The Nigeria Extractive Industries Transparency Initiative (NEITI) has urged the Presidential Committee on Fiscal Policy and Tax Reforms to provide detailed clarifications on its proposed tax reform bills currently before the National Assembly. The agency called for explicit guidelines on harmonizing federal and state tax laws and the roles of subnational governments in implementing the reforms.

This appeal was contained in a statement signed by NEITI’s Acting Director of Communications and Stakeholders Management, Obiageli Onuorah, on Tuesday. According to NEITI, the draft legislation reflects extensive research and consultation but leaves critical gaps that must be addressed to ensure successful implementation.

The transparency agency, aligning with the Nigeria Governors’ Forum, endorsed the bills, describing them as a potential milestone in modernizing Nigeria’s tax system. NEITI emphasized that the proposed reforms could streamline tax administration, expand the tax base, and align the system with global best practices.

Key Highlights of NEITI’s Position

1. Strengths of the Bill:
   NEITI praised the draft bill’s provisions for consolidating legal frameworks, taxing digital assets, addressing resident and non-resident taxation, and introducing measures to curb tax evasion. The agency noted the bill’s potential to improve revenue generation, create jobs, and enhance economic opportunities.
2. Identified Gaps:
   NEITI’s section-by-section review revealed shortcomings, particularly in harmonizing federal and state tax laws, a lack of clear roles for subnational governments, and limited focus on specific mandates affecting the extractive sector.
3. Recommendations for Extractive Industries:
   • Reduce hydrocarbon tax rates for smaller operators to encourage industry participation.
   • Expand incentives for carbon capture, renewable energy projects, and energy transition investments.
   • Address the exclusion of partnerships and joint ventures in petroleum operations.
4. Taxing Digital Assets:
   NEITI commended the inclusion of digital asset taxation, aligning with global trends. However, it recommended clear definitions, valuation guidelines, and phased implementation for small businesses.
5. Resident and Non-Resident Taxation:
   The agency highlighted the importance of clear criteria for significant economic presence to prevent enforcement disputes. It also stressed the need for international collaboration to ensure effective taxation of foreign subsidiaries.
6. Support for SMEs and Startups:
   NEITI advised the inclusion of exemptions or phased implementation for small businesses and startups to encourage reinvestment and growth.
7. Stamp Duties and VAT:
   While the provisions were described as comprehensive, NEITI called for measures to mitigate compliance burdens on small businesses and improve enforcement in the informal sector.
8. Technical and Administrative Recommendations:
   • Introduce robust digital tax administration tools to prevent VAT evasion and fraud.
   • Simplify tax application procedures and expand incentives for sustainability projects.
   • Invest in capacity-building for tax administrators and adopt data-driven monitoring systems.

Public Engagement and Transparency

NEITI emphasized the importance of public trust in the proposed reforms, calling for robust stakeholder engagements, particularly with civil society organizations. It offered to lead these efforts, leveraging its experience in relationship management and confidence-building.

NEITI’s Call to Action

The agency urged the National Assembly to address the identified gaps, particularly in areas affecting the extractive industries and sustainability initiatives. It recommended specific exemptions for renewable energy projects and a stronger focus on environmental priorities to align with global energy transition goals.

NEITI also called for the establishment of a clear dispute resolution mechanism, such as tax tribunals, to handle conflicts and promote transparency in implementing the reforms.

The proposed tax reform bills, if passed, are expected to transform Nigeria’s fiscal landscape. However, NEITI’s recommendations underscore the need for careful implementation to ensure that the reforms achieve their intended objectives while fostering economic growth and fairness.