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The Nigeria Extractive Industries Transparency Initiative (NEITI) has backed the tax reform bills currently before the National Assembly.
NEITI also identified areas of the proposed law that needed to be worked on.
NEITI’s position was contained in a memo signed by its Executive Secretary, Dr Ogbonnaya Orji, and addressed to the leadership of the National Assembly and Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele.
The memo said, “The bills have the potential to modernise Nigeria’s tax system, streamline and broaden its administration and tax base to align with global best practices.”
Orji disclosed that NEITI’s observations followed a detailed review of the draft legislation, which showed extensive research and consultation to produce the innovative provisions currently being deliberated upon.
The draft tax bill, NEITI stated, emphasised consolidation of legal frameworks, taxing digital assets, resident and non-resident taxation, and measures to curb tax evasion, while demonstrating a strong commitment to fiscal transparency and efficiency.
“A detailed review of the bill revealed that it has the potential to impact positively on revenue generation, household livelihoods, job creation, and overall economic opportunities,” a statement signed by NEITI’s spokesperson, Obiageli Onuorah, said.
As an agency with legitimate interests in the draft legislation, NEITI said the public debate generated by the bills underscored the overwhelming public interest by Nigerians and the need for greater clarity and trust in its provisions.
Despite the potential of the bills, NEITI said its section-by-section review of the draft law revealed its strengths and weaknesses, particularly as they affected the extractive industries, which is the core of NEITI’s specific mandate.
It made several recommendations to bridge the gaps in the implementation of the proposed law.
NEITI said, for instance, Sections 1 and 2 aimed to ensure a unified tax legislation across Nigeria for all individuals and legal entities. It stressed, however, that the sections did not have explicit guidelines to harmonise federal and state tax laws and clarify roles of sub-national governments.
Commending the intent of the bills on unifying tax administration in the country, by repealing existing Acts and consolidating them into a single framework, NEITI stated that careful management of the transition process and robust public awareness campaigns were critical to avoid administrative confusion.
On implications of the tax law for the oil, gas and mining industries, including income, petroleum operations, VAT, and tax incentives, NEITI recommended the introduction of clauses to address issues of alignment with state tax systems and provide guidance for resolving jurisdictional conflicts.
It stated that the provision on taxation of digital assets aligned with global practices. But it called for clear definitions of the taxable assets and events, and valuation guidelines to be established to ensure effective reporting mechanisms and implementation, allowing for exemptions or phased implementation for small businesses, to support growth.
On Resident and Non-Resident Taxation, NEITI commended the provision for significant economic presence, but said it required clear criteria to avoid disputes and challenges in enforcement.
While the provision requiring minimum effective tax rates for foreign subsidiaries was desirable to curb profit shifting, NEITI said collaboration with international tax authorities was essential for its success.
The transparency and accountability agency stated further that it supported the provisions on taxation of undistributed profits, but advised that consideration must be given to small and medium enterprises (SMEs), to avoid disproportionate impacts on their businesses.
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