Tax Reform Bills: What You Need to Know

President Bola Tinubu’s tax reform bills are currently making waves in the National Assembly, with some radical measures that could impact the funding of tertiary institutions in Nigeria.

The bills aim to reform the country’s tax laws, but they face stiff opposition from various quarters, particularly from the northern parts of the country.

The proposed tax reform bills have sparked intense debate, with some hailing the changes as a step in the right direction, while others have expressed concerns about the potential impact on tertiary institutions.

At the heart of the controversy is the proposal to review the special tax privileges granted to the National Information Technology Development Fund (NITDF), the National Agency for Science and Engineering Infrastructure (NASENI) Fund, and the Tertiary Education Trust Fund (TETFUND).

The bills propose a phased removal of taxes charged exclusively for these three trust funds. While the NITDF levy is currently calculated as 1% of the profit before tax (PBT) of companies earning above N100 million, under the existing laws, 0.25% of profits before tax of commercial companies and firms with turnovers of N100 million and above in the banking, telecommunications, ICT, aviation, maritime, and oil and gas sectors are collected for NASENI. The levy is managed by the Federal Inland Revenue Service (FIRS) and credited to NASENI’s account.

For TETFUND, the tertiary education tax is payable by companies registered in Nigeria at the rate of 3% of their assessable profit. The new proposal sets 2029 as the expiry date for these special privileges. Section 59 of the Nigerian Tax Bill seeks to consolidate all development levies into a single levy of 4% of the profits of all eligible entities in 2025 and 2026. From 2027 to 2029, the rate will be reduced to 2%, and by 2030, the levies will cease entirely.

The proposed sharing formula allocates 50% of the levy to TETFUND in 2025 and 2026, increasing to 66% from 2027 to 2029, and then reducing to 0% by 2030. The Student Loan Fund is set to receive 25% of the developmental levy in 2025 and 2026, increasing to 33% between 2027 and 2029, and eventually receiving 100% by 2030. Similarly, the NITDF and NASENI are to be excluded from the development levy by 2027.

This proposal is expected to be a significant blow to TETFUND, which received over N800 billion in the 2024 budget. The fund is responsible for providing infrastructure in public tertiary institutions and training lecturers.

On Sunday, Governor Babagana Zulum of Borno State raised concerns about the issue during an interview, claiming that the bills seek to scrap the three agencies. However, the Chairman of the Presidential Committee on Fiscal Reforms, Taiwo Oyedele, and the Chairman of the Federal Inland Revenue Service (FIRS) have insisted that the proposal will not scrap the agencies.

Instead, the government will directly approve funding for them rather than relying on existing statutory transfers. “The proposal is not to scrap the agencies, but to ensure that funding is provided directly by the government,” Oyedele explained. The controversy surrounding the tax reform bills highlights the complexities and challenges of reforming Nigeria’s tax laws.