Nigerian governors have expressed their strong support for the Nigerian Government’s proposed tax reform bills, while suggesting a revised formula for the distribution of value-added tax (VAT) proceeds.
The new proposal was discussed at a meeting between the Nigeria Governors’ Forum (NGF) and the Presidential Tax Reform Committee, held on Thursday.
In a joint communiqué issued after the meeting, the governors reaffirmed their commitment to overhauling Nigeria’s outdated tax system. The governors acknowledged that modernizing the tax laws is crucial for improving fiscal stability and aligning the country with global best practices. They also highlighted the importance of ensuring that the tax reforms are equitable and beneficial to all regions of the country.
One of the main highlights of the governors’ position was the suggestion of a new VAT-sharing formula. Under the proposed framework, 50% of VAT revenue would be distributed equally among the states, 30% based on derivation, and 20% according to population. The governors argue that this new formula will help ensure a more equitable distribution of resources, addressing concerns about fairness and regional disparities.
While supporting the tax reforms, the governors emphasized that there should be no immediate increase in the VAT rate or a reduction in Corporate Income Tax (CIT) to maintain economic stability. They also called for the continued exemption of essential goods and agricultural produce from VAT to safeguard the welfare of citizens and encourage agricultural productivity.
Furthermore, the NGF recommended the removal of terminal clauses for certain development agencies, including the Tertiary Education Trust Fund (TETFUND), the National Agency for Science and Engineering Infrastructure (NASENI), and the National Information Technology Development Agency (NITDA), in the proposed tax reform bills.
Despite the ongoing debates and opposition from some quarters, particularly from northern governors and regional leaders who claim that the reforms are unfavorable to their region, the governors have expressed their unwavering support for the continued legislative process. They have called for the passage of the tax reform bills in the National Assembly, underlining that the reforms are intended to improve the lives of all Nigerians, not to disadvantage any particular region.
President Bola Tinubu introduced the four tax reform bills last year, which include the tax administration bill, the Nigeria tax bill, and the joint revenue board establishment bill. The proposed reforms also aim to replace the Federal Inland Revenue Service (FIRS) with a new entity, the Nigeria Revenue Service. Despite resistance from some sections of the country, the presidency has insisted that the reforms are in the best interest of the nation and will enhance the overall economic landscape.
As the bills make their way through the legislative process, the focus remains on ensuring that they strike the right balance between modernizing the tax system and addressing the concerns of all stakeholders across the country.
