PBAT Tax Reforms - An Economic Pathway to Prosperity: Lagos as a Case Study

South Africa's economy is larger than Nigeria's, yet they don't have the oil we pride ourselves on. 

This implies that a nation's economy is not solely dependent on petroleum. 

Great Britain, for example, lacks natural resources but remains rich and powerful due to an efficient tax system.

The new tax reform aim to:

• Streamline no of taxes from 63 to 9 
• Eliminate tax for low income earners 
• Reduce tax for some income earners 
• Increase Tax for those that earned more than N100 million per month
• Automated and Digitized tax for easy payment from the comfort of your home.

So nothing to fear about the new tax reform. But so much to gain from it.

Historical Review - Lagos Survived Without Nigerian Oil for almost 8 Years

Historically, Tinubu managed to run Lagos State most of his tenure from 1999 to 2007 without the monthly FAAC allocation because President Obasanjo tried to frustrate him out of office. 

Tinubu instead of fighting over the Obasanjo-witheld FAAC, increased Lagos State's IGR by 1333% - from N600 million monthly to N8 billion. He used IGR to run his government till 2007.

Using Tinubu's IGR template, Lagos has increased its IGR by 7400% in 2021, twenty years later.

If Lagos can survive without FAAC from 1999-2007, then it means the whole of Nigeria can survive without petroleum. Many countries without petroleum, like South Africa, are far better off than Nigeria - which means nation don't survive by oil alone,  but by good governance like we have in PBAT.

Background Information

Presently, PBAT government is working out a system to reduce reliance on petroleum as the backbone of Nigeria economy, using a tax reform.

A significant change in the new tax reform is the introduction of the **derivation principle**, where 60% of the VAT revenue will be distributed based on where it is collected, aiming to address perceived inequities in the current system.

Present VAT Sharing Formula

Today, VAT is shared between the Federal, State, and Local Governments based on:

• Derivation: 20%
• Equality: 50%
• Population: 30%

Proposed VAT Sharing Formula

PBAT's Reform propose that VAT be shared as follows:

• Derivation: 60%
• Population: 20%E
• quality: 20%

The new tax proposal suggests:

1. Reducing the Federal Government's share from 15% to 10%

2. Increasing the State Governments' share from 50% to 55%

3. Keeping the Local Governments' share at 35%

PBAT's Tax Reforms - tax collection 

Presently every states, LGs and FIRS collect taxes and levies separately. This makes tax collection chaotic and several - 63 different taxes across the country.

Consequently, an haulage driver carrying food items from the northern Nigeria to SE or SS can pay up to 30 duties and levies before reaching destination - reasons why food expensive in SE and SS.

The new tax stream Nigeria taxes from 63 to 9.

Only one agency of the government called NRS would collect revenue for government regardless what: Taxes, levies, and even custom duties etc. 

This would eliminate tax touts and hoodlums from incessant harassment of haulage drivers across Nigeria. And anybody caught would be treated like a criminal.

The new tax reform is a big welcome to the island of sanity

Just like PBAT organize Oshodi from haven of criminals and chaotic hell, Tinubunomics is gradually bringing sanity across Nigeria if given the chance.

Noteworthy

Lagos and Rivers state have taken the federal government to court on the issue of VAT collection. 

Both states have been vindicated, won the case at one time or the other but the FIRS appeal the judgement.

According to Taiwo Oyedele 

“If we get a judgment from the supreme court today, it will tell you that VAT should be collected and administered by states. That will be chaotic. 

Moral Lesson

Let support the new tax reform for liberation from the oil dependent nations to economic prosperity with or without oil.

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*Sources*

1. Taiwo Oyedele: Businesses will suffer, economy will retrogress if states collect VAT:

https://www.thecable.ng/taiwo-oyedele-businesses-will-suffer-economy-would-retrogress-if-states-collect-vat/