The Nigeria Governors’ Forum (NGF) has approved a revised Value Added Tax (VAT) distribution formula as part of its support for comprehensive tax reform in the country. In a communique issued after a meeting with the Presidential Tax Reform Committee in Abuja on Thursday, the governors proposed allocating 50% of VAT revenue based on equality, 30% on derivation, and 20% on population.
Kwara State Governor and NGF Chairman, AbdulRahman AbdulRazaq, emphasized the need to modernize Nigeria’s tax system to enhance fiscal stability and align with global standards.
The forum also backed the continuation of legislative processes to facilitate the eventual passage of the four tax reform bills—Nigeria Tax Bill 2024, Nigeria Tax Administration Bill, Nigeria Revenue Service (Establishment) Bill, and Joint Revenue Board (Establishment) Bill—sent to the National Assembly by President Bola Tinubu in October 2024.
Divergent Views on Tax Reform
The tax bills have sparked controversy across the country, with northern leaders raising concerns over their potential socioeconomic impact. The Northern Governors’ Forum and traditional rulers rejected the proposed VAT provisions, urging the National Assembly to consider the welfare of their citizens.
Prominent northern leaders, including Bauchi State Governor Bala Mohammed and former Vice President Atiku Abubakar, echoed similar sentiments, while northern lawmakers successfully pressured the House of Representatives to suspend debates on the bills.
Conversely, southern leaders and lawmakers have expressed strong support for the reforms. Groups such as the Pan Niger Delta Forum, Afenifere, and South-South Senators described the bills as beneficial and people-oriented.
Broader Consultations Ongoing
Amid the divided opinions, the Presidential Tax Reform Committee, chaired by Taiwo Oyedele, has continued engaging stakeholders to ensure widespread support for the bills.
Reacting to the NGF’s proposed VAT formula, experts welcomed the move as a step toward equitable resource distribution. Chief Economist Muda Yusuf described it as a political consensus to advance the reform process, while Professor Richard Mayungbe called the revised formula more equitable for all states.
Concerns Over Development Levy Allocation
However, opposition remains over clauses in the proposed bills, including those affecting the Tertiary Education Trust Fund (TETFund). The Academic Staff Union of Universities (ASUU) criticized plans to replace the Development Levy with the Nigeria Education Loan Fund, warning of dire consequences for tertiary education funding.
ASUU’s Bauchi Zonal Coordinator, Prof. Namo Timothy, urged the National Assembly to protect TETFund and halt debates on the bills.
Meanwhile
The NGF’s communique stressed the importance of balancing fiscal modernization with citizen welfare. It advocated for continued VAT exemptions on essential goods and a temporary freeze on VAT rate increases to avoid economic instability.
As consultations continue, stakeholders and lawmakers continue to navigate competing interests to achieve a tax system that promotes growth, fairness, and national development.