Seek new sharing formula for VAT

Nigerian governors have expressed their support for Tinubu’s tax reform bills.

The decision followed a meeting of the Nigeria Governors’ Forum (NGF) and the Presidential Tax Reform Committee on Thursday.

The governors’ stance is a major boost for advocates of the bills that have caused much controversy in the country.

The bills before the National Assembly have caused a lot of division in the country, including even among the lawmakers.

However, even though the governors accepted the tax reform bills, they are proposing a new sharing formula for the value-added tax (VAT), an area that made northern governors and lawmakers reject the bills.

Governors under the aegis of the Nigerian Governors Forum (NGF) have unanimously opposed any increase in the Value-Added Tax (VAT) rate.

This stance was expressed in their communiqué after their high-level meeting with the Presidential Tax Reform Committee on Thursday in Abuja.

The governors emphasised the importance of maintaining economic stability and safeguarding the welfare of citizens during ongoing fiscal reforms.

In a significant move to address inequities in resource allocation, the forum suggested a revised VAT sharing formula: 50 percent  based on equality, 30 percent based on derivation, and 20 percent based on population.

This formula aims to promote fairness and balance in resource distribution across the country, addressing the needs of smaller states while incentivizing revenue generation at the subnational level.

The NGF firmly opposed raising VAT rates, citing the potential impact on consumers and businesses.

The governors also advocated the continued exemption of essential goods and agricultural produce from VAT, emphasising the need to protect the most vulnerable and promote food security.

The forum endorsed the ongoing legislative process at the National Assembly to enact comprehensive Tax Reform Bills.

The governors also recommended the retention of development levies allocated to key national agencies, including the Tertiary Education Trust Fund (TETFUND), National Agency for Science and Engineering Infrastructure (NASENI), and National Information Technology Development Agency (NITDA), without terminal clauses.

Chairman of the NGF and Kwara State governor AbdulRahman AbdulRazaq stated, “The Forum reiterated its strong support for the comprehensive reform of Nigeria’s archaic tax laws.

”Members acknowledged the importance of modernising the tax system to enhance fiscal stability and align with global best practices.

“Members agreed that to maintain economic stability, the VAT rate should not increase or Corporate Income Tax (CIT) should be reduced at this time.