How will tax reform bill shape Nigeria’s economy?

Nigeria's tax reform bill has sparked discussions and debates among lawmakers, experts, and the public as they gather for a 2-day public hearing to address some contentious issues. Kenneth Erikume, Partner and Director of Tax Reporting and Strategy at PwC Nigeria, and Theo Emuwa, Partner at Aelex, shared their insights on the bill's implications, likely outcomes of the public hearing, and recommendations needed to achieve set targets. One of the key themes that emerged from the discussion was the need for clarity, transparency, and collaboration among stakeholders to ensure the successful implementation of the tax reform bill. Here are the key points and highlights from the conversation: The timing of the proposed changes in the tax reform bill has raised concerns, particularly the introduction of a minimum tax of 15% of profit. This abrupt change could have a significant impact on businesses, especially those operating in free zones who had structured their operations based on the assumption of tax exemptions. The government's move to allow businesses to recover input VAT on their expenses also poses challenges in terms of implementing technology to prevent leakages. The public hearing serves as a platform for stakeholders to provide feedback and recommendations on the tax reform bill. While the two-day hearing may be sufficient to gather viewpoints from the public, the real work lies in analyzing the feedback and making informed decisions on potential amendments. Balancing conflicting suggestions from various stakeholders, such as government proposals versus taxpayer recommendations, is crucial in shaping the final version of the bill. The issue of VAT derivation and consumption, particularly concerning imported goods, highlights the complexity of attributing VAT revenues to specific states. Stakeholders must address this challenge to ensure a fair distribution of VAT proceeds. The ambitious timeline set for passing the reform bills by the end of the quarter and implementation by July raises concerns about the thoroughness of the law-making process. While the public hearing allows for feedback, the ultimate responsibility lies with the National Assembly members to address concerns and make necessary amendments. Recommendations for a smoother transition and addressing specific provisions, such as taxing capital gains at the corporate income tax rate, are critical to safeguarding investor interests and capital market stability. The need for a clear tax policy that aligns with the goals of incentivizing specific industries precedes the detailed design of tax laws. Collaborative efforts among federal, state, and local governments are essential for enhancing transparency and accountability in revenue allocation and utilization. Direct allocation of funds to local governments aims to improve service delivery and accountability to the public. Establishing better collaboration and synergy among stakeholders will be crucial in modernizing and optimizing Nigeria's tax system for sustainable economic growth and development.