…Approves 5% of tax revenue for national cyber, defence security fund
…Moves petroleum profit tax, royalties, others from PIA into Nigeria Tax Bill
By Yahaya Umar
Senate has passed two of President Bola Tinubu’s four tax reform bills. Passed after extensive debate are the Nigeria Revenue Service Amendment Bill 2025 and the Nigeria Tax Administration Bill 2025.
One of the major highlights of the bills, as passed, is the retention of Value Added Tax at 7.5%. The sharing formula was fixed at 10% for the federal government and the federal capital territory.
The states get 55%, and the local governments will receive 35%.
The amount of VAT revenue standing to the credit of states and local governments would be
distributed among them on the following basis: 50% equality, 20% population, and 30% for place of consumption.
Also, the Nigeria Revenue Service, which has now replaced the Federal Inland Revenue Service ,FIRS, will retain 2% of the total tax revenue collected on behalf of the federal government as collection cost.
The 2% would be appropriated by the National Assembly, subject to a review, as dictated by the prevailing economic situation, the bill stated.
The original bill had prescribed 3%, which was adopted in the recommendations of the Senate Committee on Finance.
But some members, during debate, argued that the 3% prescribed in the original bill could be higher than the monthly revenue allocations of about 17 states put together.
Also, the “derivation” clause, relating to the sharing of VAT revenue in the original bill, was changed to “place of consumption”.
Similarly, the lawmakers set aside 5% of tax revenue as the National Cyber Security Fund and Defence Security Fund.
The bill introduced a 4% development levy to replace earmarked taxes in different laws, such as the Tertiary Education Trust Fund ,TETFUND, National Information Technology Development Agency ,NITDA, and the National Agency for Science and Engineering Infrastructure ,NASEN.
The Senate noted that phasing out funding for the agencies could lead to stagnation in education and the country losing out on technological evolutions and advancements.
The Bills also made consequential amendments to the Petroleum Industry Act ,PIA, by importing the fiscal provisions into the Nigeria Tax Bill.
The administration of royalty under the PIA, Petroleum Profit Tax Act ,PPTA, and Deep Offshore Inland Basin Production Sharing Contract Act ,DOIBA, is now under the administrative jurisdiction of the proposed Nigeria Revenue Service ,NRS.
The Nigeria Revenue Service is empowered to assess persons, including corporations, companies, and individuals chargeable with tax, other than individuals, and residents in any state of the Federation or the Federal Capital Territory
It will also, in collaboration with the relevant ministries and agencies of government, subject to the approval of the Senate, review the tax regimes and promote the use of taxation to develop, stimulate and grow economic activities.
It would also adopt measures to identify, trace, freeze, confiscate or seize proceeds derived from tax fraud or evasion, in line with the provisions of this bill.
The Senate is expected to pass the remaining two bills – the Joint Revenue Board (Establishment) Bill 2025 and the Nigeria Tax Bill 2025.
