Ndume And Kwankwaso’s VAT Ignorance And Hypocrisy

By Michael Chibuzo

Two weeks ago, the Senator representing Borno South in the national assembly, Sen. Ali Ndume launched a bizarre political attack against the tax reform bills sent to the parliament for legislative action. During an interview on Channels TV, Sen. Ndume famously said that Tinubu’s tax reform bills are dead on arrival. Also, despite receiving the bill, Ndume said he has not read the contents and doesn’t need to read the content to oppose the bills.

The federal government, alongside the Taiwo Oyedele-led presidential committee on fiscal policy and tax reforms vigorously pushed out information and explainers laying out the correct facts contained in the bills in response to the initial misconceptions that greeted the tax reform bills especially from the northern governors forum and politicians like Sen. Ali Ndume. It was obvious that many of those critics of the bill have not thoroughly gone through all the provisions contained in the bills or were misinformed by their hired experts/consultants.

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Unfortunately, as if there is a coordinated pact by some politicians to truly render this landmark bill dead on arrival, over the weekend, former presidential candidate of the NNPP, Rabiu Musa Kwankwaso took an even more bizzare approach in opposing the tax reform bills than Sen. Ndume when he alleged that the Lagos axis wants to impose and take away taxes from Kano and the North to Lagos. The ignorant and inciting utterances by Kwankwaso on the tax reforms shows clearly that just like his friend Sen. Ali Ndume, he did not even bother to go through the tax reform bills or at least hire a consultant to prepare an executive summary for him.

Kwankwaso on Sunday said, “today as we have seen, even the telephone (calls), that we make or register here in Kano, the efforts are there for them to take all the taxes to Lagos. Even our sons and daughters who have brought factories, many of them here in Kano and northern Nigeria, and even banks because somehow they are forced to take to their headquarters in Lagos. Taxes will now have to go to Lagos. We have seen the efforts of some people to make the poor poorer and the rich richer…”

While Sen. Ali Ndume’s utterances and shocking display of incompetence for a lawmaker of such years of experience can be forgiven since he is now becoming notorious for disruptive opposition to the executive and even the parliament because of his inability to emerge as Senate President or Deputy Senate President, Dr. Rabiu Musa Kwankwaso on the other hand needs to be chastised for playing to the gallery and exhibiting such hypocrisy.

While Ndume does not have any ideology or executive manifesto one can judge him by, Kwankwaso has a manifesto which he published during the 2023 presidential election campaign season. A look at parts of the Kwankwaso manifesto that talks about tax and tax reforms immediately reveals Kwankwaso’s hypocrisy – unless of course one would assume that Dr. Kwankwaso is unaware of the contents of his own 2023 election manifesto.

Kwankwaso’s manifesto vs Tinubu’s tax reforms

It will shock many to realise that a lot of the reforms President Bola Tinubu is proposing in the four tax reform bills are actually in line with what Rabiu Kwankwaso promised in his manifesto. I am not ashamed to admit that while President Tinubu in his manifesto did promise to carry out tax reforms, Kwankwaso was far more detailed in his manifesto when it comes to the specific tax reforms he would embark on if elected President. Fortunately, all these reforms promised by Kwankwaso are what Tinubu is now proposing. I will outline some of them below:

1. In page 22 of his manifesto, Kwankwaso identified that Nigeria was in a fiscal mess and that to get out of the mess, trade-offs and short-term pains will be required. He promised to pursue increase in non-oil revenue to avoid an imminent debt crisis.

#TaxReformBills
2. In page 24 of his manifesto Kwankwaso acknowledged that Nigeria’s tax to GDP ratio is shockingly low and said that his administration will carry out RADICAL reforms to change this. He also acknowledged that despite the controversy around VAT (that is Rivers and Lagos wanting states to collect VAT), VAT remains key to improving government revenue and thus needs to be centrally managed and collected.

3. Kwankwaso promised to overhaul the VAT system and deploy technology to increase monitoring and collection efficiency. He also promised to reform the company income tax. He correctly observed that even with a very low VAT rate of 7.5%, VAT revenue is always more than revenue from CIT whose rate is 30%.

4. Kwankwaso stated that he would review the tax regime once elected, promising to reduce the CIT tax rate to 25%. He also promised to develop a centralised citizens’ database for utilisation across agencies and Ministries.

5. In page 25 of his manifesto, Kwankwaso promised to reform the revenue generating agencies. Specifically he mentioned that in the long-term, he will target to merge collection of taxes, royalties of oil and gas and mining and import and excise duties in one agency. However, in the short term he said he would move collection of oil and gas royalties to FIRS since it won’t require large number of staff and major organisational change as they are the ones currently assessing and collecting petroleum profit tax and hydrocarbon tax.

Now let’s look at the major highlights of the Tinubu Tax Reform Bills that Kwankwaso is mischievously tagging as an attempt by “Lagos young men” to impose and take away taxes from Kano and the North to Lagos:

1. The four tax bills generally aim at cleaning up the fiscal mess through streamlining of tax administration including putting in place various provisions that will improve efficiency of collection of tax revenue and reduce tax evasion. These provisions are meant to increase the revenue available to governments across the three tiers so that we can sort out our fiscal mess through reduced borrowing and consequently starving off a debt crisis. Today, even without these bills, we have managed to reduce our revenue-debt service ratio from over 90% to around 64%. With increased revenue inflows due to the anticipated tax reforms, this ratio will definitely fall below 50%.

2. Before President Bola Tinubu came on board, Lagos and Rivers had secured judicial victory to collect VAT in their states. Even though FIRS got a stay of execution from the Appeal Court, it was almost certain that they would lose and the VAT system will be thrown into turmoil. Just like Kwankwaso noted in his manifesto, Tinubu understood that it is necessary to manage and collect VAT centrally. This birthed the VAT reforms contained in the tax reform bills that Kwankwaso is mischievously criticising today.

3. VAT revenue is the biggest source of revenue for states. However, 70% of VAT revenue in Nigeria today are remitted to the FIRS in Lagos, Rivers, Oyo and the FCT due to current practice of remitting VAT at the place a company’s headquarters is located instead of where the consumption took place. So if Lagos and Rivers states are allowed to have their way, at least 70% of the biggest source of revenues available to the states will be taken away from them. To prevent this, Tinubu proposed a change in the derivation model to attribute VAT to the place they were derived and not the headquarters of the company.

4. So, contrary to what Kwankwaso is alleging, the so-called “Lagos young men” by these reforms are actually trying to take VAT revenue away from Lagos, Rivers and Oyo states! A careful reading of Section 22(12) of the Nigeria Tax Administration Bill would have saved Kwankwaso this open display of ignorance. The reforms is also meant to deploy greater technology in the monitoring and collection of these taxes just like Kwankwaso promised in page 24 of his manifesto.

5. The Nigeria Tax Bill, the harmonised legislation that contains all taxes in Nigeria also seeks to reduce the company income tax from 30% to 25% just like Kwankwaso promised in page 25 of his manifesto. Also, the tax reforms seeks to consolidate the 2.5% education tax, 1% NITDA tax and 0.25% NASENI tax that many firms pay in addition to their CIT into one tax called the development levy, to be charged at 2% from 2030. As someone who claims to be a lover of education, Kwankwaso should be particularly delighted that the 2% development levy will be exclusively channeled to NELFUND from 2030.

6. The Tinubu tax reforms is also meant to allow a single agency, the Nigeria Revenue Service to be in charge of collection of taxes, royalties, import and excise duties in Nigeria just like Kwankwaso wanted to implement. In fact this was a long-term target for Kwankwaso but Tinubu is trying to pull it off in the short-term so that agencies such as Customs and NUPRC can focus on their core duties while the NRS whose core duty is revenue administration would be allowed to collect these revenues more efficiently.

Dr. Rabiu Kwankwaso ordinarily, should be happy that President @officialABAT is implementing all the reforms he promised to implement to overhaul Nigeria’s tax administration system. The tax reforms by President Bola Tinubu is much more comprehensive and pro-poor. For example, minimum wage earners would be exempt from personal income tax while other bands of income earners up till those earning N25 million and above will witness some level of tax reduction too. Small businesses are also exempt from income taxes with the definition of a small business also witnessing a change from N25 million turnover threshold to N50 million.

So, if politicians like Kwankwaso or Ali Ndume are really interested in the welfare of the poor people, they should take out few days and go through these landmark tax reform bills to truly understand their contents and see how transformational these bills are and that the provisions contained therein are for the best interest of everyone including the northern states (or voters), they claim they are fighting for. The “Lagos young men” actually needs commendation for engineering such a set of reforms that required major compromises from Lagos. The time for 2027 politics is from 2026 and not 2024.