States to Receive More as Senate Passes Two Landmark Tax Reform Bills, Retains VAT at 7.5%
Nigeria’s senate passed two of the tax reform bills, namely the Nigeria Revenue Service (Establishment) Bill, 2025 and the Nigeria Tax Administration Bill 2025, at plenary on Wednesday. The passage of the bills followed the presentation and consideration of the report of the Committee on Finance, chaired by Senator Sani Musa. After the clause-by-clause consideration of the two bills, the red chamber retained the 7.5 per cent being collected by the federal government from consumers of goods and services as Value Added Tax (VAT). It approved that the federal government should be entitled to 10 per cent of the total revenue collected as taxes, while the states and local governments get 55 per cent and 35 per cent, respectively. Before the passage of the bill, the federal government received 15%, states receives 50%, and local governments received 35%. The proposed legislation defined derivation as the place of consumption of products and services. It clarified that states where any product was consumed would be the beneficiary of the VAT collected on such items. Besides, the senate okayed the establishment of the Tax Appeal Tribunal. It approved the renaming of the Federal Inland Revenue Service (FIRS) to the Nigeria Revenue Service (NRS). Similarly, the upper chamber approved the constitution of a board of directors for the proposed NRS, with a non-executive Chairman heading the board of the agency, while the chief executive officer would be addressed as Executive Vice Chairman. The senate okayed a two per cent cost of production for the proposed NRS from the funds collected from the oil and non-oil sectors. It explained that the Tax Appeal Tribunal shall be funded through the Consolidated Revenue Fund, as may be appropriated by the National Assembly, towards the execution of its functions under the Act. It also provided a clearer, more structured, and professional qualification standard for Tax Appeal Commissioners, promoting efficiency and credibility in tax dispute resolution. The bill expanded the tribunal’s jurisdiction to cover all federal and state tax laws and amended it to restrict it to tax disputes and not controversies. It said the tax appeal commissioners shall be paid salaries and allowances to be determined by the Revenue Mobilisation Allocation and Fiscal Commission. This was done to provide for emoluments. Furthermore, the senate approved the establishment of Office of the Tax Ombud, which shall be funded from the Consolidated Revenue Fund, as may be appropriated by the National Assembly. The senate rejected the recommendation of the finance committee, which stated, “Except as otherwise provided under this Act, any other law or any enabling agreement or arrangement or as otherwise authorised by the Board or the Executive Secretary, any person who discloses institutional information, communication, document or internal, shall on conviction, be liable to a fine of N5,000,000.00.” The red chamber deleted the clause as being draconian, autocratic, obnoxious and self-serving. Justifying the establishment of NRS, the senate agreed with its committee that it was to “provide for a legal, institutional and regulatory framework for the administration of taxes and revenue accruable to the government of the federation, as prescribed by the National Assembly”. The bill said NRS would assess persons, including corporations, companies and individuals chargeable with tax, other than individuals resident in any state of the federation or the Federal Capital Territory. The bill empowered NRS, in collaboration with the relevant ministries and agencies of government, subject to the approval of the senate, to review the tax regimes and promote the use of taxation to develop, stimulate, and grow economic activities. NRS will also adopt measures to identify, trace, freeze, confiscate, or seize proceeds derived from tax fraud or evasion, in line with the provisions of the bill. The bill added, “The Chairman of the Board who shall be appointed by the President; and (b) Executive Vice Chairman who shall be the head of the Revenue Service and subject to confirmation of the Senate.” It said, “The Secretary shall be a lawyer, or a chartered accountant or a chartered secretary who shall not be less than the rank of a Deputy Director. “Executive directors should be appointed to the Board of the Service. We propose that the relevant clause be amended as follows. “The President shall appoint six Executive Directors for the Service, each representing a geopolitical zone on rotational basis among the states in the zone in alphabetical order, provided that the Executive Vice Chairman and an Executive Director shall not come from the same state “The timeline for reporting by the service should not exceed three months after the end of the preceding year. “The amount of VAT revenue standing to the credit of states and local governments shall be distributed among them on the following basis: “State Governments: Equality – 50 per cent; Population -20 per cent; Place of consumption -30 per cent; Local Governments -70 per cent; Equality -30 per cent. “Change the word ‘Derivation’ to ‘place of consumption’ to provide clarity. “Penalties for the following offences were amended as follows: Clause 100 – Failure to register: (a) N100,000.00 in the first month in which the failure occurs; and (b) N50,000.00 for each subsequent month in which the failure continues. “Clause 101 – Failure to file returns:(a) N200,000.00 in the first month in which the failure occurs: and (b) N50,000.00 for each subsequent month in which the failure continues. “Clause 102 – Failure to keep books: (b) on request by the relevant tax authority, fails to provide any record or book prescribed in this Act shall be liable to pay an administrative penalty of: in the case of a person other than a company, N10,000.00, and in the case of a company, NI00,000.00. “Clause 107 – Failure to remit tax deducted at source or self-account: A person who fails to comply with subsections (1) and (2), shall on conviction for any of the offences under this section, in addition to the administrative penalty, be liable to a term of imprisonment not exceeding three years. “Development Levy: Retain the funding of TETFUND, NASENI, NITDA, Cyber Security and NELFUND from the Development levy using the following sharing formula: “Tertiary Education Trust Fund 50 per cent; Nigerian Education Loan Fund 15 per cent; National Information Technology Development Fund – 10 per cent; and the National Agency for Science and Engineering Infrastructure 10 per cent. Others are, the National Cybersecurity Funds – five per cent and the Defence Security Funds – 10 per cent. Retain the VAT rate at 7.5 per cent and Company Income Tax rate 30 per cent.”
Admin | 2025-05-08 15:54:49