Tax reform bills: Sharia council, FCT imams, Yadudu reject inheritance law, VAT increase

Stakeholders want contentious clauses expunged Kano govt differs with NGF on VAT distribution formula, wants existing rate maintained   Stakeholders on Wednesday raised concerns over some contentious clauses in the four tax reform bills sent to the National Assembly by President Bola Ahmed Tinubu. The stakeholders including the Kano State Government, Supreme Council for Shariah […]

• Stakeholders want contentious clauses expunged

• Kano govt differs with NGF on VAT distribution formula, wants existing rate maintained

 

Stakeholders on Wednesday raised concerns over some contentious clauses in the four tax reform bills sent to the National Assembly by President Bola Ahmed Tinubu.

The stakeholders including the Kano State Government, Supreme Council for Shariah in Nigeria, Committee of FCT Imam and the Nigerian Customs Service, among others, expressed their concerns while presenting their memoranda during the public hearing on the tax reform bills organised by the House Committee on Finance.

The four tax bills are: the Nigeria Tax Administration Bill, the Nigeria Revenue Service (Establishment) Bill, the Joint Revenue Board Bill, and the Nigeria Tax Bill, which have been passed for a second reading by both the Senate and the House of Representatives.

The Kano State Government in its memorandum presented to the committee raised concerns over several clauses in the tax reform bills, urging the committee to either delete or amend.

The memorandum presented to the committee was signed by the Permanent Secretary, Office of the Secretary to the Kano State Government, Umar Muhammad Jalo.

On VAT distribution formula, the Kano State government disagreed with the position of the Nigeria Governors’ Forum (NGF) and recommended that the current sharing formula in the original act should be maintained.

Daily Trust reports that the NGF had proposed VAT sharing formula of 50% based on equality, 30% based on derivation, and 20% based on population.

However, the Kano State Government in its presentation, said the existing horizontal distribution of VAT framework, viz: equality (50%), population (30%) and derivation (20%) should be maintained for a transitional period of two years. The government said the transitional period is deemed sufficient enough for relevant agencies to collaborate and generate credible data.

The government also argued that the transition period will also provide an opportunity for the tax authority to re-establish local VAT offices in all the states of the federation and FCT for effective administration of VAT.

The government urged the committee to uphold the current vertical VAT distribution framework of 15% for the federal government, 50% for the state government and 35% for local governments.

On why the Kano State government differed its position from that of the NGF on VAT distribution, a constitutional lawyer, Prof Auwalu Yadudu, who was part of the delegation said, “If I may respond to the issue raised by the chair, it is our view and the view of people of Kano that the Nigerian Governors Forum cannot speak decisively and exclusively to preclude positions being taken differently from what they have taken.

“So, our memo has in a way modified that position and we think we are entitled to do that.”

The government also recommended that TETFUND, NITDA and NASENI should continue to be funded from the Development Levy with the Student Loan as additional beneficiary.

On proposal for incremental review of VAT, the Kano State government opposed it, saying that increasing VAT rate from 7.5% to 10% at a time Nigerians are facing unprecedented cost of living crisis will create more difficulties for families and elevate their levels of vulnerability and deprivation.

It, therefore, urged the committee to delete the proposed provision and maintain status quo (7.5% VAT).

The government raised concern over Section 7(1),(2) and (3) which deals with the composition of the Governing Board of the proposed Nigeria Revenue Service.

The government recommended that derivation should be clearly and unambiguously defined in the interpretation section of the bill and that derivation should be attributed to only the point of consumption since VAT is a consumption tax.

The government raised concerns over the supremacy clause provision in Section 141 of the bill, saying only the Constitution which is the grundnorm is Supreme. It therefore, recommended the deleting of supremacy provision from the bill.

A constitutional lawyer, Professor Auwalu Yadudu while speaking after the submission by the delegation from Kano State, highlighted the areas in the Tax Reform Bills that are in conflict with constitutional provisions.

Yadudu said he had reviewed the piece of legislation and noticed “serious concerns”.

He said the ‘supremacy clause’ and the repeated use of “notwithstanding” in the bills will undermine the supremacy of the Nigerian constitution.

“The act or the bill being proposed is given the supremacy status like the Constitution. Only the Nigerian Constitution has supremacy, and therefore if you were to enact any of these bills and you enact them on the basis that they are supreme over any other law which would contradict them, then that would be wrong, and that would be contrary to the Constitution,” he said.

He also observed that it is constitutionally wrong for the National Assembly to create tax boards for states and local governments as proposed in the bills.

Yadudu said the proposed Nigerian Revenue Service board should consist of representatives from the 36 states and the FCT to make it truly federal.

He said, “In the boards that you have established, I think it is the tax administration, you are establishing a board, management board, giving the name National Revenue Service, but having members that are only ex-officials mainly with the chairman of the board and six representatives of geopolitical thoughts.

“I think this goes contrary to the federal character of this nation in that you either call it Federal Revenue Service Board, in which case you can have any number of ex-officials of your members or if you want to make it truly federal, then you should have each state represented on that board. My preference is that it will be federal.”

He also raised concerns over the inheritance tax in the proposed tax bills and urged the committee to look into it.

“I think, as has been submitted, this is not acceptable for Muslims and Christians. There was a submission yesterday that you are imposing a tax on an entitlement of an inheritance by members, and then you are calling it, that it is not an inheritance tax.

In their submissions, the Supreme Council for Shari’ah in Nigeria represented by Prof. Ahmed Bello Dogarawa said the VAT rate should revert to 5% or maintain the status quo of 7.5%.

The council acknowledged the importance of tax reforms but opposed the proposed inheritance tax, stating that it conflicts with Islamic law and religious practices.

He said, “While we appreciate efforts to streamline tax laws, we cannot support a provision that contradicts deeply held religious principles. Taxing inheritance in this manner would create unnecessary tension and legal challenges.”

The council also called for the modification of the clause on inheritance tax and called for the entire expunging of Section 4(3) Part 1, Chapter 2 of the Nigeria Tax Bill.

“The new clause should read as either of the following: ‘In this section, the reference to family income or however called, shall not affect the operation of distribution of the estate under the Personal Law of the deceased,” it added.

The council also raised concerns over removing tax exemptions for religious institutions, warning that it could hamper their ability to provide community services.

“Any attempt to tax inheritance would be seen as an infringement on religious rights and could create legal disputes,” he said.

He added that if the federal government insists on maintaining inheritance tax, the bill should be amended to explicitly state that it does not apply to estates distributed under personal law (Sharia law, among others).

The council said the term “derivation” in the bill was vague and ambiguous, saying that it must be properly defined.

Professor Dogarawa said derivation should be explicitly defined as the location where actual consumption takes place.

In its presentation, the FCT imam committee represented by Dr Umar Aliyu, the Imam of Banex Mosque Abuja, said his association opposed any form of taxation on religious institutions and faith-based organisations.

He said religious institutions play a crucial role in community development and welfare; therefore, imposing taxes on mosques and religious centres would create financial hardships and discourage charitable activities.

Like the Sharia council, the imams also opposed VAT increment but rather proposed a reduction of VAT rate from 7.5% to 5% or at best, the current rate of 7.5% should be sustained.

The association also proposed that the clause which seeks to stop the funding of TETFund, NASENI and NITDA by 2030 should be expunged from the bills.

The clerics also opposed the development levy, arguing that it would place unnecessary financial strain on religious institutions that are already playing a key role in supporting the needy.

The Nigeria Customs Service (NCS) also on Wednesday said the Tax Reform Bills especially the Nigerian Revenue Service Establishment Bill was in conflict with the Nigerian Customs Service Act 2023 as the Bills seek to take over the statutory responsibilities of the NCS.

In his submission at the public hearing on the Bills before the House of Representatives Committee, the Custom’s boss, CG Bashir Adewale Adeniyi said that there are jurisdictional conflict issues between the Tax Reform Bills and the NCS Act.

We’ll consider proposals from Nigerians in passing tax bills – Speaker Abbas

The Speaker of the House of Representatives, Abbas Tajudeen, in his remarks, assured that the House would consider proposals and recommendations received from stakeholders in the final report on the four tax reforms bills.

Speaker Abbas noted that the House would ensure it scrutinised the bills in the best interest of Nigerians.