Understanding Nigeria’s tax reform bills
The Chairman of the Presidential Advisory Committee on Fiscal Policy and Tax Reform, Taiwo Oyedele, says the government does not intend to withdraw the tax reform bills currently before parliament, however, the committee looks to re-engage with stakeholders. Theo Emuwa, Partner at Aelex joins CNBC Africa for on the tax reform bills and Nigeria’s journey to harmonizing its tax system.
Tue, 03 Dec 2024 14:11:55 GMT
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AI Generated Summary
- Addressing concerns and objections to specific provisions in the tax reform bills is essential for effective implementation.
- Changes in value-added tax (VAT) distribution have sparked debates among stakeholders, highlighting the need for nuanced discussions and refined proposals.
- Infrastructure development plays a critical role in supporting businesses and driving economic growth, underscoring the importance of addressing fundamental challenges alongside tax reforms.
Nigeria is currently embarking on a significant journey towards tax reform, aiming to harmonize its tax system and create a conducive environment for economic growth. The Chairman of the Presidential Advisory Committee on Fiscal Policy and Tax Reform, Taiwo Oyedele, has made it clear that the government does not plan to withdraw the tax reform bills currently before parliament. Despite this stance, there is a commitment to re-engage with stakeholders to address concerns and ensure a smooth implementation process. To shed light on the complexities of the tax reform bills and Nigeria's path forward, Theo Emuwa, a Partner at Aelex, shared valuable insights during a recent interview on CNBC Africa.
During the interview, Emuwa highlighted the need to differentiate between parts of the tax reform bills that are beneficial and those that spark objections. He emphasized the importance of addressing discomfort with specific provisions and proposing improvements rather than outright rejection. Emuwa drew parallels with past legislative challenges, such as the Petroleum Industry Act (PIA), stressing the impact of mixing regulatory and tax issues in a single bill. This led to prolonged debates and delays in passing crucial legislation. Moving forward, Emuwa called for a more strategic and objective approach to evaluating the tax reform bills.
One of the key areas of contention identified by Emuwa is the proposed changes in value-added tax (VAT) distribution. He explained that the new arrangement shifts from an equal sharing basis to a derivation-based model, significantly altering the revenue allocation among states. This adjustment has raised concerns among stakeholders, particularly in states that may receive a reduced share under the revised system. Emuwa encouraged stakeholders to delve deeper into the bill's provisions, pinpointing specific areas of unease, and presenting constructive suggestions for refinement.
Looking ahead, Emuwa expressed skepticism regarding the notion that tax legislation alone can spur economic growth. He underscored the critical role of infrastructure in supporting businesses and driving overall economic development. Emuwa argued that while adjusting tax rates is important, it is equally crucial to address fundamental challenges such as inadequate infrastructure, lack of electricity, poor road networks, and limited access to water. He emphasized that these factors pose significant obstacles to businesses, overshadowing the impact of taxation.
As Nigeria navigates its tax reform journey and aims to achieve a one trillion-dollar economy by 2026, the focus on addressing broader economic impediments alongside tax reforms becomes imperative. Emuwa's insights shed light on the multifaceted nature of Nigeria's economic landscape, emphasizing the interconnectedness of tax policies, infrastructure development, and sustainable growth. Moving forward, sustained dialogue, targeted engagement with stakeholders, and a comprehensive approach to policy formulation will be crucial in shaping Nigeria's economic trajectory and fostering a conducive environment for businesses to thrive.