A policy analyst and an economics professor were among the experts who told EQ that, beyond proposing new tax reform bills, the government must strike a balance between generating revenue through taxation and taxing citizens without incapacitating them.There have been nonstop conversations and questions about the four tax reform bills proposed by President Bola Tinubu in the past few days.Since the president submitted the bills to the National Assembly in October, there have been controversies and differing views. However, reactions surged on November 28 after the bills passed the second reading in the Senate.The bills are the Nigeria Tax Bill, Nigeria Tax Administration Bill, Nigeria Revenue Service (Establishment) Bill and Joint Revenue Board (Establishment) Bill.Habeeb Bello, a policy analyst, told EQ that the four bills would harmonise and change the Nigeria Tax system. According to Bello, the NTB is meant to repeal 11 existing tax laws and amend 16 laws to provide a unified fiscal legislation governing taxation in Nigeria.On the other hand, the NTAB aims to provide a framework for how taxes are assessed, collected and accounted for in Nigeria. While the NRSB will repeal the Federal Inland Revenue Service (FIRS) Establishment Act and create a new body to be in charge of collection and accounting for all revenues due to the Federation, the JRB bill creates a new body that will function as the existing Joint Tax Board (JTB). The analyst noted that this board will have expanded functions of harmonising and creating a tax database for the Federation.As earlier reported by EQ, some of the major talking points of the bills include the sharing formula for Value Added Tax (VAT), personal and corporate income tax changes, development levies and the proposed replacement of the FIRS with the Nigeria Revenue Service (NRS) to unify taxation.One thing is certain in the coming years: Nigerians will pay more VAT. However, taxes are exempted on essential services like rent, public transportation, health, food and education.In the proposed bill, the VAT charged on the goods and services Nigerians use will increase from 7.5% to 10% first and then progressively to 15% by 2030.Regarding the sharing formula for VAT revenues, the federal government takes 15 per cent, while 35 per cent goes to all the 774 local government areas and 50 per cent is shared among the states under the current system. But the proposed tax reform bill introduces a new sharing formula: 10 per cent for the federal government, 55 per cent for states while the local governments take the remaining 35 per cent.In his analysis, Bello explained that the VAT, which is in the NTB, is an attempt to correct the flaw in the existing framework that unfairly attributes VAT to where the headquarters of companies are located.Increasing the VAT rate to 10 per cent, coupled with the proposed 5 per cent reduction in the federal government’s share of the revenue, could mean no state would lose under the new sharing formula.READ ALSO: EXPLAINED: Proposed Tax Bills, What They Would Mean for NigeriansThis aligns with the argument made by Taiwo Oyedele, the chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, who highlighted that the current system allocates VAT revenue to states based on where payments are made rather than where consumption occurs. This approach disproportionately benefits states such as Lagos, where many businesses have their headquarters and process payments, regardless of where the actual consumption takes place.“To promote equity and stimulate economic activity across the country, the reform proposes attributing VAT to where consumption takes place and increasing the share of VAT revenue states retain,” Oyedele had said.Segun Ajibola, a professor of Economics and former president of the Chartered Institute of Bankers of Nigeria (CIBN), told EQ that as the economy changes, along with its dynamics and structures, so also must taxation, which is a major revenue source.“Every law and act that has to do with an economy must contain some elements of review because the economy changes in character and culture. The global environment is not static. Rules and regulations, governance, employer-employee relationship and public-private interaction, among others, change from country to country and globally,” he said.“Taxation is one of such issues that are often subjected to periodic and regular review because taxation constitutes a major instrument of fiscal policy.”For Professor Ajibola, there are pluses and minuses for taxation.On one hand, it generates revenue for the government to function, to provide necessary services and to manage the monetary affairs of the economy. However, on the other hand, it reduces the purchasing power of individuals and corporate institutions.The professor opined that as a source of revenue, government spending relies heavily on taxation. When the government taxes corporate institutions, corporate bodies and multinationals, the purchasing power and disposable income of individuals reduce.He, however, mentioned that the law must be able to strike a balance in generating revenue for the government through taxation without incapacitating individuals and corporate institutions.“Taxation is an instrument of redistribution. It should take away from the rich and give to the poor so that the rich will not be super rich and living in opulence while the poor will be multidimensionally poor and unable to provide for their needs. So, you tax the rich heavily to subsidise the living conditions of the poor,” Ajibola explained.“When you look at all of these, a time will come when laws that have been in existence on tax matters for years will no longer be capable of taking care of the present condition of the economy in terms of government responsibility, standard of living, et cetera.”READ ALSO: Market Women in ‘People’s Paradise’ Groan Over Multiple Tax, InfectionRegarding the concerns of northern governors about the proposed VAT-sharing formula, which they felt would be skewed against their region, Professor Ajibola stated that the region could promote local economic activity and enter into bilateral agreements with top-level institutions to attract businesses to their states.He noted that while some businesses may not have head offices in major northern cities despite sourcing raw materials there, certain companies could be persuaded to relocate for reasons like the ease of doing business.The post Experts Stress FG’s Responsibility to Tax Nigerians Through Reform Bills Without Incapacitating Them appeared first on Foundation For Investigative Journalism.