New VAT Sharing Formula Proposed As Governors Back Tinubu’s Tax Reform
The thirty-six State Governors under the aegis of the Nigeria Governors’ Forum, NGF have brainstormed with the federal government on the tax reform bills forwarded to the National Assembly by President Bola Tinubu, proposing a new sharing formula if the tax reform bills must see the light of the day.
The Governors at the end of a meeting of Subnational consultations and engagement yesterday in Abuja with the Chairman of Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, have thrown their weight behind the continuation of the legislative process at the National Assembly that will culminate in the eventual passage of the Tax Reform Bills.”
In a Communique signed by the NGF Chairman and Governor of Kwara State, Abdul Rahman Abdul Razaq said that the Forum endorsed a revised Value Added Tax (VAT) sharing formula to ensure equitable distribution of resources of 50% based on equality, 30% based on derivation, and 20% based on population.
The Governors have resolved that there should be no increase in the VAT rate or reduction in Corporate Income Tax (CIT) at this time in order to maintain economic stability, just as they have called for the continued exemption of essential goods and agricultural produce from VAT as that would help safeguard the welfare of citizens and promote agricultural productivity.
The Governors also at the end of the meeting recommended that there should be no terminal clause for
Tertiary Education Trust Fund, TETFUND, National Agency for Science and Engineering Infrastructure, NASENI, and National Information Technology Development Agency, NITDA in the sharing of development levies in the bills.
The Communique read, “We, members of the Nigeria Governors’ Forum (NGF) and presidential tax reform committee, convened on the 16th of January 2025 to deliberate on critical national issues, including the reform of Nigeria’s fiscal policies and tax system, and arrived at the following resolutions:
“The Forum reiterated its strong support for the comprehensive reform of Nigeria’s archaic tax laws. Members acknowledged the importance of modernizing the tax system to enhance fiscal stability and align with global best practices.
“The Forum endorsed a revised Value Added Tax (VAT) sharing formula to ensure equitable distribution of resources: 50% based on equality, 30% based on derivation, and 20% based on population.
“Members agreed that there should be no increase in the VAT rate or reduction in Corporate Income Tax (CIT) at this time, to maintain economic stability. The Forum advocated for the continued exemption of essential goods and agricultural produce from VAT to safeguard the welfare of citizens and promote agricultural productivity.
“The meeting recommended that there should be no terminal clause for TETFUND, NASENI, and NITDA in
the sharing of development levies in the bills.
“The meeting supports the continuation of the legislative process at the National Assembly that will culminate in. the eventual passage of the Tax Reform Bills.”
Recall that on October 3, 2024, President Tinubu transmitted four tax reform bills to the National Assembly for consideration, following the recommendations of the Presidential Committee on Fiscal and Tax Reforms headed by Taiwo Oyedele for the review of existing tax laws.
The bills include the Nigeria Tax Bill 2024, which is expected to provide the fiscal framework for taxation in the country, and the Tax Administration Bill, which will provide a clear and concise legal framework for all taxes in the country and reduce disputes.
Others are the Nigeria Revenue Service Establishment Bill, which will repeal the Federal Inland Revenue Service Act and establish the Nigeria Revenue Service, and the Joint Revenue Board Establishment Bill, which will create a tax tribunal and a tax ombudsman.
Also recall that the same day, both the Senate and the House of Representatives embarked on the hurried recess, the National Economic Council ( NEC ) chaired by Vice President Kashim Shettima, resolved that the tax reform bills should be withdrawn from the National Assembly by President Tinubu for wider consultation.
But President Tinubu on Thursday, 31st October, 2024, responded to the request that the bills should be allowed to pass through the required legislative processes at both chambers which according to him, will give concerned Nigerians the opportunity to get details on the bills and make their inputs, particularly at the stage of Public hearing.
Also recall that the bills were passed for second reading in the Senate on 28th of November, 2024.
