Following a closed-door deliberation lasting over two hours, the red chamber ratified recommendations from its finance panel, chaired by a key northern legislator. The measures now move to the lower legislative house and require executive authorization before they become enforceable instruments.

One of the approved policies introduces a new basis for allocating proceeds from value-added economic activities, replacing prior location-based criteria with end-user consumption as the determinant. Under this model, central authorities will retain a 10% share, sub-national entities will receive 55%, and grassroots administrations are assigned 35%. Among regional governments, distribution will consider equal share (50%), population size (20%), and location of end-use (30%), while the grassroots tier follows a slightly adjusted formula. A proposed reduction in collection fees from 4% to 2%—including revenue derived from extractive sectors—was accepted during deliberations.

The second measure formalizes the reconstitution of the primary revenue entity, appointing the national chief executive as chair of its supervisory board, with a Senate-approved deputy leading operational affairs. The structure includes regional representation, ensuring a spread of appointments across the country’s six major zones, with safeguards against dual appointments from any single state.

Expanded mandates for the restructured entity include overseeing corporate levies, driving policy modernization, and pursuing illicit financial activities linked to non-compliance. The proposal sets financial and custodial penalties for failure to register, declare earnings, or maintain accurate records, with fines ranging from tens of thousands of naira to potential imprisonment.

Presiding officers of the chamber praised the process and those who mediated disputes, asserting that the final framework was shaped by consensus rather than sectional interests. One senior figure noted that a special internal committee played a pivotal role in reconciling early disagreements, paving the way for broad legislative alignment.

Two additional components of the fiscal reform package are scheduled for review during the next plenary session.

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At a webinar put together by the Chartered Institute of Taxation of Nigeria (CITN), the Executive Chairman of Kano State Internal Revenue Service (KIRS), Zaid Abubakar, who made a Critical Review of Taxation of Income of Persons under the Proposed Nigeria Tax Bill, 2024, sported some grey areas in the bill.

Abubakar maintained that, though the fiercely debated bill, which comprises 43 clauses and six parts, has been adjudged by the federal government of having the potential to protect small businesses and engender economic growth and development; however, there are much that needed to be addressed to avoid overheating the polity.

KIRS Executive Chairman, explained that where gains accrue to a person on disposal of shares from Nigerian company, it is not clear whether both the proceeds and gains must equal or exceed N150M and N10M respectively to be taxed, or if exemption can be enjoyed, and if either one of the proceed or the gain is below the stated threshold and the other is above.

Moreover, he pointed out that the N150M threshold for asset disposal is high, as most sub -nationals do not have significant number of residents that own such volume of assets. “Section 35(1) while extending the disposal of assets beyond sale, transfer, assignment and compulsory acquisition, to include ‘lease’, did not define the type of – lease- Is it finance or operating lease? What if the -lease- is the ordinary course of business of an enterprise? In essence, the definition of ‘lease’ is too generic.

“The N50M compensation for individuals is a welcome development, especially for those whose integrity has been impaired by libel, etc. The exemption for lands attached to primary dwelling is a further relief for individuals”

He stressed that small companies are not well defined- going by paid up capital, number of employees, or turnover. However reduction in CIT will be welcome development for corporate entities, while the minimum tax rate of 15% is good, but the baseline N208 to qualify for the minimum tax is high.

“The exemption of tax payers at the bottom of the pyramid will bring some relief to the poor. However, it will erode the tax base of most sub -nationals without any compensation. It is not clear what will happen to incomes between N800K to N2.2M bracket. Will they be zero-rated or charged at 15%” he queried.

He posited that, allowing NITDA, TETFUND, and NASENI to rely on budgetary allocations or having a sunset clause for them, will negatively affect the educational and technological advancement of Nigeria.

On Pension, which is included as part of income, he suggested that it should be part of eligible deductions, while there is need to harmonise Section 4(1) and Section 12 in order not to give room for misinterpretations on account derived, brought and received in Nigeria.

“The exemption of employers such as start up, tech-driven services or creatives arts has the implication of denying competent Nigerians the opportunity to compete. The non -inclusion of IPGs brought or received in Nigeria may create gaps in determining total income subject to tax in Nigeria. There is need to align this clause with the ADBR test, as it is in the current Act.

“The failure of Section 17(9d) to include digital space in the meaning of a place is incompatible with the reality of the digital age. Therefore, there is need for a regulation to be issued by the Minister. To him, Assessable Profit as captured in the document was not clearly defined, asking “Is it accounting profit or adjusted profit”?

The expert highlighted that the provision on chargeable gains did not successfully distinguish between gains accruing from assets used in trade, vocation or business with gains from disposal of individual assets.

“Section 30 of the Bill, allows for ‘eligible deductions’ which includes payment made as contributions for National Housing Fund, National Health Insurance scheme, pension, payment for life insurance for the individual or spouse, interest payment on loans for developing an owner occupied residential house and rent relief of 200,000 or 20% of annual rent paid (whichever is lower). This effectively eliminates consolidated relief allowance and minimum tax for individual tax payers,” he added.

Meanwhile, the President/Chairman in Council of CITN, Mr. Samuel Agbeluyi, called on analysts, tax professionals, policymakers, legal practitioners, other experts, and Nigerians at large to tread with caution as reactions towards the tax bill heightened.

He urged tax experts to explain better for Nigerians to understand the direction of the presidency and why everyone should be very careful, bearing in mind the economic storms overwhelming the country at the moment.

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In an emergency stakeholders’ meeting convened to discuss the bill, the operators highlighted how key provisions in the proposed law, such as changes to tax exemptions and incentives for free zone enterprises, could undermine foreign investments and the significant economic growth the zones have helped foster. The operators fear the bill could distort the achievements made by the free zones, despite the government’s intentions to modernize and consolidate the tax framework.

As of January 2024, Nigeria’s Special Economic Zones (free trade zones) had attracted over N300 billion in investments, generated N650 billion in government revenue, and created more than 100,000 direct jobs, along with 500,000 indirect jobs. The operators believe the tax bill would jeopardize these gains.

The stakeholders specifically raised concerns about Sections 57, 60, 198(2), and 198(3) of the bill, which they argue would revoke long-standing tax exemptions and incentives that have been central to the operations of free zone enterprises. The operators warn that removing these tax exemptions and protections against levies, duties, and foreign exchange restrictions would significantly reduce the attractiveness of Nigeria’s free zones to international investors, potentially resulting in massive capital flight and job losses.

The communique further pointed out that the bill’s provisions would effectively reverse policies that were established decades ago, which had allowed free zone enterprises to sell up to 100 percent of their products into the Nigerian Customs Territory, upon payment of appropriate customs duties. The operators argue that the bill’s restrictions, based on a misinterpretation of the law, fail to acknowledge previous approvals granted by the government.

The stakeholders emphasized that regulatory certainty is crucial for attracting investment, and the sudden withdrawal of incentives could damage Nigeria’s reputation as an investment destination. They warned that such a move could prompt legal challenges from international investors and lead to a decline in Nigeria’s global business ranking, resulting in the diversion of investments to other countries with more favorable policies.

In response, the Free Zone operators called on the Federal Government to reconsider the bill, particularly Sections 60, 198(2), and 198(3), and to exclude free zone enterprises from the scope of Section 57. They also urged for the removal of the Second Schedule of the bill, stressing the importance of consulting with free zone stakeholders to avoid undermining the success of the scheme.

The operators concluded by warning that the proposed tax changes could harm Nigeria’s ongoing economic reforms, damage the country’s global investment standing, and lead to a significa

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