Kano Govt Opposes FG Control Over State, Local Tax Agencies

…NLNG Calls For Equity In Corporate Tax Payment

ABUJA – The Kano State government has raised strong objections to sections of the pro­posed tax reform bills that seek to extend the Federal Government’s control over state and local tax agencies.

Speaking at a three-day public hearing organised by the House of Representa­tives Committee on Finance in Abuja on Wednesday, Umar Mohammed Jalo, the Permanent Secretary in the Office of the Secretary to the State Government, ex­pressed Kano’s concerns over provisions in the bill that, if passed, could un­dermine state tax administration.

Jalo urged the committee to re­view and amend the contentious clauses, emphasising the need to respect the autonomy of states in tax collection.

He specifically called for the re­moval of provisions that place the proposed tax reform bill above oth­er existing laws, arguing that such a move would centralise taxation in a manner that conflicts with Ni­geria’s federal structure.

He said, “This clause is highly objectionable as it seeks to grant the bill a constitutional status akin to military rule, an approach that cannot withstand constitutional scrutiny. The supremacy provision should be removed.

“Moreover, these provisions significantly violate the 1999 con­stitution of the Federal Republic of Nigeria, as the National Assembly lacks the legal competence to legis­late on matters that fall exclusively under the jurisdiction of state and local governments.”

Jalo cautioned that reducing funding for key strategic agencies such as TETFUND, NITDA, and NASENI would have far-reaching negative impacts on national in­terests, particularly in education, engineering, and information technology.

He stressed that continued in­vestment in these institutions is essential for driving technological advancement, economic prosperity, and sustainable development.

He also raised concerns over the Federal Government’s proposed plan to increase the Value-Added Tax (VAT) from 7.5% to 15% by 2030, warning that such a move would exacerbate the economic hardships already faced by Nige­rians. According to him, the rising cost of living has placed significant strain on households, and any fur­ther increase in VAT could deepen financial difficulties for citizens across the country.

As an alternative, “The Kano State government has proposed strengthening tax collection mech­anisms as an alternative to increas­ing Value Added Tax (VAT).”

A government official empha­sised that improving tax coverage and collection efficiency could gen­erate significant revenue, noting that weak compliance remains a major challenge.

While supporting the need for fiscal reforms, the government em­phasised key concerns regarding the Federal Government’s ongoing tax restructuring.

It also underscored the urgen­cy of expanding Nigeria’s revenue base, stating that current public earnings, around 10% of GDP, are inadequate to meet the country’s growing development needs.

“The fiscal space needs to be enlarged,” the government noted. “Public revenues at approximately 10% of GDP are currently too small relative to the daunting challenges of development.

“A more auspicious fiscal space will provide tremendous opportu­nities for the governors to deliv­er on their promises, including achieving the Sustainable Devel­opment Goals (SDGs), reducing poverty, and rebuilding infrastruc­ture for growth, wealth, and job creation.”

The Kano government wel­comed the Federal Government’s efforts to reform the tax system, which they described as “long overdue,” and acknowledged that the current tax regime is overly complex and riddled with ineffi­ciencies.

“Despite past reforms, tax administration remains weak and plagued by inefficiency, poor governance, and corruption. Tax avoidance and evasion are preva­lent and must be addressed.”

The state further praised the proposed harmonisation of Ni­geria’s multiple tax laws, stating, “Harmonisation will enhance clarity, compliance, and adminis­trative efficiency. It will also ensure legislative cohesion and policy co­herence.”

However, the government ex­pressed strong reservations about the manner in which the reforms were being rushed through the Na­tional Assembly without sufficient stakeholder consultation.

“The bills were apparently in­troduced with the utmost haste and without exhaustive stakeholder en­gagement,” the government stated.

“For any reform to be successful, social dialogue and effective com­munication are critical. The Federal Government should learn to consult more, to harvest ideas and diverse perspectives from its citizens.”

Kano also criticised the Federal Government’s failure to adequately communicate the potential benefits and costs of the reforms, and the vilification of Northern governors who opposed certain provisions of the bills.

“Northern State governors who voiced their opposition to certain provisions of the bills were vil­ified and accused of ‘backward thinking’ and ‘parasitism.’ Citi­zens’ opposition to reforms must be addressed with civility, tact and diplomacy.”

The Comptroller General of the Nigeria Customs Service, Adewale Adeniyi in his submission on the bill, said its purpose was to make Nigeria more business-friendly and competitive but raised con­cerns about potential jurisdictional conflicts.

The Customs boss argued that while tax is a vital revenue-generat­ing tool, customs duties go beyond fiscal policy to promote industriali­sation, prevent environmental pol­lution, and uphold public health.

He said: “Our concerns are laid out in a 17-page document, but key areas of conflict include Section 23, 29, and 41A of the Joint Reve­nue Bill,” said the representative. They pointed out that Section 162 of the bill essentially “legislates the Nigeria Customs Service out of existence.

“The UK experience is instruc­tive,” the representative contin­ued, referencing the 2005 merger of customs and tax functions in the UK, which was later reversed due to operational inefficiencies. “In 2012, the UK separated border control functions, acknowledging the distinct nature of customs op­erations.”

He cited examples from African countries like Uganda and Ghana, where customs and tax authority integration initially resulted in higher tax-to-GDP ratios but later caused inefficiencies and opera­tional complexities.

“With success stories like Mo­rocco’s customs modernisation, which increased revenue by 37% and reduced clearance times by 65%, Nigeria’s Customs Service argued for preserving its autono­my. In fact, the NCS noted that since the enactment of the NCS Act in 2023, Nigeria Customs revenue had surged by 92%, and trade facilita­tion had markedly improved.

“We should encourage collab­oration between customs and tax authorities, not abolish customs or repeal an existing law”, Adeni­yi added.

The Secretary General of the Trade Union Congress, Comrade Nuhu Toro, rejected the gradual increase of Value Added Tax.

He said: “The gradual incre­ment of VAT from the current 7.5% to 15%. Mr. Chairman and respected members, the TUC un­equivocally rejects this proposition.

“Our reason is simple; allowing the VAT rate to remain at 7.5% is in the best interest of the nation. Increasing it would place an addi­tional burden on Nigerians, many of whom are already struggling with their economic challenges and realities.

“At a time when inflation is on the rise, and unemployment is be­coming an ever-growing concern, higher taxes will only further strain households and business­es alike. We must be mindful, Mr. Chairman, that such measures could slow down the economy.”

Speaking for the Nigeria Liqui­fied Natural Gas (NLNG), Manager Tax and Financial Systems, Clem­ent Okoro Efeyita, said the organ­isation fully supports the bill, and it will be of great benefit for the committee to consider making ex­ports from Nigeria to be zero-rated on VAT.

According to Efeyita, “That way, exporters from Nigeria will be com­petitive globally. Another issue is we are of the view that agreements, contracts that are already subject to the value-added tax rules should not be subject to value-added tax.

“In a way, it creates a form of double taxation if this area is not looked into. Mr. Chairman, we also would like to advocate with regards to the currently subsisting execu­tive orders.

“Our view on it is simple. Most of the executive orders are tied to laws that will be repealed by the time the current bill is passed into law. Our view, which we seek for this committee to take into account, is to ensure that the provisions in those executive orders are fully reflected in the Nigerian tax field.

“That way, it will take away all forms of indignity. And it will also not create a situation where inves­tors’ confidence in the country is in any way dampened”.

Still on the Nigerian tax bill, Efeyita added: “It is with regards to the far out claim of capital arms. And our advocacy is very simple. Paragraph 21, subparagraph 1 of the first schedule of the Nigerian tax bill.

“Our advocacy point is very simple and straightforward. We would like the bill, as currently drafted, to give full powers to tax­payers to be able to determine how they claim capital arms. Doing so will not in any way shortchange the government.

“But rather it will create a situa­tion where the government is able to receive, in good time, taxes that are due. So our advocacy point is one of this.

“We would also like to draw your attention to the fact that by the time the Nigerian tax bill is passed into law, the Company Income Tax Act, among several other acts, will immediately be repealed.

“Mr. Chairman, I would like to draw your attention to section 23, subsection 1 of the Company Income Tax Act. And to mention that this particular provision has not been reflected in the Nigerian tax bill. And this provision, essen­tially, is one that will truly benefit the Nigerian state.

“It is a provision that grants a tax waiver to companies that bring in income they’ve earned abroad. Income types such as roy­alty, interest, and dividend. At this critical time of our economy, when we need foreign exchange inflow, should not be the time for such a critical provision that encourages taxpayers to bring in foreign cur­rency they’ve earned abroad to be taken out of the proposed bill.

“But not to forget the fact that going to the Nigerian Tax Ad­ministration Bill at this point in time, there is also the new provi­sion that will be found in section 12 and section 49 of the Nigerian Tax Administration Bill. There is a new provision that seeks to sub­ject companies that produce LNG to a tax regime similar to what is obtainable upstream.”

Speaking before a legislative committee, NLNG representatives emphasised the need for uniform tax payment structures across all eligible companies.

“Our advocacy is straightfor­ward. It is unfair that while most companies are subject to the exist­ing company income tax regime, not all are required to remit their taxes in an evenly distributed man­ner over a 12-month period. This creates an imbalance, or, permit my language, a form of discrimi­nation,” the company stated.

NLNG further urged lawmak­ers to ensure that all companies paying the standard 30% corporate tax, as stipulated in the Nigerian Tax Bill, do so under the same con­ditions.

“Mr. Chairman, honourable committee members, these are cru­cial issues in restructuring our na­tion’s macroeconomic standards. Addressing them will strengthen the objectives outlined in Section 16 of the 1999 Constitution (as amend­ed),” NLNG added.