The Senate on Wednesday made changes to the Tax Administration Act by insisting on sharing revenues generated from taxes among states and areas where goods and services are consumed, rather than where they are produced.
Under the proposed new law, VAT revenue would be distributed as follows: 10% to the Federal Government, 55% to the States and the Federal Capital Territory, and 35% to Local Governments.
Among the states, the allocation would be based on equality (50%), population (20%), and place of consumption, that is, location of consumer at the time of consumption (30%). For Local Governments, 70% of the total allocation will be distributed using equality (30%) and the remainder based on population.
By this, the Senate replaced the term “derivation,” which refers to revenue allocation based on where resources are produced; with “place of consumption.”
A 2% service cost of collection was also adopted. The collection fees accruing to the tax collection agency was reduced from 4% which was applicable for non-oil revenue to 2% based on the inclusion of oil revenues. Sen. Seriake Dickson who raised the amendment noted that the 4% collection will make the funds accruing to the tax agency too much.
This means that the Red Chamber passed two out of the four much anticipated Tax Reform Bills which are expected to overhaul the country’s tax laws.
The four key bills are the Joint Revenue Board (Establishment) Bill, 2025, the Nigeria Revenue Service (Establishment) Bill, 2025, the Nigeria Tax Administration Bill, and the Nigeria Tax Bill.
But of the four, only the Bill to Repeal the Federal Inland Revenue Service Act and enact the Nigeria Revenue Service (Establishment) Bill, 2025 and the Nigeria Tax Administration Bill (An Act to provide for the assessment, collection of, and accounting for revenue accruing to the federation, federal, states and local governments; prescribe the powers and functions of tax authorities, and for related matters) were approved.
Senate President Godswill Akpabio disclosed that the remaining two bills will be considered in plenary on Thursday. The Senate had spent close to 2 hours behind closed doors
Though they have scaled through 3rd reading, the bills will need concurrence with the House of Representatives and assent by President Bola Tinubu to make them laws of the Federal Republic of Nigeria.
The lawmakers approved them following the consideration and adoption of recommendations contained in the Tax Reform Bills report which was submitted by its Committee on Finance led by Sen. Sani Musa on Tuesday.
The bills seek to reform Nigeria’s tax framework, strengthen institutions, and enhance accountability and compliance.
For the Nigeria Revenue Service Bill, the President shall act as Chairman of the Board while an Executive Vice Chairman, subject to Senate confirmation, would serve as head of the Service. Clause 7 was amended to reflect this structure: “The Chairman of the Board who shall be the President; and (b) Executive Vice Chairman who shall be the head of the Revenue Service and subject to confirmation of the Senate.”
To promote inclusivity, the new bill provides that six Executive Directors be appointed—one from each geopolitical zone—on a rotational basis, with no Executive Director and Vice Chairman coming from the same state.
Clause 4 expands the functions of the Service to include assessing corporate taxpayers, collaborating with ministries to reform tax regimes, and adopting measures to “trace, freeze, confiscate or seize proceeds derived from tax fraud or evasion,” while Clause 13(2) requires the Secretary of the Board to be a qualified legal or financial professional of not less than Deputy Director rank. Annual reports are to be submitted no later than three months after each fiscal year.
The Senate also introduced updated penalties for tax offences to deter non-compliance. This includes N100,000 fine for failure to register (Clause 100) in the first month, and N50,000 monthly thereafter.
Others include failure to file returns (Clause 101): N200,000 in the first month, N50,000 for each subsequent month; failure to keep records (Clause 102), N10,000 for individuals and N100,000 for companies and failure to remit tax (Clause 107).
In addition to administrative penalties, offenders face imprisonment for up to three years.
In his remarks, the president of the Senate, Godswill Akpabio, commended the committee on Finance and senators for a thorough job. He also expressed gratitude to the group of “elder senators” who collated and deliberated on areas of contention in the Tax Bill through meetings and consultation with dissenting voices.
Akpabio expressed optimism that the tax laws will revolutionalise and optimise tax collection across the country. He expressed satisfaction that the passage of the bills have dispelled rumours that they were meant to serve the interests of a part of the country, adding that all Nigerians will benefit from them.
On his part, the Deputy President of the Senate, Sen. Barau Jibrin, congratulated the entire Senate and in particular the Committee on Finance and the Elders Committee for the wisdom and leadership that has been shown in the passage of the bills.
“Initially, there were disagreements and there were rancors here and there. But the Senate, standing on its position as the highest assembly in the land, decided to establish this committee, Committee of Elders (Special Committee), to look at all those areas of contention and hear the views of religious leaders, regional organisations and other stakeholders.”
