Nigeria’s Tax Reforms Committee Streamlines Taxes into 8 Categories

The Presidential Fiscal Policy and Tax Reforms Committee (PFPTRC) has recommended the harmonisation of taxes and levies collectable by the three tiers of government into eight headings.

Chairman of the committee, Mr. Taiwo Oyedele, said the proposed streamlining of taxes sought to make tax administration modern, simple, and adaptive, as well as make it become a growth enabler.

Speaking at a public consultation workshop for journalists and public analysts with the theme, “Proposed Changes to the National Tax Policy, Tax Laws and Administration,” in Lagos, Oyedele also urged the federal government to adopt an exchange rate of N800 per dollar for customs import duty.

He expressed concern over the import duty rate, which constantly changed due to the volatility of the foreign exchange (FX) market, adding that this does not allow for adequate planning by businesses.

According to him, “When we did the budget, we said naira to dollar will be N800, now it is 1,000 something. People need to plan.

“So now, we’re saying, dear government, can you, please, sign an order that says for the purpose of paying import duty, we shall use N800… for the rest of the year till December. So, we have proposed N800.”

The proposed list of harmonised taxes and levies included income tax, property tax, Value Added Tax (VAT), customs duties, excise tax, stamp duties, special levy, and harmonised levy.

He also hinted on the social security contribution, which he said was “not a tax.”

Oyedele said, “The principles that we are working with is to do away with nuisance taxes with very low revenue yield, high cost of collection and ultimate burden on the poor and small businesses.

“We are focusing on high revenue yielding taxes that are broad-based and relatively easy to collect by merging taxes and levies that are imposed on the same or substantially similar tax base and keep the total number of taxes across all level of government to a single digit.”

He said the committee further recommended the institutionalisation of tax harmonisation reforms to ensure its sustainability.

Oyedele explained that the committee had consolidated the education and police taxes under special levy, adding that “we introduced the special levy with just one rate and we take out all those other taxes”.

He said the Harmonised Tax Levy (HTL), which comprised road and market taxes, was meant to cater for the local governments.

The PFPTRC chairman said under the proposed new tax regime, income tax should now comprise Company Income Tax (CIT), Withholding Tax (WHT), CPT, and capital gain tax, among others.

He said, “We are hoping that when we are done there will be no consumption tax in any state. We will just agree that it is VAT and it is VAT.

“We will specify who is paying it, who is collecting it and who owns the tax. Nigerians tend to assume that if the FIRS (Federal Inland Revenue Service) collect taxes it is for the federal government alone. No.

“Even though the number of taxes we propose is eight, the federal government will feel like collecting five taxes; state governments will feel they are collecting seven taxes; local governments collecting six taxes.”

According to him, “All these will be done automatically and when we are done, there will not be need to be sharing FAAC on monthly bases. 

“The tiers of government will get their accounts credited on daily basis.” 

He stressed that the objective of the committee was to simplify the tax to reduce the burden on businesses, particularly SMEs.

Oyedele said part of the committee’s advocacy was exemption for withholding taxes for small businesses within the range of N50 million annually as they will lack the capacity to comply.

He also revealed that the committee’s reform of the withholding tax, which he said remained the most difficult and complex tax to comply with in Nigeria, had been approved.

Oyedele said, “The good news is that it has moved from proposal to approval because it has been signed, waiting to be gazetted. 

Among our objectives is to simplify the tax to reduce the burden on businesses, particularly SMEs.

“We want to promote competitiveness, prevent tax avoidance, detect tax evasion and close the tax gap that reflects what is happening globally.”

He also said, “We have reduced the rates for businesses producing goods and services because their margins are very small.

“We have created exemptions for manufacturers. So, if you are manufacturing anything, do not worry about withholding tax.

“We have put measures to curb evasion. These are part of the reforms that we have introduced in withholding tax regulation that has just been approved.”

The committee further recommended that any extra revenue incurred by government should be used to pay down its Ways and Means borrowing from the Central Bank of Nigeria (CBN).

It also urged the federal government to use some portion of banks’ Cash Reserve Ratio (CRR) to provide concessionary interest rates at a single digit for manufacturers. 

Oyedele said the overall objective of the reform initiative included the protection of the poor and vulnerable businesses that were merely trying to survive from tax burdens.  

He said, “It has been said a million times that our money is in the informal sector, but let me say to you that we have done our analysis, and we have the data and the evidence, and it does not support that assertion.

“Our money is not in the informal sector – 95 per cent of them are not going to bear any tax burden in any form.

“The money that we are looking for is in the middle, upper and elite classes.

Oyedele said it was regrettable that the “people paying the taxes in Nigeria are the helpless ones while those with the power and resources do not want to pay and we allowed that to continue”. 

 Dike Onwuamaeze

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