Nigerian Senate has officially resolved to engage the Attorney General of the Federation, tomorrow Thursday, to resolve areas of disagreement on the proposed Tax Reform Bills. The bill has attracted a lot of criticism and generated controversy from the first day it was presented for legislation by Honourable members .
Deputy President of the Senate Barau Jibrin while presiding at plenary earlier on Wednesday says the decision followed series of meetings by the senate in relation to the proposed tax reforms.
He also announced the setting up of a committee in that regard to be chaired by the Minority Leader of the Senate, Senator Abba Moro.
Meanwhile, the Senate Committee on Finance has been directed to put on hold further legislative actions on the bill and await the outcome of the meeting with the Attorney General of the Federation.
Senate has resolved to engage the Attorney General of the Federation, tomorrow Thursday, to resolve areas of disagreement on the proposed
Tax Reform Bills.
Deputy President of the Senate Barau Jibrin while presiding at plenary Wednesday says the decision followed series of meetings by the senate in relation to the proposed tax reforms.
He also announced the setting up of a committee in that regard to be chaired by the Minority Leader of the Senate, Senator Abba Moro.
Meanwhile, the Senate Committee on Finance has been directed to put on hold further legislative actions on the bill and await the outcome of the meeting with the attorney general of the federation.
It is on this development therefore that this writer based his opinion. The featured script reads thus:
I have been on this tax reform bill for sometimes but my worry is heightening by the day. One honourable member almost suggested that my worries are likely to be scaremongering. But the truth is, tax experts filed with Tinubu’s apologists and 90% South western Ronus worked on the bill and hid so much into the bill which will put Lagos and Ogun into economic advantage slightly short of extortion from
other states .
And our South East SE governors and legislators have not set up a tax study group or even hire Global tax experts even if they disdain Igbo experts.
Let us take VAT as example. VAT is the tax charged on consumption of goods and services. By the reform bills, 60% of the VAT will go the state of collection. This sounds attractive right? But see where the problem is. I will use First bank, MTN and Chicken Republic as case studies.
First bank: The registered address of first bank in CAC or FIRS is 35 Marina Lagos. However first bank has 15 branches in Anambra. In the course of rendering bank services, First bank collects VAT from its branches. But the way it is right now, the VAT collected from the 15 branches of first bank in Anambra is credited to Lagos because it is the registered office of first bank. Thus, if First bank collects N500m as VAT from Anambra, 60% of it under derivation will go to Lagos. And this is replicated in the other states in Nigeria.
MTN has its registered office in Lagos. But as at 2021, it had about 3m voice subscription in Anambra. MTN collects VAT from the telecom services rendered to about 3m subscribers in Anambara on daily basis. Let’s say it collects N700m monthly from Anambara subscribers, MTN credits this amount it collects to Lagos state. And by the reform bill, Lagos will collect 60% of it.
Now apply the principle to all the banks, breweries and mineral water bottling companies. You should be able to understand what the tax reform bill plans to do.
Any solution? Yes! The proper thing as it is done everywhere in the world and should be done in Nigeria is what we call tax attribution to the area of collection. It is after tax attribution, you now talk of derivation. Using the above scenarios of First bank and MTN, the VAT collected by FIRS from the 15 branches of first bank in Anambra will be credited to Anambara state account with FIRS. That is tax attribution to area of consumption.
Also, the VAT collected by MTN from the 3m subscribers in Anambra will be credited to the Anambra account with FIRS. And by the new bill, 60% of collections from MTN and first bank in Anambra will now be given to Anambra by way of derivation.
This principle should be applied in all the states of the federation. This is what we mean by tax attribution to the area collected before derivation. The tax reform bill must include proper attribution of tax to areas of collection before derivation or else, it will become extortion from the South East SE and South South SS.
Sadly, with their propaganda, they will tell you how the generate revenue more than the 35 states of the federation and we run with it.
The publication of the dangers of this tax reform bill has been on for days. This is the third publication on this and if this bill shortchanges the SE, I want this generation of Igbos to know that our legislators and Governors were given enough notice and they chose to ignore it.
I personally give my tax expertise free of charge here and it is with N200m in consultancy fees but I chose to forgo it but to alert our leaders what may turn out to be the heist of the century!
Chris Okafor Writes from Abuja Nigeria.
