By Charles Ebi

Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Mr Taiwo Oyedele, says the tax reform bills proposed by the administration of President Bola Tinubu will lift the tax burden on 90% of Nigerian workers.

He gave this clarification while appearing before senators during the plenary to brief the lawmakers on the need to pass the bills on Wednesday.

He also explained that the bills aim to review the sharing formula of the Value Added Tax ,VAT, to accommodate what each state will get for what is consumed within their territory.

Recall that in September, President Tinubu transmitted four tax bills to the National Assembly for approval. These are the Nigeria Tax Bill 2024, the Tax Administration Bill, the Nigeria Revenue Service Establishment Bill, and the Joint Revenue Board Establishment Bill.

One of the bills seeks to change the sharing formula of the Value Added Tax by reducing the federal government’s share from 15%  to 10%. However, the bill includes a caveat that the allocation among states will factor in the derivation principle.

Mr Oyedele said if the bills are passed and assented to by the president, 30% of Nigerians who earn between N50,000 to N70,000 monthly will be exempted from paying tax to the government because they are classified as poor people.

“These proposals, if approved by the Senate, will reduce the tax on 90% of our workers, both in the private and the public sector, and it will exempt more than 30% of our citizens who earn about minimum wage, around 50,000, 60,000, 70,000 Naira”, he said.

Mr Oyedele noted that Nigerian workers who earn above N70,000 monthly will commit to payment of taxes.

He explained that those earning N100 million monthly will pay 25% of their income as tax.

“Then the remaining 10% who are not so poor will now pay a little bit more. The top rate today is 24%  in the long, and we are proposing it goes to 25%. We are doing some other reforms around allowances and relief.

“So effectively, if somebody earns N100 million per month, the maximum they will pay even on that approval side is only 25%. If they were in South Africa, they would be paying 41 per cent. If they were in Kenya, they would be paying 35%. Of course, if they were in the UK or the US, they would be close to 40%, but we are doing only 25%”.

He also noted there will be changes to VAT sharing formula, adding the tax reform bills prescribed that every state will receive credit for consumption within their territory and that the state government will only have power to collect sales tax, leaving the tax on import and international services for the Federal Government.

“Our proposal before you is that going forward, if we have your approval for the bills, every state will receive credit for the consumption within their territory.

“Number one, every state will collect less than half of what they are getting now. Number two, businesses will struggle because you bought something in Kaduna and you are selling it in FCT. They will not allow you for the input, and the more the cost piles up, the more businesses will struggle”, he added.

He further explained that, “If states should begin to collect VAT today, they will not be able to collect import VAT. Import VAT and international VAT is about half the VAT we collect in Nigeria today. If anybody could benefit at all, it would be the federal government”, he added.

Mr Oyedele emphasised that each state will get credit for economic activities within their jurisdiction.

Mr Oyedele also said the tax reform bills will review the percentage formula for sharing VAT by the federal, state and local governments.

The current formula for sharing VAT prescribes that the federal government should take 15% the states 50% and the local government 35%.

The tax man noted that the reform bills will review the VAT sharing formula and make states the largest receivers among the three tier of government, as it will take 5% from the FG.

“10%  will go to the  Federal Government, 55% State Government and 35% Local Government”, he said, “Provided that 60 per cent of the amount standing to the credit of states and local governments shall be distributed among them on the basis of derivation”.

…Bars NBC from requesting Pay-TV’s VAT documents, among other financial records

By Yahaya Umar

 Federal High Court in Abuja on Wednesday struck down Section 2 (10) (b) of the National Broadcasting Code, 6th Edition, which required broadcasters to pay 2.5% of their “Gross Annual Income” as an Annual Operating Levy.

This judgment followed a suit filed by MultiChoice Nigeria Ltd and Details Nigeria Limited ,GO TV, against the National Broadcasting Commission ,NBC.

Justice James Omotosho, while delivering the judgment on Wednesday, ordered that the provision be struck down and replaced with ‘Net Annual Income’ instead of the existing ‘Gross Annual Income’.

The court also barred the National Broadcasting Commission ,NBC, from demanding the plaintiffs’ VAT remittance, FIRS reports, bank statements, audit adjustment journals, trial balances, and general ledgers for the purpose of computing the plaintiffs’ annual income, other than the annual audited accounts of the companies as stipulated in the NBC Code.

The judge stated that NBC can only access the other financial documents of MultiChoice through sister agencies such as the Federal Inland Revenue Service ,FIRS.

In suit number FHC/ABJ/CS/652/2024, the plaintiffs’ counsel, Moyosore Onigbanjo, SAN, sought several reliefs, including a determination of whether the NBC had the authority to demand any financial documents other than the annual audited accounts.

 He also sought clarification on whether the term “gross annual income”, as used in the NBC Code, was fair and equitable.

“Income, as provided by the NBC Code 6th Edition, is not defined, nor is it defined in any previous editions or in the NBC Act of 2004″, the counsel submitted in court.

Onigbanjo also asked the court to determine whether the waiver or agreement between the plaintiffs and the NBC to pay a flat rate of N800,000,000 (Eight Hundred Million Naira) as an Annual Operating Levy for the years 2020–2023, including certain previous years, was binding on both parties.

Counsel to the NBC, Victor Ogude SAN, argued before the court that the agreement was not binding on the NBC, as the NBC’s acting Director-General who entered into the agreement on its behalf acted beyond his powers.

He contended that the NBC was entitled to the full amount payable.

Ogude also urged the court to uphold NBC’s oversight role over MultiChoice and Details Nigeria.

Delivering his verdict on Wednesday, Justice Omotosho, said with his experience as a trained economics teacher,  running a business like the one operated by the plaintiffs requires significant capital and expenses. It is only fair, he said, that these expenses be deducted before the Annual Operating Levy is paid.

He stated that net income is the actual profit after subtracting all business expenses, adding that the taxable amount cannot be determined when calculating gross profit but should be based on net profit.

The judge emphasized that the Annual Operating Levy charged by NBC is a form of tax imposed on broadcasters.

He held that it would be unjust to impose it on their gross income.

“The proper and lawful income to impose a levy on is the net income”, he said, adding that this aligns with tax laws and global best practices. “In the United States, for instance, companies pay a flat rate of 21% on their profits, determined after all expenses have been deducted. Similarly, in the United Kingdom, a 25% corporation tax is imposed on company profits”.

“From this Court’s knowledge of economics, gross income implies all money that accrues to a person or business within a specific time. This gross income typically does not account for company expenditures such as production costs, rent, vendor payments, staff salaries, taxes, and other costs. It is only after all these payments are made that the company determines its profit, known as net income”.

“Consequently, this Court holds that Section 2 (10) (b) of the National Broadcasting Code, 6th Edition, which demands 2.5% of Gross Annual Income from broadcasters as an Annual Operating Levy, is unconscionable, unfair, and stifling to the plaintiffs”, Omotosho ruled.

Furthermore, Omotosho noted that the plaintiffs had provided credible and documentary evidence showing they had faithfully paid their Annual Operating Levy (AOL) without fail, and the defendant did not challenge these documents.

He said the NBC’s claim that it was entitled to N4 billion, as stated in its letter dated August 15, 2023, was unsupported by any evidence.

“Simply basing its claim on the fact that the plaintiffs increased their subscription fees is grossly insufficient. First, there is no evidence before the court that subscription fees were increased. Second, the defendant failed to consider that the plaintiffs may have increased their production costs or incurred additional expenses. This Court refrains from speculation as the defendant has invited it to do”, Omotosho added.

Regarding the agreement, Omotosho ruled that when parties express their intention and enter into a binding agreement, neither party is allowed to abandon the agreement simply because one or more of its terms are unfavorable.

The judge declared that the agreement between the defendant and MultiChoice, or the waiver on the payment of N800,000,000 (Eight Hundred Million Naira) throughout their current “DTH license”, is binding on both parties.

He also restrained NBC from demanding any additional sum from the plaintiffs as AOL for the years in which they have already made payments.

He issued a perpetual injunction restraining the NBC, its servants, agents, or privies from sanctioning, fining, or suspending the plaintiffs’ license, contrary to the court’s judgment on the issues raised.

MultiChoice has faced accusations from various agencies and Nigerian customers.

Over the years, the Pay-TV provider has been scrutinized by lawmakers and consumer protection tribunals over its pricing practices.

This year, a tribunal fined MultiChoice 150 million Naira and mandated a one-month free subscription for violating interim orders. However, MultiChoice appealed and filed for a stay of proceedings.

The tribunal rescheduled the case to November, but the lawyer who sued the Pay-TV company chose to withdraw the suit, which the tribunal approved without awarding costs.