Comprehensive Analysis of the Nigeria Tax Bill, 2024: Transforming Nigeria’s Tax Landscape

The Nigeria Tax Bill, 2024 (NTB) represents a landmark in Nigeria’s fiscal history, setting the stage for a more unified, transparent, and efficient tax system. Together with three accompanying reform bills—Nigeria Tax Administration Bill, Nigeria Revenue Service Establishment Bill, and Joint Revenue Board Establishment Bill—the NTB seeks to simplify tax laws, enhance compliance, promote economic growth, and ensure fairness in the distribution of tax burdens.

Transmitted to the National Assembly on October 3, 2024, by President Bola Tinubu, this legislative package marks a decisive effort to reform the country’s tax framework comprehensively. This article delves into the key components of the NTB, its objectives, features, implications, and challenges, offering an extensive professional analysis of its potential impact.

Overview of the Nigeria Tax Bill, 2024

The NTB aims to consolidate disparate tax laws into a unified legal framework, centralizing tax collection under a newly established Nigeria Revenue Service (NRS), which will replace the Federal Inland Revenue Service (FIRS). By integrating overlapping tax statutes and standardizing tax practices, the NTB endeavors to:

1. Simplify Nigeria’s tax system.

2. Improve administrative efficiency.

3. Reduce compliance costs for taxpayers.

4. Encourage investment and business growth.

These goals reflect the NTB's commitment to aligning Nigeria’s tax framework with global best practices, addressing long-standing inefficiencies, and fostering economic resilience.

Objectives of the Nigeria Tax Bill

1. Unified Tax Framework: Eliminate conflicts, redundancies, and ambiguities in existing tax laws.

2. Tax Relief: Reduce the tax burden on individuals and businesses, particularly for low-income earners and small enterprises.

3. Broader Tax Base: Incorporate previously untaxed income and transactions, ensuring a more equitable distribution of tax responsibilities.

4. Efficiency in Revenue Collection: Centralize tax administration under a single body to reduce leakages and enhance compliance.

5. Economic Development: Foster growth through targeted tax incentives for key sectors, including technology, mining, and petroleum.

Key Features of the Nigeria Tax Bill

1. Consolidation of Tax Laws

The NTB repeals 11 tax statutes, including:

• Capital Gains Tax Act
• Companies Income Tax Act
• Petroleum Profits Tax Act
• Value Added Tax Act

This consolidation eliminates overlapping provisions and simplifies compliance for taxpayers. Additionally, the NTB amends 13 other laws to align them with its unified framework, including the Petroleum Industry Act and the Customs, Excise Tariffs Act.

2. Centralized Tax Administration

The bill establishes the Nigeria Revenue Service (NRS) as the sole authority for collecting all national taxes. Key responsibilities transferred to the NRS include:

• Royalties, previously collected by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
• Excise duties and import VAT, previously handled by the Nigeria Customs Service.
• Centralizing tax administration is expected to enhance efficiency, reduce administrative costs, and ensure more effective enforcement.

3. Supremacy Clause

Section 202 of the NTB establishes the bill's supremacy over all other tax-related laws, resolving conflicts and ambiguities in the legal framework. This clause ensures that the NTB becomes the ultimate authority on taxation in Nigeria.

Tax Reforms for Individuals

Personal Income Tax (PIT)

• The NTB introduces a progressive tax regime that reduces the burden on low-income earners while ensuring higher contributions from high-income earners:
• Exemptions: Individuals earning less than ₦800,000 annually are exempt from PIT, compared to the current threshold of ₦300,000.

New Rates:

• 0% for the first ₦800,000.
• 15% for the next ₦2.2 million.
• Rates increase to a maximum of 25% for incomes above ₦50 million.

This structure aligns with the NTB’s pro-poor stance, benefiting over 70% of Nigerians who earn below ₦800,000 annually. Furthermore, employees of start-ups and technology-driven businesses are exempt from PIT, encouraging innovation and youth employment.

Capital Gains Tax (CGT)

The NTB revises the CGT framework to reduce burdens and incentivize economic activity:

Exemptions:

• Proceeds from the sale of residential properties (up to 1 acre).
• Compensation for personal injuries (e.g., defamation or loss of employment) up to ₦50 million.

These reforms encourage property ownership and provide relief to individuals affected by personal or professional setbacks.

Tax Reforms for Businesses

Corporate Income Tax (CIT)

The NTB introduces business-friendly measures, particularly for small and medium enterprises (SMEs):

• Exemptions for SMEs: Businesses with annual turnovers below ₦25 million are exempt from CIT.
• Reduced Rates for Larger Corporations: CIT rates will decrease to 27.5% in 2025 and 25% from 2026 onward, compared to the current rate of 30%.

These changes aim to free resources for businesses to expand and invest, ultimately driving economic growth.

Harmonization of Levies

The NTB consolidates multiple levies, including the Tertiary Education Tax, NASENI Levy, and NITDA Tax, into a single Development Levy. This levy will decline from 4% in 2025 to 2% by 2030, reducing compliance costs and administrative complexity.

Value Added Tax (VAT)

The NTB introduces a phased increase in VAT rates:

Current Rate:

• 7.5%.

New Rates:

• 10% in 2025.
• Gradually increasing to 15% by 2030.

To mitigate the impact on low-income households, essential goods and services (e.g., food, medical supplies, transportation) are exempt or zero-rated. The NTB also shifts the derivation model to attribute VAT revenues to the place of consumption, promoting equity among states.

Sector-Specific Reforms

Mining and Petroleum

The NTB harmonizes royalties for petroleum and solid minerals, transferring collection duties to the NRS. Key provisions include:

• Tax Incentives: Exemptions for investments in associated and non-associated gas production.
• Standardized Royalties: Rates for 71 solid minerals are set at 3% or 5% of their selling value.

Stamp Duties

• The NTB standardizes stamp duty rates for 47 dutiable instruments, specifying clear exemptions to simplify compliance.

Significance of the NTB

For Individuals

• Pro-Poor Relief: Exempts low-income earners from PIT and reduces the tax burden on individuals through progressive rates.
• Incentivizes Innovation: Exemptions for start-up employees promote growth in technology and other high-value sectors.

For Businesses

• Support for SMEs: CIT exemptions and reduced levies foster entrepreneurship and small business growth.
• Simplified Compliance: Harmonized taxes reduce administrative burdens and costs.

For Government Revenue

• Efficiency Gains: Centralized tax collection under the NRS enhances compliance and reduces leakages.
• Broader Tax Base: Mandatory reporting of high-value transactions (above ₦25 million) ensures greater inclusivity.

Challenges and Recommendations

Challenges

1. Implementation Complexity: Transitioning responsibilities to the NRS may face resistance from existing agencies.

2. Public Perception: VAT increases could be misconstrued as regressive without proper education.

3. Capacity Constraints: The NRS may require significant investment in technology and personnel.

Recommendations

1. Capacity Building: Provide extensive training for NRS staff to ensure seamless implementation.

2. Public Awareness Campaigns: Educate stakeholders on the benefits of the NTB and address misconceptions.

3. Investment in Technology: Develop robust systems to monitor VAT derivation and track high-value transactions.

Conclusion

The Nigeria Tax Bill, 2024, is a transformative step toward modernizing Nigeria’s tax system. By consolidating laws, centralizing administration, and introducing progressive tax regimes, the NTB aligns with global best practices. Its focus on fairness, efficiency, and economic development promises to reduce inequality, foster innovation, and enhance revenue generation. While challenges exist, a strategic approach to implementation and stakeholder engagement will ensure that this landmark reform achieves its full potential, setting a new standard for tax administration in Nigeria and beyond.

Olatunji Abdulrazaq CNA, ACTI, ACIArb

Founder/CEO, Taxmobile.Online