On Wednesday, the Senate approved two of four proposed Tax Reform Bills: the Nigeria Revenue Service (Establishment) Bill, 2025, which repeals the Federal Inland Revenue Service Act, and the Nigeria Tax Administration Bill, designed to enhance revenue assessment, collection, and accountability.
Following a two-hour closed-door session and the adoption of the Senate Committee on Finance’s report led by Sen. Sani Musa, the bills now await the concurrence of the House of Representatives and the assent of President Bola Tinubu to become law.
The Nigeria Tax Administration Bill introduces a significant change by replacing “derivation” with “place of consumption” for VAT revenue allocation.
Under this new formula, 10% of the revenue will go to the Federal Government, 55% to States and the Federal Capital Territory, and 35% to Local Governments. The allocation among states will be based on equality (50%), population (20%), and place of consumption (30%). For Local Governments, 70% will be allocated using equality (30%) and the remainder based on population.
Additionally, the collection levy has been reduced from 4% to 2%, as proposed by Sen. Seriake Dickson, to encompass oil revenues.
The Nigeria Revenue Service Bill appoints the President as Board Chairman, with an Executive Vice Chairman, subject to Senate confirmation, serving as the head of the Service. “The Chairman of the Board who shall be the President; and (b) Executive Vice Chairman who shall be the head of the Revenue Service and subject to confirmation of the Senate,” states Clause 7. Six Executive Directors, one from each geopolitical zone, will ensure inclusivity, with conditions that no Director and Vice Chairman can come from the same state. The Service’s responsibilities include assessing corporate taxpayers, reforming tax regimes, and confiscating proceeds from tax fraud or evasion.
Non-compliance penalties have been specified, including: N100,000 for failure to register (Clause 100) in the first month, followed by N50,000 monthly; N200,000 for failure to file returns (Clause 101) in the first month, with N50,000 subsequently; N10,000 for individuals and N100,000 for companies for failure to keep records (Clause 102); and imprisonment of up to three years for tax offences.
Senate President Godswill Akpabio commended the Finance Committee and “elder senators” for resolving contentious issues, stating, “The passage of the bills have dispelled rumours that they were meant to serve the interests of a part of the country.”
Deputy Senate President Barau Jibrin expressed gratitude to the Elders Committee for addressing stakeholder concerns.
“Initially, there were disagreements and there were rancours here and there. But the Senate… decided to establish this committee, Committee of Elders (Special Committee), to look at all those areas of contention,” he noted.
The remaining bills, the Joint Revenue Board (Establishment) Bill, 2025, and the Nigeria Tax Bill, are scheduled for plenary on Thursday, May 8, 2025.
