Nigeria’s tax system containing 1939 laws, among most backward worldwide —Oyedele

Nigeria’s tax system is among the most outdated globally, urgently needing reform, says Taiwo Oyedele, Chairman of the Presidential Tax Reform Committee.

Speaking on Channels Live Television over the weekend, Oyedele criticised the system, which still operates under a 1939 stamp duty law, calling it “embarrassing” and a “big shame.”

He warned that efforts to halt the reform process would be a setback for the nation, urging stakeholders to support the tax reform bill without delay.

Oyedele highlighted that fears among state governors and the National Economic Council (NEC) over the reform’s impact on revenue distribution could be addressed without withdrawing the bill.

According to him, this bill aims to make the tax system fairer, helping low-income earners, small businesses, and even large firms by reducing corporate income tax rates to stimulate investment.

“There is so much at stake,” Oyedele emphasised, stressing the importance of not delaying reforms as Nigeria lacks “the luxury of time.”

A central concern in the reform debate has been the collection of Value Added Tax (VAT). While some governors have pushed for state-level VAT collection, Oyedele warned that such an approach could “lead to chaos.”

Allowing states to collect VAT, he argued, would create disparities thereby reducing the revenue some states would collect and potentially hurting businesses.

“If we get a judgment from the Supreme Court today that VAT should be collected and administered by states, that will be chaotic. States will collect less, businesses will suffer, and the economy will retrogress,” Oyedele said.

“If it doesn’t work, that would be a big shame for our country. I don’t know whether it will happen again in my lifetime where you have this level of commitment from the highest level for a holistic reform. I have done all my career in Nigeria. Nigeria’s tax system is one of the most backward in the world.  it’s embarrassing. We had laws we inherited from our colonial masters. The stamp duty law is the law of 1939. We are in 2024. So, anything that stops the process of trying to reform that will be really, really sad. So I do want to envisage that option, “ he emphasized.

The proposed tax reform bill, he explained, suggests a unified approach where the Federal Inland Revenue Service (FIRS) would handle VAT collection on behalf of all states. By centralising VAT and other tax collections, the reform intends to enhance data accuracy, improve economic planning, and reduce compliance burdens on businesses.

“Whatever you do in Abia, whatever you do in Kogi, reflects on the system, and that helps us a lot,” Oyedele noted,emphasising the benefits of a streamlined, centralised tax collection system.

One of the committee’s initial concerns was resistance from Lagos but the state accepted to work with the committee.

Oyedele pointed out that while Lagos generates significant VAT, much of the VAT on imported goods and international services—which is a major revenue source—remains federal.

This revenue is not attributed to any specific state, making a federal pool necessary for fair distribution.

Currently, VAT revenue is shared among states based on a formula: 20 percent based on derivation (where the tax is generated), 50 percent based on equality, and 30 percent based on population. The committee’s proposal increases the derivation portion to 60 percent, with 20 percent each for population and equality. This adjustment is meant to ensure more fair and balanced distribution across states while still encouraging economic growth.

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