other personnel serving in combat zones, hazardous areas or in designated operations, provided that where any other income accrues to the person, not being income by way of personal emoluments, that income shall be liable to tax.”
Furthermore, according to the approved bill, Banks are now required to report transactions above N50m for individuals and N250m for companies. On the Nigeria Revenue Service (Establishment) Bill which seeks to replace the Federal Inland Revenue Service (FIRS), among the approved recommendations is the expansion of the NRS Governing Board with six executive directors representing the geopolitical zones and one representative from each of the 36 states and the FCT to ensure federal character.
The House also ruled that the NRS must obtain a court order before seizing taxpayers’ assets. On the Nigeria Tax Administration Bill, the House approved stricter tax compliance measures, but with provisions that ease the burden on small businesses.
The lawmakers approved the extension of the timeframe for issuing Taxpayer Identification Numbers (TINs) from two to five working days. On the contentious issue of technology-driven tax collection, the House the introduction of real-time VAT reporting, which will require businesses to file their tax returns instantly where the necessary technology is available.
According to the newly amended Section 22 of the Nigeria Tax Administration Bill, taxable businesses must comply with digital VAT filing regulations:
“Where technology is deployed by the Service, a taxable person shall render returns in real-time or at such other time as the Service may prescribe”, it said. Under Section 23 of the same bill, businesses will now be legally required to adopt the EFS for automated tax recording and submission:
“Where the Service deploys an Electronic Fiscal System (EFS), any person making a taxable supply shall use the EFS for recording and reporting all supplies.”
Furthermore, according to the passed legislation, The Joint Revenue Board (Establishment) Bill amended by the House allowed a restructuring of the Tax Appeal Tribunal (TAT), which will now receive direct funding from the Consolidated Revenue Fund.
Also, if assented to by the President, companies winding down their operations will now have three months to file their final tax returns, down from the previous six-month requirement. On the VAT distribution system, the lawmakers ruled that tax revenues should be allocated based on actual consumption location, rather than company headquarters.
The House also introduced a controversial provision requiring taxpayers to provide passwords and access codes for electronically stored financial records, citing the increasing digitization of tax filings and the need for effective auditing.
In the approved legislation, the House granted a five-year tax reduction of 25 per cent for companies operating in priority sectors, including agriculture, manufacturing, and renewable energy. For the oil and gas sector, solid mineral royalties will increase from 3%-5% to 7.5%-10%, while petroleum companies’ tax exemptions are revised.
With consideration and adoption, the bills are now set to be passed for third reading at the next legislative day. Chairman of the House of Representatives Committee on Finance, Rep. James Faleke (APC-Lagos) assured that the amended tax laws will be acceptable to all Nigerians. Faleke gave the assurance in an interview with newsmen on Thursday after the House considered and adopted the report on the four tax reform bills in Abuja.
“These bills took three full days of the public hearing, we took memoranda from more than 80 critical stakeholders and after the three days, we resorted to a retreat for eight days, debating all the clauses for each of the bills. I am glad that members of the house saw that we had done a thorough job and they have approved all our recommendations.
“We want to appreciate our members and all Nigerians who showed interest in these bills and we assure that the laws that will come after these bills are acceptable by all Nigerians,’ he said. Faleke appreciated the leadership of the house for entrusting the committee with the responsibility of processing the tax bills and laying them before the House.He also commended President Bola Tinubu for considering it worthy to amend tax laws saying that some of our tax laws are as old as 1959.
According to the lawmakers, we cannot continue to operate with those tax laws that are archaic to meet our demands for survival, business and the revenue target that we seek to achieve.
The Deputy Chairman of the committee, Rep. Saidu Abdullahi (APC-Niger) said that no bill in the 10th Assembly had generated such controversies as the tax reforms bills.He said that the house, under the leadership of Speaker Tajudeen Abbas, was able to build consensus among all the stakeholders.
Abdullahi said that interest groups from each geo-political zone and regional thought leaders were drafted into the committee which allayed the fears of the people.He said that the recommendations of the committee were an offshoot of all the inputs of the various stakeholders.
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There were never seen as a perfect document, there were proposals from the Executive and the public hearing provided Nigerians the platform to make the better and from what we have seen today, the whole country represented by the lawmakers have assented to it,’’ he said.
In the meantime, trade unions and civil society organisations have strongly opposed key provisions in the proposed Nigerian Tax Bill 2024, including the scrapping of the Tertiary Education Trust Fund (TETFUND) and a gradual increase in Value Added Tax (VAT) from 7.5 per cent to 15 per cent.
At a symposium organized by the Campaign for Democratic and Workers Rights (CDWR) in Lagos, labour representatives and activists voiced concerns that these proposals would further weaken Nigeria’s education system and worsen the country’s economic crisis. The event also marked the launch of a CDWR pamphlet titled: “Tinubu’s Tax Reform Will Compound the Economic Crises; CDWR Demands a Progressive Tax System.”
The symposium had the trade unions represented; which include the Academic Staff Union of Universities (ASUU), Association of Senior Staff of Banks, Insurance and Financial Institutions Employees (ASBIFIE), Cab Operators Union, Lagos State Council of Amalgamated Union of Public Corporation, Civil Service Technical and Recreational Services Employees (AUPCTRE), Lagos State Council of National Association of Nigeria Nurses and Midwives (NANNM), Precision Electrical and Related Equipment Senior Staff Association (PERESSA), National Union of Food Beverage and Tobacco Employees (NUFBTE) and Lagos State Welders Association.
There were also representatives of the Lagos State Councils of both the Nigeria Labour Congress (NLC) and Trade Union Congress (TUC). The pro-labour organisations and civil society organisations in attendance are the Democratic Socialist Movement (DSM), Centre for Popular Education (CEPED), MEKUNU-KOYA, Joint Action Front (JAF), ACTIVISTA, Movement for African Emancipation (MAE), Socialist Party and Socialist Vanguard Tendency (SVT).
Union leaders and activists warned that abolishing TETFUND, as proposed in Section 59 of the Tax Bill, would severely impact tertiary education, which is already underfunded. They called for increased government spending on education, including intervention funds, rather than eliminating vital funding agencies.
Similarly, the proposed VAT hike in Section 146 was described as a move that would exacerbate Nigeria’s cost-of-living crisis, increase poverty, and disproportionately affect low-income earners.
Participants also demanded union representation on the boards of tax-related agencies to ensure transparency and accountability in fund management. A tax expert, Mr Lanre Akinola, highlighted that Section 77 of the Nigerian Tax Administration Bill could worsen economic disparities among states, further weakening financially struggling regions.
“The ruling elite is obsessed with imposing taxes and levies on ordinary Nigerians, yet they fail to invest in the people through social programs, infrastructure, and productive economic activities that generate decent jobs,” Akinola stated .
Additionally, activists criticised ongoing government policies including increases in electricity tariffs, fuel prices, and currency devaluation, arguing that these measures have led to skyrocketing inflation and worsening poverty. They called for an immediate reversal of these anti-poor policies.
CDWR also opposed the proposed reduction in corporate tax rates, as outlined in Section 56 of the bill. The bill seeks to lower corporate tax from 30 per cent to 27.5 per cent in 2025 and to 25 per cent by 2026.
