The Tax Reform Bill Of The Bola Tinubu Administration Explained In Simple English

The Tax Reform Bill of the Bola Tinubu Administration is a comprehensive overhaul of Nigeria's tax laws, aimed at simplifying tax administration, reducing tax burdens, and increasing revenue generation, if what government officials say is to be trusted.

Here Are The Key Provisions Of The Bill

The five key provisions of the Tinubu Administration's Tax Reform Bill include:

Reduction in personal income tax
Reduction in company profit tax
Progressive VAT
Redesign of capital gains tax
Streamlining of taxation of income from mining and petroleum operations

Let's briefly explain what all this means.

1. Reduction in Personal Income Tax

The bill proposes to reduce personal income tax rates, exempting individuals earning below ₦800,000 annually from paying income tax. If the bill scales through, the new tax rates will be as follows:

First ₦800k p/a – 0%
Next N2.2m p/a – 15%
Next N9m – 18%
Next N13m p/a – 21%
Next N25m p/a – 23%
Above N50m p/a – 25%

2. Reduction in Company Profit Tax

The Bola Tinubu Tax Reform Bill also reduces the top rate of company profit tax from 30% to 25% and exempts small businesses with annual turnovers below ₦25 million from paying profit tax.

3. Progressive Value Added Tax (VAT)

The bill increases VAT rates gradually from 7.5% to 15% by 2030. However, it aims to exempt or zero-rate basic goods and services that are essential for the poor and vulnerable populations.

Here are some examples of goods and services that might be exempt or zero-rated:

Food items: These include staple foods like rice, beans, maize, and cassava.
Fresh fruits and vegetables
Bread and other baked goods
Beverages
Water
Milk and other dairy products
Healthcare services: These include public healthcare services. Also proposed to be included are essential medicines and medical supplies
Education: These include public education services and educational materials like textbooks and stationery
Housing: This includes rent for low-income housing and building materials for low-cost housing
Personal hygiene: Included here are soap, toothpaste, and toilet paper.

Please note that the specific list of exempt or zero-rated goods and services might vary depending on the final version of the Tax Reform Bill and the regulations that will follow.

4. Redesign of Capital Gains Tax

The bill exempts certain capital gains from taxation, such as proceeds from the sale of residential property or land adjoining it.

The Bola Tinubu Tax Reform Bill's provision on capital gains tax exemption for residential property is a significant aspect of the legislation. Here's what you need to know about this:

Exemption Scope: The bill exempts capital gains arising from the sale of:

A person's primary residence (i.e., their main home).
Land adjoining the primary residence, provided it's sold together with the residence.

Conditions for Exemption: To qualify for the exemption, the following conditions must be met:

The property must have been the seller's primary residence for a specified minimum period (not yet specified but it is between 3-5 years).
The seller must not have claimed the exemption on another property within a specified timeframe (not yet specified but it is between 5-10 years).

Implications: This exemption of the Bola Tinubu Tax Reform Bill aims to encourage homeownership, particularly among low- and middle-income individuals. By exempting capital gains from taxation, the bill reduces the financial burden on homeowners when they sell their primary residence.

Please note that the specifics of this provision, such as the minimum period for primary residence or the timeframe for claiming exemptions, might be subject to change or clarification in the final version of the bill.

5. Streamlining of Taxation of Income from Mining and Petroleum Operations

The Bola Tinubu Tax Reform Bill aims to hand over revenue collection duties from the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) to the Nigeria Revenue Service (NRS). It also aims to streamline taxation of income from mining and petroleum operations.

The revenue collection duties being referred to here involve the collection of specific revenues related to the oil and gas industry, such as royalties, flare gas penalties, concession rentals, and miscellaneous oil revenues. These revenues are currently collected by the Nigeria Upstream Petroleum Regulatory Commission (NUPRC), which is the primary regulator of the upstream petroleum sector in Nigeria.

The Bola Tinubu Tax Reform Bill proposes to transfer these revenue collection duties to the Nigeria Revenue Service (NRS), which is likely a new or proposed revenue collection agency. However, it's worth noting that the Federal Inland Revenue Service (FIRS) is indeed the primary institution responsible for collecting revenues on behalf of the Federal Government of Nigeria.

It appears that the bill aims to streamline the taxation of income from mining and petroleum operations, potentially creating a more efficient and centralized system for revenue collection. However, further clarification on the specifics of the bill and the roles of NUPRC, NRS, and FIRS would be necessary to fully understand the implications of this proposal.

Conclusion

Overall, the Bola Tinubu Tax Reform Bill aims to create a more efficient and equitable tax system, promoting economic growth and development in Nigeria. Therefore, if the government can be sincere and take ample political will into the implementation of the bill, it could be one of the best things ever to grace the Nigerian economy.

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