The Nigerian Federal Government has recently proposed significant changes to its tax system as part of the Nigeria Tax Bill 2024, submitted to the National Assembly for deliberation. One of the key initiatives is the introduction of an installment payment option for tax obligations, allowing taxpayers to settle their dues either in a lump sum or through monthly payments leading up to the deadline for filing. This move aims to enhance flexibility for individuals and businesses in managing their tax payments, while simultaneously fostering compliance with tax regulations. Alongside this proposal, the government is also establishing a dedicated account for tax refunds, which aims to streamline the refund process and ensure that overpayments are promptly returned to taxpayers.
This initiative falls within a broader set of reforms introduced by the government to bolster tax revenue collection. The four bills presented to the National Assembly are designed to create a legislative framework that aligns with recommendations from the Presidential Fiscal Policy and Tax Reforms Committee. The essence of these reforms is to enhance the efficiency of collecting direct taxes and various levies, with a notable shift in responsibility from numerous revenue agencies to the proposed Nigeria Revenue Service. The initiative also includes establishing a tax tribunal and ombudsman, reinforcing the government’s commitment to tax transparency and accountability while eliminating inefficiencies caused by multiple collecting entities.
The draft bill details mechanisms for implementing the proposed installment payment plan, which allows taxpayers to fulfill their obligations through equal monthly payments. According to Section 48 of the draft, individuals will be required to make the first installment payment no later than three months into the accounting period, with subsequent payments due by the end of each month. This system, which emphasizes a structured approach to tax payments, is expected to ease financial burdens on taxpayers while ensuring that revenues are collected timely and efficiently.
Additionally, the bill specifies the procedures for calculating and assessing taxes for taxpayers utilizing the installment plan. It states that the final installment is due on or before the due date for filing self-assessment, incorporating any previous payments made during the accounting period. This thorough framework provides clear guidelines for how tax liabilities are determined, ensuring that taxpayers can plan their finances with greater certainty while remaining compliant with tax laws. Moreover, the bill emphasizes that estimations for tax payments will be treated as charged and assessed tax, promoting a sense of accountability among taxpayers.
To improve the processing of tax refunds, the proposed legislation outlines a structured approach for handling overpayments. Taxpayers who qualify for refunds will be guided through a transparent process where the relevant tax authorities audit claims and issue refunds within a specified timeframe, ideally within 90 days. This efficiency is expected to enhance taxpayer trust in the system, as it addresses concerns regarding delayed refunds. The establishment of dedicated accounts by the Accountant-General for managing tax refunds will ensure proper oversight and accountability for funds set aside for this purpose.
Lastly, the bill revises the distribution framework for value-added tax (VAT) revenue, proposing a new allocation structure to ensure that federal, state, and local governments receive a fair share of tax revenue. Specifically, the new distribution model allocates 10% to the Federal Government, 55% to State Governments and the Federal Capital Territory, and 35% to Local Governments. A stipulation that 60% of the funds earmarked for states and local governments be distributed based on derivation underscores a commitment to equitable financial management across different governmental tiers. This restructuring is intended to enhance fiscal responsibility and ensure that adequate resources are available at all governmental levels for public service delivery and development.
