The Fiscal Responsibility Commission (FRC) has made a strong appeal for nationwide support for the contentious Tax Reform Bills currently under consideration by the National Assembly. These bills, crafted by the Presidential Fiscal Policy and Tax Reforms Committee, aim to overhaul Nigeria’s tax system. However, they have encountered substantial resistance from lawmakers and various stakeholders, leading to a temporary halt in their legislative progress. The FRC Chairman, Victor Muruako, argues that a meticulous review of the bills reveals no bias towards any specific region or segment of the country. Instead, he emphasizes their potential to equitably distribute resources among the federating states, benefiting all Nigerians, particularly low-income earners and micro, small, and medium-scale enterprises (MSMEs).
The proposed reforms encompass several key provisions designed to stimulate economic growth and alleviate the tax burden on vulnerable groups. One significant aspect is tax relief for low-income earners. Individuals earning less than N1.7 million annually would experience a reduction in their income tax obligations. Moreover, businesses with turnovers below N50 million would be entirely exempt from taxation, while a vast majority of small businesses (over 90%) would no longer be subject to profit tax. This targeted relief aims to boost household savings and capital formation, potentially fueling investment and driving sustainable economic growth.
Furthermore, the reforms propose a simplification of the existing tax structure. By significantly reducing the number of taxes and levies, the reforms seek to streamline tax administration and enhance compliance. This simplification is also expected to improve the ease of doing business in Nigeria, attracting investments and fostering economic activity. Additionally, the reforms intend to increase revenue allocation to sub-national governments by granting them a larger share of Value Added Tax (VAT) revenue. This increased fiscal autonomy for states is anticipated to empower them to address local development needs more effectively.
Muruako underscores the potential positive impacts of these reforms on Nigeria’s economic landscape. He believes that the tax relief for low-income earners will not only enhance their disposable income but also stimulate savings and investments at the household level. This increased investment activity, in turn, is expected to contribute to the overall growth of the national economy. Moreover, the reduced tax burden on small businesses is projected to provide much-needed breathing room for MSMEs, enabling them to expand their operations and contribute to a sustained increase in the nation’s GDP.
The controversy surrounding the Tax Reform Bills highlights the complex and often sensitive nature of fiscal policy adjustments. While the FRC emphasizes the potential benefits of these reforms, concerns raised by lawmakers and stakeholders warrant careful consideration. These concerns may relate to the potential impact on government revenue, the distribution of tax burdens across different income groups, and the overall effectiveness of the proposed changes in achieving the desired economic outcomes. Addressing these concerns through open dialogue and transparent consultations is crucial for building consensus and ensuring that the final tax reforms are equitable, sustainable, and conducive to economic growth.
Muruako commends President Bola Tinubu’s democratic approach in allowing space for further dialogue on the bills. This willingness to engage with stakeholders reflects a recognition of the importance of inclusive policymaking. By fostering a participatory process, the government can address concerns, build support for the reforms, and ensure that the final tax system serves the best interests of all Nigerians. The path forward requires a balanced approach that considers the need for revenue generation, economic growth, and social equity.
