The Layman’s Understanding of the Proposed Tax Reform Bill

By Emmanuel Odekina Iyede Aidoko Onuche

In recent weeks, the Nigerian Senate has been discussing President Bola Tinubu’s proposed tax reform bills. These bills are a big deal because they could change how Nigeria collects and shares its money. But what does it really mean for the everyday person? Let’s break it down in the simplest way possible.

What Is the Tax Reform Bill About?

Think of it as a plan to fix Nigeria’s money-sharing system. Right now, the federal government collects most of the money, like VAT (Value Added Tax), and then shares it with the states and local governments. The proposed tax reform will:

1. Give states a bigger share of the money collected (55% of VAT instead of the current 15%).
2. Remove unnecessary taxes to make things easier for businesses.
3. Let people earning below the minimum wage pay no tax at all.

In short, the government wants to make the system simpler and fairer for everyone.

What If States Get Full Control of Their Resources?

Imagine Nigeria as a family where every state is a child. Right now, the parents (the federal government) collect all the pocket money (resources) and decide how much each child gets. But what if each child got to keep their own pocket money and decide how to use it?

That’s what people mean when they say states should control 100% of their resources. Here’s how it might work:

• States with a lot of oil, like Rivers or Delta, would keep all the money made from selling oil in their area.
• States rich in agriculture, like Kebbi or Plateau, would keep all the money from farming products.
• States with industries, like Lagos, would keep the taxes from businesses in their state.

This system is called “resource control.”

What Are the Pros of Full Resource Control?

1. Fairness: States would be rewarded for their hard work. If a state generates a lot of money, it keeps it.
2. Healthy Competition: States might work harder to improve their economy so they can earn more.
3. Local Accountability: Instead of waiting for handouts from Abuja, state governors would have to manage their money wisely.

What Are the Cons of Full Resource Control?

1. Unequal Development: States without big industries or resources, like Borno or Yobe, might struggle to generate enough money for schools, hospitals, or roads.
2. Higher Taxes Locally: States may need to increase taxes on their residents to generate income.
3. Risk of Mismanagement: If a state leader misuses resources, there’s no federal backup to bail them out.

How Does This Affect the Average Nigerian?

• If you live in a resource-rich state, life could improve with better roads, schools, and healthcare—if the government uses the money wisely.
• In less wealthy states, there might be higher taxes or fewer services unless they find new ways to generate income.
• Everyone would rely more on their state government for development instead of the federal government.

In Summary

The proposed tax reforms aim to share resources more fairly and encourage states to take more responsibility. While the current reforms don’t give states 100% control yet, it’s a step towards making states more self-reliant.

For the everyday Nigerian, the key is holding leaders accountable—whether it’s in Abuja or your state capital. After all, whether the money comes from oil, taxes, or farming, it’s meant to improve the lives of the people.