Senior Advocate of Nigeria, Mike Ozekhome, has expressed support for the Federal Government’s Tax Reform Bills, stating that they “make sense” despite concerns about their timing and potential impact on Nigerians facing economic challenges.
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In an exclusive interview with Nairametrics on Friday, Ozekhome advised the Federal Government to “stagger” the implementation of the tax reform bills, if passed into law, while encouraging aggrieved parties to approach the reforms with an “open mind,” particularly regarding the Nigerian Tax Bill and the Nigerian Tax Administration Bill.
President Bola Tinubu recently directed the Attorney-General of the Federation, Lateef Fagbemi SAN, to work with the National Assembly to address “genuine concerns” related to the Tax Reform Bills before they are passed into law. This followed the President’s rejection of the National Economic Council’s proposal to withdraw the bills, insisting that the Council, which includes governors, should follow the “legislative process.”
The tax reform proposals have generated controversy, with some northern elites and governors openly rejecting them, arguing that the changes may not favor their region. However, Mr. Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, has maintained that the reforms will benefit vulnerable Nigerians and has criticized the current mode of VAT distribution, which considers the location where VAT is remitted rather than where goods are supplied or consumed.
Ozekhome explained that the proposed bill would discard the current oil-industry derivation model in favor of a system that attributes VAT to the place of supply and consumption, ensuring greater equity in the distribution of VAT revenue. He also noted that the new derivation model sets a higher rate of 60% and will result in a slight adjustment to the current formula for distributing VAT among the Federal Government, states, and local governments.
While acknowledging the understandable fears in some quarters due to the mismatch between VAT income and contributions under the present system, Ozekhome believes that a closer examination of the bills may reveal that these fears are exaggerated or unjustified. He urged neutral parties to embrace the change with an open mind.
However, Ozekhome attributed the rejection of the bills in some quarters to a lack of perception management by the government and pointed out that the timing of the reforms is problematic, given the rising cost of living for Nigerians. He advised the Federal Government to work hard to renew trust and to “stagger the reforms so that they are not perceived as all coming at once,” acknowledging that there is little appetite for another dramatic shift in Nigeria’s economic and fiscal policy.
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