Governors Approve Tax Reform Bills, Propose Revised VAT-Sharing Formula

Nigerian governors endorse key tax reform bills and suggest a new VAT-sharing formula to promote equitable revenue distribution among states.

Nigerian governors have expressed their support for the Federal Government’s tax reform bills, while also suggesting a new distribution method for value-added tax (VAT).

The decision came after a Thursday meeting between the Nigeria Governors’ Forum (NGF) and the Presidential Tax Reform Committee.

In a statement concluding the meeting, the governors’ forum “reaffirmed its strong support for comprehensive reform of Nigeria’s outdated tax laws.”

Members recognized the significance of updating the tax system to improve fiscal stability and align with international best practices.

The governors introduced a new VAT-sharing formula that they claimed would guarantee fair distribution of resources.

As per the NGF, the updated distribution formula will allocate 50% based on equality, 30% according to derivation, and 20% based on population.

The communique from the Chairman of the NGF and Governor of Kwara State, Abdul Rahman Abdul Razaq, stated that members concurred there should be no rise in VAT rates or cuts to Corporate Income Tax (CIT) at this moment to preserve economic stability.

The Forum supported maintaining the VAT exemption for essential goods and agricultural produce to protect citizens’ welfare and enhance agricultural productivity.

The NGF advised against including terminal clauses for the Tertiary Education Trust Fund (TETFUND), National Agency for Science and Engineering Infrastructure (NASENI), and National Information Technology Development Agency (NITDA) in the allocation of development levies outlined in the bills.

Despite the heated debates surrounding the tax reform bills, the governors express their support for “the continuation of the legislative process at the National Assembly that will lead to eventually passing these Tax Reform Bills.”

FILES: President Bola Tinubu (left) greets Senate President Godswill Akpabio and Speaker of the House of Representatives Tajudeen Abbas during a joint session at the National Assembly in Abuja.

President Bola Tinubu submitted four tax reform bills to the National Assembly last year, requesting that lawmakers review and pass them.

The proposal comprises the tax administration bill, the Nigeria tax bill, and the joint revenue board establishment bill.

Tinubu also intends to repeal the law that established the Federal Inland Revenue Service (FIRS), aiming to replace it with a new entity called the Nigeria Revenue Service.

However, the decision has faced resistance from various parts of the country, particularly from northern governors and some leaders in that region of Nigeria.

They urged the National Assembly to oppose the bills, asserting that they were detrimental to the region. Some even described them as anti-north.

President Tinubu, nevertheless, promised not to withdraw the bills. The presidency has assured that they do not oppose any part of the country; instead, their aim is to enhance the lives of Nigerians.