Reps approves Tax Reform Bills with revised VAT plan

The House of Representatives has given the green light to the tax reform bills following the approval of the report from the Committee on Finance.

During Thursday’s plenary, James Faleke, chairman of the finance committee, called for a clause-by-clause review of the bills. After thorough consideration, the committee’s recommendations were adopted.

The bills, which include the Nigeria Tax Bill, the Tax Administration Bill, the Joint Revenue Board Establishment Bill, and the Nigeria Revenue Service Bill, were presented to the National Assembly after President Bola Tinubu pushed for their passage on October 3, 2024.

Initially, the bills faced opposition from northern governors, who expressed concerns about their potential impact on regional interests and demanded fair implementation across all regions. However, in January 2025, the Nigeria Governors’ Forum (NGF) backed the bills after reaching an agreement on a fair VAT-sharing formula.

The Senate approved the bills for second reading in November 2024, while the House of Representatives followed suit in February 2025 after extensive debate, leading to a public hearing.

One of the key provisions of the Nigeria Tax Bill, under Section 146, had proposed a gradual VAT increase from 7.5 percent to 12.5 percent between 2026 and 2029, with a final increase to 15 percent by 2030. However, this proposal met stiff resistance from stakeholders, including the Trade Union Congress (TUC), during the public hearing.

In response to the public outcry, the finance committee reviewed the proposal and recommended that VAT remain at the current rate of 7.5 percent, a decision that was approved by the House.

Regarding VAT revenue allocation, the original proposal suggested that the federal government receive 15 percent, while states and the Federal Capital Territory (FCT) would get 50 percent, and local governments 35 percent.

However, the committee recommended a revised formula: 10 percent for the federal government, 55 percent for states and the FCT, and 35 percent for local governments. This adjustment was also approved by the House.