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The Senate has passed two of the four Tax Reform Bills transmitted by President Bola Tinubu in October 2024, aimed at overhauling Nigeria’s tax system.

The bills passed include the Nigeria Tax Administration Bill 2024 and the Nigeria Revenue Service (Establishment) Bill 2024.

The remaining two—the Nigeria Tax Bill 2024 and the Joint Revenue Board (Establishment) Bill 2024—are expected to be concluded on Thursday.

The Senate President, Godswill Akpabio, announced the passage of the two bills following a majority voice vote by the senators.

He also disclosed that a harmonisation committee would be set up to align the Senate’s version with the one passed by the House of Representatives in March.

Once harmonised, the unified bills will be forwarded to the President for assent. Akpabio said the legislation would reshape Nigeria’s tax collection and distribution structure and noted that the Senate was committed to finalising the outstanding bills without delay, even if it required working late into the night.

“These bills will add immense value to governance and transform how taxes are collected and shared in Nigeria,” he said.

“We are committed to concluding the outstanding bills tomorrow, even if we have to stay here until 10 p.m.,” Akpabio said.

Senators began deliberations on the bills after a closed-door session that lasted about an hour.

Presenting the committee’s report, Senator Sani Musa, Chairman of the Senate Committee on Finance, said the proposals had been thoroughly scrutinised, including through public hearings.

He noted that over 64 organisations, including civil society groups, participated in the hearings and most supported the reforms.

On the VAT sharing formula, the committee recommended 10% for the federal government, 55% for states and the Federal Capital Territory, and 35% for local governments.

Read also: Senate debates Tax Reform Bills

The VAT allocation to states would be distributed based on equality (50%), population (20%), and place of consumption (30%), while local government allocations would be split 70% on equality and 30% on population. The committee also proposed that 10% each be earmarked for TETFund, NASENI, and NITDA, 5% for cybersecurity, and 10% for security and defence.

Musa urged passage of the bills, arguing that they would simplify tax compliance, stimulate the economy, and increase investor confidence.

Senator Abdullahi Yahaya, representing Kebbi North and a member of the Special Committee on Tax Reform, confirmed that the committee’s report had been merged with the Finance Committee’s recommendations.

During the clause-by-clause consideration, the Senate adopted the retention of the current 7.5% VAT rate.

It amended Clause 22 to allow states to establish their own Revenue Tax Boards and approved that 2% of the total revenue collected by the Nigeria Revenue Service be appropriated by the National Assembly.

The percentage, initially proposed at 3%, was reduced following an amendment by Senator Aliyu Wadada, who argued that 3% would amount to a revenue pool greater than the budgets of 16 states combined. He called for caution, noting the inclusion of oil and non-oil revenue in the calculations.

Clause 39 also sparked debate.

Senator Adams Oshiomhole, supported by Senator Ibrahim Dankwambo, warned against over-legislating operational financial decisions, which he said could delay urgent actions.

Musa responded that the clause was intended to enhance oversight and prevent unauthorised disbursements, not to stall executive functions.

Former House Speaker and Senator Aminu Tambuwal argued that the National Assembly lacked the constitutional power to create state-level tax agencies, urging the removal of Clauses 87 to 97 from the bill.

The Nigeria Revenue Service (Establishment) Bill introduced several structural and operational reforms.

The President will chair the Revenue Service Board, while an Executive Vice Chairman, subject to Senate confirmation, will serve as the head of the Service. Clause 7 was amended to reflect this leadership structure.

To ensure inclusivity, six Executive Directors will be appointed, each from a different geopolitical zone, with a rotational system to ensure no Executive Director and Vice Chairman come from the same state.

Read also: How tax reforms bill will make housing affordable – Presidency

Clause 4 of the bill expands the Service’s responsibilities to include assessing corporate taxpayers, collaborating with ministries to review tax regimes, and adopting measures to trace, freeze, confiscate, or seize proceeds from tax fraud. Clause 13(2) requires that the Secretary of the Board be a lawyer, chartered accountant, or chartered secretary not below the rank of Deputy Director.

The Service must submit its annual reports within three months after each fiscal year.

The Senate also introduced updated penalties to curb non-compliance.

Failure to register with the tax authority will attract a N100,000 fine in the first month and N50,000 for each additional month.

Failure to file returns will incur N200,000 in the first month and N50,000 for each subsequent month.

Individuals who fail to keep proper records will be fined N10,000, while companies will be fined N100,000. Offenders also face imprisonment for up to three years, depending on the severity of the violation.

Senator Seriake Dickson moved the amendment to reduce the tax collection agency’s commission from 4% to 2%, arguing that including oil revenues would significantly raise the funds due to the agency.

In his closing remarks, Senate President Akpabio commended the Finance Committee and the Senate for their thorough work.

He thanked a group of senior senators who helped resolve contentious issues through consultations with religious leaders, regional organisations, and other stakeholders.

Akpabio said the new tax laws would modernise the country’s revenue system and address public concerns that the bills were sectional or discriminatory.

Deputy Senate President Barau Jibrin also praised the Senate and particularly the Finance and Elders Committees for their role in navigating disagreements and building consensus.

He acknowledged that although the bills were initially met with resistance, the Senate had successfully resolved major concerns through constructive dialogue.

The Senate adopted the Committee’s recommendation that the objectives of the Nigeria Revenue Service (Establishment) Bill be amended to include the legal and institutional framework for administering federal taxes, assessing corporations and individuals (except those resident in a state), and promoting taxation as a tool for economic growth.

The Service would also have powers to detect and act against tax fraud in line with the bill.

Furthermore, the Senate adopted recommendations on the Nigeria Tax Administration Bill, which provides for the assessment, collection, and accounting of revenue accruing to all tiers of government and outlines the responsibilities of tax authorities.

The penalties for non-compliance were detailed once again: N100,000 in the first month and N50,000 for each subsequent month for failure to register; N200,000 initially and N50,000 thereafter for failure to file returns; N10,000 for individuals and N100,000 for companies for failing to maintain proper books; and imprisonment for failure to remit taxes.

The tax bills, which were the sole item on the report submitted by Senator Musa, are expected to become key instruments for fiscal transformation and national development.