New Tax Law: ‘Lagos Will Lose VAT Revenue ..Oyedele

Taiwo Oyedele is Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms. In this interview after President Bola Tinubu assented to four landmark bills – The Nigerian Tax Bill, the Nigerian Tax Administration Bill, the Nigerian Revenue Service Establishment Bill, and the Joint Revenue Board Establishment Bill, Oyedele reveals how reforms will end the era of taxing the poor, close loopholes for tax evaders, and usher in a more transparent, people-centered system.

He also shares the emotional toll the process took on his family, the data-driven approach to protecting vulnerable Nigerians, and why these changes signal a new fiscal direction for the country. Excerpts:

How do you feel over the passage of the Tax Reform Bills into law?

I feel really very excited. I feel like nothing is impossible if we put our minds and hearts to it. And that despite the controversies, we can still work together as one people with one goal, and this shows possibilities that it can happen anywhere, including Nigeria. So I’m quite happy.

And thank you for the live session you moderated. It was one of the big turning points for us. At the height of the misunderstanding, controversy, people started cooking up conspiracy theories, misinformation, it was tough. I think it’s right to say that it was very difficult and it could have gone either way. But we’re here today, so we’re happy.

On the 8th of August 2023, you were inaugurated, and your life changed. How significant was that for you?

Very significantly. Everything, actually, both in terms of my career trajectory, which is a decision I took intentionally, so I’m not complaining. In terms of the financial sacrifices, maybe that is even now smaller, looking back.

Were you getting lower income?

Yes, because the amount government was going to pay was going to be ridiculous. I said, “You know what, just cover the cost of what you asked me to do. You don’t need to pay me a salary. And I’m also fine with that. It’s a small sacrifice in the context of the impact that this can make”. But the biggest sacrifice turns out to be the emotional impact, particularly on my family.

At the height of it, there were people who would cook up stories on blogs, on newspapers. There were headlines that were really very difficult to understand and it took a toll on my family. My wife, for example, was in vigil every night and then struggled to stay awake the following day.

Thank God my kids are still too young, so they don’t know exactly what we’ve been going through. But it’s been tough, it’s a big sacrifice. I think it’s important to make the point that if Nigerians really, truly want a better country, they should not discourage honest people who want to help. It’s already a tough decision to try and work in the public sector, making it harder than it needs to be is not very helpful.

What you portrayed to us or what you told Nigerians is that this will bring about transparency in the very terribly opaque system that we operate. Can you tell us in what way would this law do that?

The current system is opaque. And usually if you’re hiding stuff from me, I need to be suspicious of you. It’s hard to trust you if you are not open and transparent. That’s exactly what we have today in Nigeria. So these new laws require that government should be more transparent. There are requirements around the standard of reporting, the timeliness of those reporting, and making them accessible to the public by the agencies like the Nigeria Revenue Service.

There’s a role for Ministry of Finance. Of course, there’s the oversight function for the National Assembly that is more properly defined. So there will be improved transparency, certainly, under this new regime. But then to the more fundamental point around what does this really mean, right? So one of the things we have been saying, because of the low level of trust, many people don’t seem to believe us, is that the primary objective of this reform is not to raise more tax revenues. Because if you set out to do a reform in an economy like this with the objective of raising more revenue, you’re placing the cat before the horse. Because tax revenues are the consequences of economic activities.

If you don’t address how to stimulate economic activities, but you want to collect more taxes, you are chasing shadows. And when you do collect taxes, taxes are a means to an end, not an end in themselves. In other words, the reason why we collect taxes is to care for the people in terms of their well-being, their welfare, and livelihood. So, therefore, your tax system, your fiscal policies, must not in any way distort economic activities, and they must not undermine the well-being of the people.

With that in mind, we set out to say primary objectives will be, number one, people-centric. Can we stop taxing poverty? Can we protect small businesses? Can we allow large businesses to become larger? We want Nigerian businesses to be multinational so that when the price of oil crashes to $40, $50, we don’t panic. Imagine if we have 20, 40, 50 Nigerian multinational firms earning billions of dollars from around the world and repatriating it back to Nigeria, then we’ll become a more stable and prosperous economy. So we want to be people-centric in the reforms.

Number two, we want to be efficiency-driven. So are there areas where we are inefficient? Maybe how we collect taxes, how government spends the money, and so on and so forth. And then number three is to be growth-focused. How can we grow? Imagine Nigeria being a $2 trillion economy. Even if you collect 10% of GDP as taxes, it’s multiple times what we collect now. But beyond that, there are also critical areas where money will come from.

Number one is tax evasion. There are people today who are doing what you’re doing. Maybe they are even earning more than you, and they’re not paying the taxes you’re paying. That is not fair, and we shouldn’t allow that to continue. That will stop. This system will not allow that as long as you are captured, you have NIN, you have bank information, you have phone number, even this phone number you are looking at, you can’t hide anywhere. It’s selling data – you travel abroad, we have the data. You buy land, we have the data.

You buy a car or even bicycle or motorcycle, you build a house, you’re going to connect to electricity, we have the data. You open an investment account, pension account, stock broking account, we have the data. We want you to do your activities, but government will track those activities so that when you refuse to report your income correctly, we will find out.

We want to get to a point where we will not come to you and say, how much did you earn in 2025? No, we will tell you how much you’ve earned. It is for you to either disprove or approve. So that system is important. Every country where you see development, this is how they build their society.

Are we able to digitize the process?

Yes, that’s exactly what we’re doing. We’re going to digitize everything. The Nigerian Revenue Service will then work in collaboration with sub-nationals. So if you live and work in Ekiti State, for example, you can’t go and tell them that actually by the way “I’m resident in the FCT”, when you are not resident here, that lie happens every single day in Nigeria today.

We’ll find out, that system will tell us where you’re resident. You know that if you move around, your phone can actually tell me where you were yesterday, right? So that data will help us to ensure that, one, we know who is truly poor and protect them and exempt them completely from paying taxes.

So this is a poor man protection policy?

It’s a pro-poor, pro-business and pro-growth and equity and fairness.

So where will the extra income come from?

One is tax evasion. So we estimate that there’s a tax gap, which is how much we are collecting versus how much we could be collecting. It’s in the region of 70%. So we’re only collecting 30% of what we can collect. So we want to close that gap. Imagine you just close it by another 30%. That’s double what you collect now. Number two is we have a lot of wasteful incentives that are not just wasteful, they are also distortionary. So we lose money and they create problems for the economy. So we fix that as well. That’s money coming to the government without raising the taxes on the people.

And then, of course, there is the one to do with just ensuring that government resources are more efficiently utilized. So these areas combined will be the initial areas where we make money from. But, ultimately, the money will come from the economy growing. If you get 10% of $200 billion, it’s more than 100% of $1 billion. So that is the whole idea. That is where the money will come. It’s not about going to the person who is struggling to survive and asking them to pay more. They have nothing else to give.

Your committee is about fiscal policy and tax reforms. Did you do any work on fiscal policy?

Absolutely. That is the first leg of the assignment by the president. I think the Tax Bills gave us the visibility because people were not paying attention to us before. But actually, you know, the tax reform bills, in my estimation, are less than 20% of the work we’re doing.

Really?

Yes. So the bulk of the work is around the fiscal side. We’ve done a lot of work around it. We’ve developed what we call a Nigeria fiscal policy framework that sets out how we do things. For example, who should do tax, what revenue should you collect, how do you deal with subsidies and conditional transfers, how do you deal with inclusiveness for youth, for women, for people with disability, how do you deal with issues around climate change? So those policies, we’ve documented them. There’s also a lot of work we’ve done around how do we transform our budgetary system? In fact, there are proposals we’ve sent to the National Assembly to amend the Constitution to tell you the extent of the work we’ve done. So you are right.

The assignment given to us is quite broad and it was very intentional. Mr. President was very intentional in the terms of reference to say “look at fiscal policy and tax for me”. In addition to that, one thing that the President did that we should commend and I recommend that this should be replicated, it’s the first time, at least, that I can remember in Nigeria, that a committee was set up with a mandate not only to come with ideas and recommendations but also a requirement for them to support in the implementation.

Just imagine a Orasanye report if we had done it like this, maybe, we would have implemented it at least to some extent. So when the controversy was really, really very heated, I said to myself, what if all we did was to write recommendations and say, “Dear Federal Government and government of Nigeria, put this provision here”, and we’ve taken photos and we moved on.

It would have been impossible to deal with those problems. So I think it’s commendable that we are not only coming up with the ideas, we’re also working with the government to do the implementation. It’s been very effective. I did a bit of research and I looked at what South Africa, for example, is generating in the personal income tax. And compare with what Nigeria is generating. South Africa has less than 80 million people. We’re about 200 million people. South Africa gets almost four times what Nigeria gets in personal income tax. It shows that something is wrong with our net.

What do you think we could possibly get? What figure do you think matches our possibility if it’s properly captured the way this law is framed now?

As of 2023, South Africa made about 50 trillion Naira equivalent on personal income tax alone. That’s more than all our revenues from all taxes, from selling crude oil, federal, state, local government, all combined. What South Africa made in personal income tax alone was more than that. By the way, that same year that they made 50 trillion, we made 1.5 trillion. So they made 30 times what we made in personal income tax. You know where the good news is, actually? South Africa is not only just about one third of our population.

They have an exemption threshold in South Africa today that if you earn about 600,000 Naira a month, you are completely exempted from paying personal income tax. That amount goes even further up if you are a senior, like you retired. And here we are in Nigeria taxing all the poorest people while we can’t raise the money. And the answer to that question is very simple. It’s because people cannot give what they don’t have. In South Africa, the top 1% of their population alone pays 90% of the personal income tax.

So this is what we’re now trying to do in Nigeria. If you want to promote equity, fairness, and have justice in a society, you must have a progressive tax system that protects the poor, collect fairly an amount from the middle class, and allow the top of society to pay a little bit more. So moving forward with these reforms, we’re going to start by collecting credible data. I don’t know of any country where people start paying taxes because they’re excited to pay. It’s always a reluctant thing to do everywhere in the world. And the reason is because, you know, if you’re hungry and you pay for a meal of food, a plate of meal, you get the benefit immediately.

We know that taxes benefit society, but you don’t see the direct benefits. So you’d rather not pay. So South Africa collects about 26% of their GDP in taxes. Nigeria collects just recently, about 13.5% of GDP. If everything works out well, back to your question, Nigeria should be at a minimum of 18% to 20% of GDP and that should translate to around 50 trillion Naira in today’s values.

Which means, fast forward to another couple of years, that number should go up because we need to spend more in infrastructure, human capital development, and investing in tomorrow. We’re barely struggling to pay salaries now, borrowing to do almost everything else. That’s not sustainable. So this holds a lot of promise for the country and we need to all work together to implement it.

How do you define the poor in Nigeria? Who is the poor?

That was an interesting debate we had. By the way, my committee is made up of more than 100 Nigerians who are all very committed. This is part of the excitement that I have gained in the past two years on this job. I’ve always been in Nigeria, but I didn’t realize that Nigerians love their country so well. But the point is, we debated this question you asked. We said, “Who is a poor person in Nigeria?” First, we started with data like, you know, the World Bank and the UN will tell you $2.15 a day per person means you are at the poverty line.

And we said to ourselves, actually, in Nigeria, there are people who do not earn $2 a day, but they are not poor because they produce the food that they eat. They don’t have to pay for transport. They just trek to the farm. I lived and grew up in the village. So we have to factor all of that in. We came up and we drew our own line for Nigeria on the basis of average of five people per family, two people working if they are lucky, taking care of the five. When we did the math, it gave us an amount, and that’s actually exactly what we used in determining the income below which nobody should pay any taxes.

What figure did you come up with?

So we came up with, I think it was 20,000 or 30,000 per month per two people working in a household of five. So if the earnings are about 250,000, they can take care of themselves. Of course, they’re not going to have luxury, but at least they can take care of themselves.

But they are still classified as poor?

They are poor and they shouldn’t pay taxes.

But there are millions of those who are not even making 50,000 in a month…

Yes, it means they won’t pay taxes. You know, this tax law will not give you cash in your pocket, right? But at least it won’t take your cash away if you’re poor. So for us, that was starting point to draw that line of poverty and from that point downwards, nobody earning those amounts of income should have to pay taxes because they don’t even have enough.

But the fear is that the middle class and the medium earners are going to be burdened…

No, no, we’ve also reduced. That’s one good thing we’ve done. So even though I don’t like to divide society but for the purpose of this, we have the low income people at the bottom. We have people at the middle, and we have people at the top. We have eliminated the tax completely for people at the bottom. We have reduced for people in the middle and we have increased slightly for people at the top. That’s what we’ve done. So if I want to give you numbers, that middle, we estimated it in the region of about N1.8 million a month.

If you’re earning those kind of amounts and below, your tax will not be zero, but it will reduce from what you are paying today. And that’s fair enough. Of course, we will argue that N2 million is not a lot of money, but in our context, it’s a lot of money because people who earn 2 million per month and above in Nigeria are less than 5% of all workers.

Are the political, religious and ethnic questions raised during the consultations settled now?

I would say substantially, yes, because for the key stakeholders, they now fully understand. And the reason why I’m not going to say is 100%, I know that there’s still people, ordinary people who still don’t believe what we are doing. They still hold on to those conspiracies, theories, misinformation. There was a guy who just, you know, cooked up that Tinubu would take one basket of produce out of every four that they produce from farmers. Like, how do we do this? Where did they find this in the world?

But some believe that some northern states are going to be more impacted negatively than southern states…

It’s not supported by anything in the reforms. Actually, it’s the other way around. The state that would have a reduction in their VAT revenue is Lagos State, which is why we started by discussing with Lagos State. We thought that was a difficult conversation to have because others would benefit, but it was misunderstood. We thought it was our responsibility to explain. We did. And I think now, substantially, our stakeholders do understand.

What is that significant lesson that you learned in all of this during the period?

What I’ve learned, number one, is when I started this job, I thought that it was about thinking smartly, coming up with brilliant ideas was going to be the job but I quickly realized that that was going to be 10% of my work. 90% of my work turned out to be stakeholder management. And in that process, the other lesson is, just because I mean well for you, I should not assume that you will support me. It’s my duty to explain to you. And one other thing that I’ve been able to do, based on feedback that people give me, is not getting angry because there’s no point, really.

Would you take this job again if offered?

Yes, I’ll do it again. I love Nigeria. So even if anything happens to me today, they will write a story about me that there was a guy who tried to help his country. I’m very glad for the opportunity to serve.

Interview first aired on Channels TV Politics Today