Tax Reforms: Senate Passes Bill, Exempts Nigerians Earning Below ₦1m

The Senate is set to pass the controversial Tax Reform Bills today, amid widespread debates and last-minute clarifications from federal tax executives. A key highlight of the bills is the exemption of Nigerians earning below ₦1 million annually from income tax, aimed at reducing the financial burden on low-income earners.

The Federal Government’s tax representatives, including Tanimu Yakubu, Director-General of the Budget Office; Zacch Adedeji, Executive Chairman of the Federal Inland Revenue Service (FIRS); and Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, addressed senators yesterday. They clarified that the bills were designed to “tax prosperity, not poverty” and promised a more equitable distribution of Value Added Tax (VAT) revenue, which has historically favored states like Lagos.

Divided Opinions in the Senate
Tensions ran high during Tuesday’s plenary as the sudden introduction of the Tax Reform Bills sparked heated confrontations among lawmakers. Senate Leader Opeyemi Bamidele cited legislative provisions to allow presentations by the invited tax experts, a move contested by Senators Abdul Ningi (PDP, Bauchi Central) and Ali Ndume (APC, Borno South).

Ningi argued that the session violated Senate rules by admitting non-legislators into the chamber without prior notice, while Ndume criticized the rushed handling of such a critical matter. “This issue is too important to Nigerians to be manipulated,” Ndume said, emphasizing the need for transparency.

Deputy Senate President Barau Jibrin, who presided, dismissed the objections, maintaining that the Senate acted within its rules. “We are here for facts, not rhetoric,” he said, urging order as the chamber grew rowdy.

Experts Present Case for Reform
In their presentations, the tax executives emphasized the pro-poor and growth-oriented nature of the reforms. Taiwo Oyedele highlighted key features, including:

• Tax Exemptions for Low-Income Earners: Nigerians earning less than ₦1 million annually will no longer pay personal income tax.
• Simplified Tax System: The Nigeria Tax Bill consolidates major taxes into a single framework, streamlining processes for businesses and individuals.
• Removal of VAT on Essentials: The reforms propose exempting essential goods and services from VAT.
• New Revenue Distribution Formula: VAT revenue allocation will be adjusted to favor consumption levels within states rather than corporate headquarters’ locations.

Oyedele stressed that taxing individuals earning as little as ₦30,000 per month was unsustainable, calling for a more equitable system. He also outlined plans to establish a Tax Ombudsman to protect small businesses and improve accountability.

A Long Road to Passage
The Tax Reform Bills include the Nigeria Tax Bill, Tax Administration Bill, Nigeria Revenue Service Establishment Bill, and Joint Revenue Board Establishment Bill. Together, these aim to modernize Nigeria’s tax laws, improve efficiency, and harmonize tax collection processes.

Despite initial resistance, many senators expressed support for the reforms after the presentations. However, public concerns over the transparency and equity of the tax system remain high.

The Senate is expected to expedite the bills through their second reading and final passage today, following a heated debate. The reforms mark a significant step in President Bola Tinubu’s broader fiscal policy agenda but face scrutiny from stakeholders and the general public.

As the nation awaits the outcome, the debate underscores the importance of balancing tax reforms with citizens’ economic realities.