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Understanding the Tinubu tax reforms

BAT 2

President Bola Tinubu

By Dapo Okubanjo

It is slightly more than one year into the President Bola Tinubu administration and like many other countries across the world, Nigeria is going through a cost of living crisis.

This has for some time led to hues and cries over some of the reforms introduced by the administration, chief among which are the fuel subsidy removal and the unification of multiple exchange rates.

But one issue that many Nigerians especially those in the opposition have not stopped talking about and are literally shouting to the rooftop over, is that of taxation especially against the President’s vow to improve on the country’s tax revenue.

It is almost normal to see social media posts suggesting that President Tinubu had since assuming office been introducing new taxes or increasing existing ones.

Opposition politicians are also known to have jumped into the fray with claims of multiple taxations which are largely political and untrue.

There is however history to these untrue claims and this has to do with, how as governor of Lagos state between 1999 and 2007, Asiwaju Bola Tinubu caused a quantum leap in the state’s Internal Generated Revenue (IGR).

President Tinubu had variously said he inherited a miserly IGR of N600m when he assumed office in 1999 and snippets from CBN data have shown that the state’s IGR in same year was N14.6bn.

By the time Tinubu was leaving office in 2007, the figure had risen to N83.02bn with a monthly average of N6.9bn. So technically between 1999 and 2007, the state’s IGR growth rate stood at 468.63 percent, showing a considerable increase when his successor, Babatunde Fashola was assuming office.

Between then and now, there have been a lot of writeups on how the then Governor Tinubu leveraged on technology to re-engineer the tax collection system and also reformed financial structure to make it happen.

Subsequent administrations in the state have since been building on that template and today, Lagos has an IGR that can easily compete and is indeed competing favourably with that of many African countries

But President Tinubu has constantly been called names for that feat by those who have no understanding of the length he went to broaden the tax net in Lagos as well as modernize tax collection in the state.

And when, soon after assuming office, he pledged to improve on tax collection at the centre and build on the reforms of the Muhammadu Buhari administration, it did not come as a surprise that many uninformed Nigerians, mainly in the opposition, latched on a poorly edited ten seconds footage from the 2019 Bola Tinubu Colloquium to spread false narratives about his intentions.

Shockingly, even a Professor of Mass communications in an American University, Farooq Kperogi, who prides himself as a thorough individual was one of those who fell for that gimmick but luckily, fact checking agencies have conveniently proved him and other naysayers wrong.

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Now to understand the sort of tax regime the President has in mind, it would be necessary to follow the trend of the work being done by the Presidential Committee on Fiscal Policy and Tax Reforms led by a renowned Tax expert, Taiwo Oyedele since it was constituted in 2023 with a one year timeline to conclude its task.

Clearly President Tinubu has no intention to toe the path of his brother President, William Ruto of Kenya who initiated a finance bill that nearly tore the East African country apart before it was withdrawn.

Rather than increase taxes or introduce additional ones, President Tinubu and his team, from the Oyedele-led committee to the Federal Inland Revenue Service (FIRS), have been systemic in demolishing tax barriers affecting business growth even as they set their gaze on a higher tax collection level.

In one of his public engagements, Oyedele said: “We propose to repeal many of these burdensome taxes, harmonize the few that are justifiable, and digitize the collection process with multiple channels including USSD to drive efficiency, reduce leakages, and promote accountability.

It is a huge task considering that the Tinubu administration is eyeing a tax to GDP ratio of 18% by 2026 up from the current abysmal level of 10.86%

But in the midst of this, the Committee has identified 60 official taxes and 200 unofficial ones across the country which the government plans to shrink to 9 in line with the Presidential directive for a single digit tax system.

As part of the ongoing fiscal policy and tax reforms, a new withholding tax regime has also been approved which will amongst others exempt small businesses with an annual turnover of N25m or less from paying withholding tax.

The new policy has since taken effect from July 1 2024 and according to the man overseeing the tax reforms, manufacturers and farmers would be exempted while businesses operating on low margins, would benefit from reduced withholding tax rates.

There are however indications that the new withholding policy which replaces the one that had been in place since 1977 is one of five draft Executive Orders on tax matters that President Tinubu is rolling out.

And now that the committee is set to wrap up, a Finance bill would be sent to the National Assembly in due course to codify a new tax regime for the country that is almost certain to take effect from January 1 2025.

Interestingly, those who have over the years flew the kite of Tinubu the tax master are silent about the creative tax initiatives while others are still not letting go of false narratives but any unbiased observer of the polity can easily see that the President is proving naysayers wrong by taking steps to reduce multiple taxes.

And if what President has been doing in recent times on the issue of tax is anything to go by, it is safe to say that he will go down in history as a tax reformer by the time he completes his tenure in office.

-Okubanjo, a journalist and public affairs analyst writes from Abuja via [email protected]

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