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The Federal Government has proposed a new tax payment system that will allow individuals to pay their taxes in instalments. This initiative is part of the Nigeria Tax Bill 2024, recently submitted to the National Assembly for consideration and approval, a draft of which was obtained by our correspondent on Sunday.
Under the new system, taxpayers will have the flexibility to meet their tax obligations either through a lump sum payment or by spreading the payments over time, as long as the total is settled before the designated filing deadline.
Additionally, the government has proposed creating a dedicated account for tax refunds, to be managed by the Accountant-General of the Federation, aimed at improving the efficiency of refund processes.
This proposal follows the government’s recent introduction of comprehensive tax reforms designed to significantly increase revenue collection. Four new bills have been submitted to both chambers of the National Assembly, providing legislative backing to key recommendations from the Presidential Fiscal Policy and Tax Reforms Committee, led by Taiwo Oyedele.
The reforms aim to enhance the collection of direct taxes and levies while streamlining the process by removing the Nigerian Customs Service, Nigerian Ports Authority, and 60 other agencies from revenue collection activities. In their place, the Nigeria Revenue Service will be created, along with a tax tribunal and an ombudsman to address disputes.
The draft of the 160-page document outlines the government’s plan to facilitate tax payment in instalments. Section 48 of the bill states, “Every person shall make payment of tax due on or before the due date of filing, either in one lump sum or instalments, provided that the final instalment is paid on or before the due date.”
Taxpayers can opt to pay their taxes in equal monthly instalments, along with a final instalment that will cover the full amount owed. The bill specifies that the first monthly payment must be made by the third month of the accounting period, with subsequent payments made on the last day of each month.
For accounting periods of less than a year, the payments will be divided into equal monthly proportions based on the estimated tax for that period. The final instalment must be paid by the deadline for filing the self-assessment for that period, accounting for any amounts already paid.
Furthermore, the bill ensures that any overpayment or excess tax due will be refunded after an audit by the relevant tax authority. Refunds are to be issued within 90 days, with the option of offsetting the amount against any future tax liabilities.
To facilitate these refunds, the bill mandates the Accountant-General of the Federation or a State to open a dedicated account for each type of tax. These accounts will be used exclusively to settle tax refunds, and estimates of the required funds will be provided by the relevant tax authorities.
Taxpayers have six years from the end of the assessment year to submit claims for refunds, and VAT refunds will be processed within 30 days of receiving a valid request. Alternatively, taxpayers may use the amount to offset future tax liabilities.
Regarding the distribution of Value-Added Tax (VAT) revenue, the bill proposes the following allocation: 10% to the Federal Government, 55% to State Governments and the Federal Capital Territory, and 35% to Local Governments. Notably, 60% of the revenue allocated to states and local governments will be distributed based on the principle of derivation, ensuring that those regions generating the most VAT benefit proportionally.
These proposed reforms are designed to improve tax compliance and enhance government revenue collection, while providing flexibility and transparency for taxpayers.
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