Nigeria’s Proposed Tax Reforms: Balancing Revenue Generation and Stakeholder Concerns

ADVANCING CUSTOMER-CENTRIC PERSPECTIVES ON THE PROPOSED TAX REFORMS BILLS : Insights from the Special Adviser to the Executive Chairman of the Federal Inland Revenue Service (FIRS) on Customer Centricity, YeyeOba Adesola Ndu

The Proposed Tax Reform Bills, 2024, represent a significant milestone in Nigeria’s effort to modernize its tax system, enhance revenue generation, and promote fairness in tax administration. These bills aim to address inefficiencies in the existing tax regime, reduce compliance burdens, and align the system with global best practices.

Whilst the reforms offer significant opportunities to increase government revenue, foster economic growth, and reduce multiple taxation, their success hinges on inclusive stakeholder engagement and careful implementation to mitigate socio-economic risks for which FIRS is aware of and on course.

This article highlights the bills’ key provisions, their advantages and disadvantages, and provides steps which FIRS is taking to mitigate against the risks.
Nigeria’s tax system as we may all agree, has long been plagued by inefficiencies, including a narrow tax base, multiple taxation, and weak compliance mechanisms.
These challenges have hampered the government’s ability to generate sustainable revenue for developmental purposes.

Existing tax laws, such as the Companies Income Tax Act (CITA), Value Added Tax Act (VATA), and Personal Income Tax Act (PITA), are fragmented and outdated, leading to inconsistencies in interpretation, enforcement, and compliance.

The Proposed Tax Reform Bills, 2024 seek to address these issues by harmonizing the tax laws, streamlining administrative processes, and expanding the tax base to include informal sector operators and digital businesses.

FIRS is aware of the fact that successful implementation requires balancing revenue generation with minimizing burdens on taxpayers, particularly vulnerable groups and small businesses.
Hence, proposed tax reform bills introduce the following key measures: simplification of tax processes through digitization of tax administration to reduce bureaucratic bottlenecks and improve efficiency; harmonization of federal, state, and local tax laws to eliminate inconsistencies, overlaps, and multiple taxation; broadening the tax base to include informal sector operators, digital businesses, and under-taxed industries to increase revenue collection; a review of corporate tax incentives to attract investments while removing redundant exemptions; the introduction of stiffer penalties for tax evasion and enhanced enforcement measures to improve compliance; and the implementation of a unified digital platform for filing and tax payment to enhance transparency and accountability.

The reforms offer several advantages.
By broadening the tax base and improving compliance, the reforms can boost non-oil revenue, reducing Nigeria’s reliance on crude oil.

Simplified processes and harmonized laws will reduce compliance burdens, encouraging investments and improving the ease of doing business.
Revenue from improved tax collection can be reinvested into critical sectors like infrastructure, healthcare, and education, fostering economic growth. Progressive measures ensure fairer contributions from high-income earners and corporations, promoting social equity.
Finally, digitized systems and clear laws reduce corruption and improve trust between taxpayers and the government, enhancing transparency and accountability.

Despite the laudable objectives of the proposed tax reform bills above, several critical issues have been identified to require attention. These include the fact that Stakeholders, including businesses and individuals, may resist reforms due to perceived higher tax burdens. Harmonizing federal, state, and local tax laws is expected to face resistance from sub-national governments keen to protect their revenue streams, hence the need for clarification Implementation of digitized systems and enforcement mechanisms may be hindered by insufficient human and technical capacity

Although , there are potential disadvantages and risks as previously identified the FIRS has taken steps to mitigate against such risks through::
● Comprehensive stakeholder engagement to address concerns and foster stakeholder buy-in, involving businesses, civil society, and state governments.
● Identifying capacity building for tax authorities through investments in training, technology adoption, and infrastructure to strengthen enforcement mechanisms and ensure smooth implementation.
● Public awareness campaigns to educate taxpayers and other Customers of the FIRS on the benefits of the reforms to build trust, improve voluntary compliance, and reduce resistance.
● Leveraging technology to simplify compliance processes, enhance transparency, and curb tax evasion should remain a priority.

In conclusion, the Proposed Tax Reform Bills, 2024 presents a unique opportunity to modernize Nigeria’s tax system, enhance revenue generation, and promote social equity. By harmonizing tax laws, reducing compliance burdens, and adopting technology-driven processes, these reforms can lay the foundation for sustainable economic growth and fiscal stability, inclusive stakeholder engagement, strategic implementation, and continuous monitoring to address challenges and maximize benefits.
Hence, it should be embraced by all for our collective benefits

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