Activista Nigeria Position Paper on Tax Bill, 2024.

Position Paper on Tax Bill, 2024

Prepared by Activista Nigeria 

Introduction 

The Nigeria Tax Bill, 2024, proposed by the Federal Government, seeks to reform the nation’s tax system by consolidating existing laws and introducing new measures to boost revenue. While these objectives appear pragmatic, the bill comes at a time when Nigerians are grappling with severe economic challenges. With inflation at 22.7%, unemployment at 33.3%, and over 63% of the population (133 million people) classified as multidimensionally poor according to the World Bank, the common man faces unprecedented hardships. Any proposed tax reforms must, therefore, prioritize social justice and equity, ensuring that the most vulnerable populations are not unduly burdened.

This position paper evaluates the proposed bill from a tax justice and accountability perspective. It highlights specific sections of the bill that raise concerns about fairness and inclusiveness, analyzes their implications for the common man, and proposes necessary reforms to protect vulnerable populations. Activista Nigeria advocates for reforms that uplift Nigerians and foster a fair and inclusive tax system, rather than deepen the current struggles of the people.

The role of taxation in national development is undeniable, yet it must be tempered with an understanding of ability to pay. Wealth redistribution through progressive taxes can reduce inequality, while regressive taxes, such as VAT and excise duties, risk worsening poverty. By addressing these critical issues in the Nigeria Tax Bill, Activista Nigeria calls for a tax system that prioritizes equity and social justice, ensuring that no Nigerian is left behind in the quest for economic development.

Objectives of the Bill

The Nigeria Tax Bill, 2024, aims to establish a unified fiscal framework that modernizes and consolidates the country’s taxation laws. Its primary objective is to streamline tax administration, increase revenue generation, and reduce inefficiencies in the existing system. Sections 1–10 of the bill emphasize creating a more efficient tax structure to enable the Federal Government to meet its fiscal needs and reduce the country’s dependence on debt financing.

A key provision of the bill, outlined in Section 22, is the broadening of the tax base to include previously untapped sources, such as informal sector workers and small businesses. While this measure aims to increase government revenue, it places additional pressure on the informal economy, which constitutes over 60% of Nigeria’s GDP. The inclusion of these groups without tailored support mechanisms highlights the need for careful consideration of how these policies impact vulnerable populations.

The bill also seeks to increase Value Added Tax (VAT) from 7.5% to 10%, as specified in Section 142. This provision is intended to generate additional revenue to fund public services and national development projects. However, VAT is a regressive tax, and increasing it disproportionately affects low-income earners who already spend a significant portion of their income on basic necessities.

Another objective of the bill is the expansion of excise duties, detailed in Section 157, to cover telecommunications services and other sectors. This measure aims to diversify the government’s revenue streams. While broadening the tax net is a laudable goal, it risks burdening consumers and small businesses with higher operational costs, which are often passed down to the common man.

The bill also addresses the taxation of non-resident entities and digital platforms under Sections 17–19. These provisions seek to capture revenue from foreign companies conducting business in Nigeria without physical operations. While this initiative aligns with global trends in digital taxation, the bill lacks clear compliance mechanisms and may face enforcement challenges, leaving room for potential revenue losses.

Sections 174–176 introduce measures to incentivize large corporations, particularly those in the oil and gas sector, through tax exemptions and reliefs. The government aims to attract investments and stimulate economic growth in these industries. However, these incentives raise questions about fairness, as they grant significant tax advantages to corporations while low-income earners bear increased tax burdens.

Finally, the bill outlines provisions for improving tax compliance through the use of technology and data collection systems, as seen in Sections 201–204. These measures aim to reduce tax evasion and improve efficiency in revenue collection. However, without strong accountability frameworks, there is no guarantee that the increased revenue will be directed toward addressing the urgent needs of the common man, such as healthcare, education, and infrastructure.

Key Issues in the Bill 

The Nigeria Tax Bill, 2024, contains several provisions that raise serious concerns about fairness, equity, and its potential impact on vulnerable populations. Chief among these is its reliance on regressive taxes, such as the proposed increase in VAT to 10% under Section 142, and the broadening of excise duties in Section 157. These taxes disproportionately affect low-income earners, who already spend the majority of their income on basic goods and services. For the 63% of Nigerians classified as multidimensionally poor, these measures will exacerbate poverty and reduce access to essential items.

Another critical issue is the lack of exemptions for basic necessities. Although Section 164 outlines tax exemptions, these are primarily targeted at corporations operating in free trade zones rather than at essential goods, such as food and healthcare services. This oversight places an undue financial burden on low-income families, who rely heavily on affordable access to these basic needs.

The bill also imposes additional compliance burdens on small businesses and informal sector operators under Sections 22 and 28. These provisions require stricter tax registration and reporting processes, which many SMEs lack the resources to navigate. Given that SMEs account for over 80% of Nigeria’s workforce, these measures risk leading to business closures, job losses, and economic stagnation, further compounding unemployment, which currently stands at 33.3%.

The taxation of multinational corporations and digital platforms, as outlined in Sections 17–19, highlights another significant issue. While it is commendable to capture revenue from foreign entities, the bill’s lack of clear enforcement mechanisms raises concerns about compliance. Multinational corporations have historically employed profit-shifting strategies to evade taxes, and the bill does little to address this. Meanwhile, local businesses that cannot navigate such loopholes are left to shoulder a disproportionate tax burden.

Accountability in the allocation of tax revenue remains a glaring weakness in the bill. Sections 201–204 fail to specify how increased revenues will be directed toward critical sectors, such as education, healthcare, and infrastructure. Without robust mechanisms for transparency, there is a risk that funds will be mismanaged, depriving Nigerians of the benefits that should accompany these reforms. Past examples of corruption and inefficiency underscore the need for stronger safeguards.

The bill’s neglect of gender disparities in taxation further raises concerns. Women, particularly those in the informal sector, face unique challenges that the bill fails to address. Regressive taxes on goods and services disproportionately impact women, who are often the primary caregivers in households. The absence of exemptions for maternal healthcare and sanitary products exacerbates gender inequality, leaving women-headed households especially vulnerable to economic hardship.

Finally, the omission of climate justice provisions is a missed opportunity to align the bill with global sustainability goals. Industries like oil and gas, which contribute significantly to environmental degradation, continue to enjoy tax benefits under Sections 174–176. A just tax system should hold polluting industries accountable while channeling revenues into climate adaptation programs and environmental restoration initiatives. By failing to address these concerns, the bill undermines efforts to protect vulnerable communities from the worsening impacts of climate change.

Implications for the Common Man 

The proposed Nigeria Tax Bill, 2024, is likely to deepen the economic challenges faced by ordinary Nigerians. Section 142, which increases VAT from 7.5% to 10%, will drive up the cost of basic goods and services, particularly food and healthcare, making them unaffordable for many low-income families. With over 133 million Nigerians living in poverty (World Bank, 2024), any increase in VAT on essentials will deepen poverty and force households to cut back on necessities.

For small businesses, which are critical to Nigeria’s informal economy and employ over 80% of the workforce, Sections 22 and 28 introduce complex compliance requirements that could push many into informality or closure. Increased taxation and burdensome processes will lead to job losses, reduced income for families, and heightened economic insecurity. Without targeted support, these measures will erode the livelihoods of millions who rely on small-scale enterprises for their survival.

Women, who are disproportionately represented in the informal sector, are particularly vulnerable to the effects of the bill. Regressive taxation, combined with the absence of exemptions for maternal healthcare products, disproportionately affects women-headed households. With gender inequality in income already a significant issue in Nigeria, the bill risks worsening the economic conditions faced by women, leaving them further marginalized and unable to support their families effectively.

The bill’s lack of exemptions for basic necessities, such as food and school supplies, further aggravates the challenges faced by families. According to the National Bureau of Statistics (NBS), over 50% of household expenditures in Nigeria are spent on food. Increasing VAT on essential goods will leave families with little to no disposable income, exacerbating child malnutrition, school dropout rates, and declining access to healthcare. This undermines efforts to reduce poverty and improve living standards.

The common man also suffers from the government’s failure to guarantee that tax revenues will be used for public welfare. Sections 201–204 provide no clear accountability mechanisms, leaving room for mismanagement of funds. Past examples of misallocated public funds have left critical sectors, such as healthcare and education, underfunded. Citizens may end up paying higher taxes without any tangible improvements in their daily lives.

Environmental concerns also impact the common man. The bill’s failure to integrate climate justice measures, such as taxing polluting industries, leaves communities exposed to the effects of environmental degradation. Low-income families, who are most vulnerable to pollution and climate-related disasters, will bear the brunt of these environmental issues without receiving the necessary resources to adapt.

Finally, the failure to address unemployment, which currently stands at 33.3%, means that increased taxation will likely worsen joblessness. Tax reforms that do not prioritize job creation risk leaving more Nigerians without income sources, further straining an already fragile economy. Activista Nigeria emphasizes that tax reforms must aim to alleviate the struggles of ordinary Nigerians, not deepen their economic hardships.

Tax Justice Analysis 

Tax justice demands fairness, equity, and accountability in taxation policies. The Nigeria Tax Bill, 2024, fails to meet these principles. By relying on regressive taxes, such as VAT and excise duties, the bill disproportionately burdens low-income earners. Section 142, which proposes a VAT increase, directly contradicts the principle of ability to pay. Wealthier individuals and corporations should bear a greater share of the tax burden, yet the bill shifts this responsibility to the poor, exacerbating poverty and inequality.

The bill provides significant tax relief for multinational corporations, particularly those in free trade zones and the oil and gas industry, as outlined in Sections 164 and 174–176. These provisions prioritize corporate profits over the needs of ordinary Nigerians. Large corporations, many of which already benefit from favorable tax regimes, pay far less in taxes compared to what the common man is required to contribute. This imbalance undermines tax equity and aggravates growing wealth gap.

Women face a disproportionate tax burden due to the lack of gender-sensitive provisions. Regressive taxes on essentials like food and healthcare disproportionately affect women-headed households, leaving them with limited resources to meet family needs. Without targeted exemptions or relief for maternal healthcare, sanitary products, or childcare expenses, the bill deepens existing gender disparities in economic opportunities and living standards.

Another critical issue is the bill’s failure to address climate justice. Industries responsible for environmental degradation are exempt from significant taxes under Sections 174–176, depriving the government of much-needed funds to combat climate change. Activista Nigeria advocates for taxing polluting industries and using the revenue for climate adaptation programs and community resilience initiatives. These measures would align with global best practices and ensure that Nigeria’s most vulnerable populations are protected from environmental harm.

Furthermore, the bill’s neglect of the informal sector risks further marginalizing millions of Nigerians. Informal workers often face disproportionate penalties under formal taxation systems, as they lack the capacity to navigate complex tax compliance requirements. Simplified tax systems and incentives for formalization should be prioritized to ensure that informal businesses can contribute without being penalized.

A fair tax system also requires transparency in revenue allocation. Without clear provisions for how taxes will be used to fund healthcare, education, or infrastructure, the bill fails to uphold public trust. Activista Nigeria insists on strict accountability frameworks to ensure that every naira collected is used to improve the lives of ordinary Nigerians.

Finally, tax justice requires that the wealthy and powerful contribute proportionately to national development. Activista Nigeria calls for progressive taxation measures, such as increased taxes on luxury goods and high-income earners, to reduce inequality and ensure that the burden of taxation is shared equitably.

Accountability and Transparency 

Effective taxation systems rely on accountability and transparency to maintain public trust. The Nigeria Tax Bill, 2024, fails to include sufficient measures to ensure that tax revenues are allocated and spent transparently. Sections 201–204, which govern revenue allocation, lack provisions for mandatory public reporting, leaving room for mismanagement and corruption.

The absence of independent oversight bodies to monitor tax revenue usage is a glaring omission. Without such structures, citizens have no assurance that the funds collected will be used for public welfare programs. Activista Nigeria calls for the establishment of civil society-led monitoring bodies to oversee tax collection and allocation processes, ensuring that funds are directed to critical sectors like education, healthcare, and infrastructure.

Citizen participation is also crucial for accountability. The bill does not outline any provisions for participatory budgeting or public input in determining how tax revenues are spent. Engaging citizens in budget decisions ensures that public funds address their needs and priorities, increasing trust in the taxation system.

The lack of audits and public disclosures further compounds transparency issues. Annual reports detailing how tax revenues are spent must be mandated to prevent misuse. Such measures provide clarity and allow citizens to hold public officials accountable for their actions.

The taxation of digital platforms, outlined in Sections 17–19, highlights additional transparency concerns. Without clear guidelines for tracking and auditing revenues generated from digital taxes, there is a risk of underreporting and evasion. Transparent digital taxation frameworks are essential to ensure compliance and maximize revenue generation.

Finally, public officials responsible for mismanaging tax revenues must face consequences. The bill does not specify penalties for the misuse of funds, leaving room for impunity. Activista Nigeria insists on strict penalties for corruption and mismanagement to foster a culture of responsibility and integrity within the public sector.

Conclusion 

The Nigeria Tax Bill, 2024, seeks to reform the nation’s tax system but fails to address the critical issues of fairness, equity, and accountability. By increasing the burden on the most vulnerable, neglecting gender-sensitive provisions, and exempting polluting industries, the bill risks deepening poverty, inequality, and environmental degradation. Without targeted reforms, it cannot serve as the transformative tool Nigeria needs.

Activista Nigeria calls for urgent amendments to the bill to prioritize progressive taxation, exemptions for necessities, and transparent revenue allocation. Taxation should be a catalyst for national development, not a source of oppression. The government must ensure that every tax money collected translates into improved living conditions for all Nigerians.

The Federal Government has a responsibility to create a tax system that fosters economic equity, uplifts the vulnerable, and ensures sustainable development. Activista Nigeria remains committed to advocating for a fair and just tax system that protects the common man and prioritizes the welfare of all citizens.