Tax harmonisation: Will reform bills secure presidential assent?

Nigeria's four tax reform bills have successfully passed both the House of Representatives and the Senate, marking a significant milestone in the country's journey towards tax reform. The next crucial step in this process involves the conference committee harmonizing the areas of differences between the versions of the bills passed by the two chambers before transmitting them to the President for his assent. Martins Arogie, Partner of Tax, Regulatory and People Services at KPMG Nigeria, provided insights into the key differences between the House of Representatives and the Senate versions of the bills. Arogie highlighted that the details of the Senate's version are not yet available, but based on the adjustments made by the House of Representatives, it is expected that the Senate followed similar lines. Notably, both chambers rejected proposals to change the Value Added Tax (VAT) and opted to maintain it at the current rate of 7.5%. This decision aligns with the aim of transitioning Nigeria to an actual VAT system, allowing for greater flexibility in VAT claims. Additionally, adjustments were made to the tax incentive framework, particularly targeting free zone entities and tax holiday periods. The reforms aim to enhance revenue generation for the government by addressing existing loopholes and modernizing the tax system. The proposed changes include the introduction of a tax credit incentive system for companies previously benefiting from tax exemptions, as well as implementing a minimum tax framework applicable to entities above a certain revenue threshold. These measures are expected to contribute to increased tax collections, although the impact on VAT revenues may remain minimal due to the unchanged VAT rates. Despite the adjustments made during the legislative process, the fundamental goal of the tax reform bills remains intact: to create a more efficient and harmonized tax system that fosters economic growth and sustainability. As Nigeria moves closer to implementing these reforms, stakeholders will closely monitor the potential effects on revenue collection and overall tax compliance.