Harmonised Tax Bills Ready, May Get National Assembly Approval Tuesday

The Nigerian National Assembly is set to pass a suite of harmonised tax reform bills on Tuesday, May 28, 2025, marking a major milestone in the federal government’s ongoing efforts to overhaul the country’s outdated and fragmented tax structure. The bills—consolidated through the efforts of a joint conference committee of both chambers—are designed to unify tax administration across all tiers of government and improve Nigeria’s revenue generation capacity.

The reforms represent a strategic part of the fiscal policy agenda under President Bola Tinubu’s administration, which is working to reduce the country’s reliance on oil revenue and expand the non-oil tax base. The four executive bills under review are the Nigeria Revenue Service (Establishment) Bill, the Nigeria Tax Reform Bill, the Nigeria Tax Administration Bill, and the Joint Tax Board (Establishment) Bill. These were separately passed by the House of Representatives and the Senate in late April, prompting a harmonisation process to align the two versions before final passage.

Chairman of the House Committee on Finance, Hon. James Faleke, who co-led the harmonisation committee alongside Senator Sani Musa, announced that the conference committee has concluded its work and produced a single version of the bills. The harmonised versions are now slated to be presented for a final vote in both chambers on Tuesday, with expectations high for their swift passage.

One of the headline reforms in the proposed laws is the replacement of the Federal Inland Revenue Service (FIRS) with a newly established Nigeria Revenue Service (NRS). The NRS is designed to be a more efficient and autonomous tax authority, governed by a board led by a non-executive chairman and administered by an executive vice-chairman. The proposed structure includes six executive directors representing each of Nigeria’s geopolitical zones to ensure nationwide representation and balanced governance.

The service cost of tax collection is also set for reform. Currently set at 4% of revenue collected, the new legislation proposes to reduce this to 2%, a move aimed at boosting government net revenue while encouraging more fiscal discipline within the tax authority.

Another crucial element of the bills is the redefinition of the Value Added Tax (VAT) distribution formula. The new proposal will allocate 10% of VAT revenue to the federal government, 55% to state governments, and 35% to local governments. Perhaps more significantly, the bills propose a shift from the current derivation-based VAT allocation to a place-of-consumption principle. This means that revenue will now be distributed based on where goods and services are consumed, not where they are produced or where companies are headquartered. This change could have far-reaching implications, particularly benefiting southern states with large consumer markets, while potentially reducing VAT allocations to less industrialized northern states.

This has sparked significant debate within the National Assembly. Lawmakers from northern states have expressed concerns that the changes could disproportionately favor the more commercially active southern regions, further widening the country’s economic divide. Some northern legislators have called for a reassessment of the formula or the introduction of a balancing mechanism to ensure more equitable distribution.

Despite these concerns, the harmonisation committee made only limited adjustments to the VAT framework, standing by the government’s argument that the reforms are essential for ensuring a fairer, more efficient tax system that reflects modern consumption patterns and economic activity.

In addition to the structural reforms, the bills also introduce a 4% development levy aimed at providing targeted funding for critical national sectors such as education, defense, and cybersecurity. The levy will be collected nationally and distributed based on needs and impact assessments, though the precise criteria for distribution are still being debated.

To further improve accountability and transparency in tax administration, the bills also establish a Tax Appeal Tribunal and an Office of the Tax Ombud. These bodies are designed to provide taxpayers with avenues for resolving disputes and voicing grievances, helping to restore public trust in the tax system and improve compliance.

The harmonised tax bills are the culmination of extensive consultation and technical review. The process was guided by recommendations from the Presidential Committee on Fiscal Policy and Tax Reforms, chaired by Taiwo Oyedele, and involved stakeholders from the private sector, state governments, and international development partners.

With final legislative approval now imminent, the bills are expected to be transmitted to President Tinubu for assent by the end of the week. The administration has signaled strong support for the reforms, describing them as vital for economic stability, investor confidence, and long-term national development.

Analysts view the passage of the harmonised tax bills as a significant achievement that could enhance revenue mobilization, reduce administrative duplication, and improve the ease of doing business in Nigeria. The successful implementation of these reforms will, however, depend on political will, intergovernmental cooperation, and robust oversight to ensure compliance and efficiency across the board.

If passed on Tuesday as anticipated, Nigeria will take a significant step toward creating a more unified and equitable tax system—one capable of supporting its growing population and developmental aspirations in the years ahead.