Nationwide Debate Over President Tinubu’s Tax Reform Bills Intensifies Amid Regional Concerns
The controversy surrounding President Bola Tinubu’s proposed Tax Reform Bills has sparked heated debates across the country, with socio-cultural organizations, political elites, and stakeholders expressing divergent views on the implications of the reforms. The ongoing discourse primarily centers on the distribution of Value Added Tax (VAT) and the proposed derivation principle, which has drawn significant opposition from northern political figures and support from southern groups. This fierce debate is being framed by concerns about regional equity, fairness, and the potential impact on the nation’s economic future.
The journey to these controversial tax reforms began in July 2024 when President Tinubu inaugurated the Presidential Fiscal Policy and Tax Reform Committee (PFPTRC). The committee’s mandate was to overhaul Nigeria’s outdated tax system by introducing a more comprehensive framework, which culminated in the drafting of four critical pieces of legislation: the Nigeria Tax Bill 2024, the Tax Administration Bill, the Nigeria Revenue Service Establishment Bill, and the Joint Revenue Board Establishment Bill. These bills are now under scrutiny by both chambers of the National Assembly, as lawmakers weigh their potential impact on various sectors of the economy and the wider population.
At the heart of the debate is the principle of VAT revenue sharing, particularly the proposal to allocate 60% of VAT collections to states based on derivation, meaning that states that generate the most VAT, largely the commercial hubs in the south, would receive a greater share of the revenue. This proposal has drawn the ire of northern elites, who argue that it would disproportionately benefit states like Lagos, which host the majority of corporate headquarters and drive much of the country’s economic activity.
Northern Governors and Traditional Rulers Oppose the Bills
The controversy over the tax reform bills reached a boiling point on October 29, 2024, when northern governors and traditional rulers publicly rejected the proposals, particularly the VAT allocation mechanism. They argued that the new formula would unfairly favor southern states at the expense of northern states, which have large rural populations and are primarily reliant on agriculture. Northern stakeholders fear that the proposed tax reforms would worsen the economic disparities between regions and disproportionately burden the northern population, which already grapples with challenges like poverty, unemployment, and underdeveloped infrastructure.
The opposition culminated in a recommendation by the National Economic Council (NEC) during its 145th meeting on November 1, 2024, urging President Tinubu to withdraw the bills. Despite this advice, President Tinubu remained resolute, asserting that the bills should be allowed to proceed through the legislative process, allowing for further scrutiny and debate in the National Assembly. Despite the growing opposition, the bills passed their second reading in the Senate on November 28, 2024, and are now set to undergo further deliberation and revision in the coming weeks.
Concerns from Northern Stakeholders: Equity and Informal Sector Challenges
Among the northern socio-cultural organizations, the Arewa Youths Forum (AYF) has been vocal in its opposition to the tax reform proposals. Yerima Shettima, the President General of AYF, voiced concerns that the tax reforms would place a disproportionate burden on northern businesses, particularly those operating in the informal sector. Shettima pointed out that many young people in northern Nigeria are employed in small-scale agriculture, trade, and artisanal businesses, which constitute the informal economy and are often outside the formal tax net.
He warned that extending tax obligations to the informal sector could lead to severe consequences for these businesses, many of which operate with thin profit margins and could be crushed by additional financial burdens. Moreover, Shettima raised concerns about the lack of education and awareness surrounding tax regulations in the country, particularly in the northern region. Many informal sector workers may not have the resources or knowledge to comply with new tax laws, potentially leading to fines and penalties that could further marginalize them economically.
Another critical issue raised by northern stakeholders is the perceived inequity in the distribution of national resources. Shettima emphasized that despite contributing significantly to the national GDP through sectors like agriculture, the northern region has historically received less in terms of infrastructure development, public services, and government investment. With the introduction of new taxes, Shettima and other northern leaders are concerned that there will be no corresponding improvement in the region’s infrastructure or services, leading to an unfair burden on an already disadvantaged population.
Shettima also questioned the transparency and accountability of the federal government in managing tax revenues. He expressed skepticism about whether the increased tax revenue would be used equitably across the country, especially in the north, where there are already concerns about corruption and mismanagement of public funds. The lack of visible development projects in the northern region despite previous tax contributions has fueled this mistrust in the government’s ability to properly manage and allocate resources.
Southern Support for the Tax Reform Bills
In contrast to the northern opposition, many southern socio-cultural organizations have expressed strong support for the tax reform bills, viewing them as a necessary step toward creating a more equitable and sustainable economic system. Ohanaeze Ndigbo, the umbrella organization for the Igbo people, has endorsed the bills, with its factional Secretary-General Okechukwu Isiguzoro emphasizing the potential benefits for small and medium-sized enterprises (SMEs) and the broader business community in the South-East. Isiguzoro highlighted that the tax reforms could help eliminate double taxation by state governments, which has been a significant barrier to business growth and investment.
The Igbo people, known for their entrepreneurial spirit, are expected to benefit from the reforms, particularly as they are set to encourage a more transparent and business-friendly environment. According to Isiguzoro, the tax reforms will create a fairer regulatory framework that will attract both local and foreign investment, bolstering the economy and improving the prospects for Nigerian workers. He urged southern lawmakers to support the bills and ensure their successful passage through the National Assembly, noting that this would help achieve the broader goal of economic restructuring in Nigeria.
Isiguzoro also acknowledged the concerns raised by northern stakeholders but insisted that the reforms should be viewed as an opportunity for all regions to benefit from a more equitable tax system. He criticized the northern governors for mobilizing opposition to the bills, suggesting that their resistance was motivated by a desire to maintain the current VAT derivation formula, which he believes disproportionately favors select interests. He warned that if the northern elites succeeded in blocking the reforms, it would set a dangerous precedent for future attempts at meaningful economic reform in Nigeria.
Afenifere’s Support for the Derivation Principle
Afenifere, a leading Yoruba socio-cultural organization, has also supported the proposed reforms, particularly the inclusion of the derivation principle in the distribution of VAT. Comrade Jare Ajayi, the organization’s National Publicity Secretary, argued that the concerns raised by northern leaders regarding the distribution of VAT are unfounded. He explained that the proposed reforms would not deprive any state of its rightful share of VAT revenue, as consumption occurs nationwide, and every state has the potential to contribute to and benefit from VAT collections.
Ajayi emphasized that the derivation principle would incentivize states to improve their local economies and infrastructure, promoting healthy competition among states. He argued that regions should focus on the positive aspects of the proposed reforms rather than dwell on perceived disadvantages. Drawing from the success of the derivation formula in regions like the Niger Delta, Ajayi pointed out that states that effectively harness their resources have benefited from increased revenue, and he believed that other states could similarly benefit under the new system.
Moving Forward: A Nation Divided on Tax Reform
As the tax reform bills continue to make their way through the legislative process, the division between northern and southern stakeholders remains sharp. While southern groups support the reforms for their potential to create a fairer and more business-friendly environment, northern groups continue to raise concerns about the fairness of the proposed VAT distribution model and its potential impact on the informal sector. The debate reflects deeper regional tensions and longstanding issues of equity and development across Nigeria.
Ultimately, the future of the tax reforms depends on how well President Tinubu and lawmakers can navigate these regional divisions and build a consensus that addresses the concerns of all stakeholders. The outcome of this debate will likely shape the direction of Nigeria’s fiscal policy for years to come, influencing everything from economic growth and development to social cohesion and political stability. As Nigeria moves forward with this critical reform, it is clear that the nation must find a way to balance the interests of its diverse regions to ensure a fair and prosperous future for all Nigerians.
