Governors Okay Tax Reform Bills, Propose New VAT-Sharing Formula

Nigerian governors have thrown their weight behind the Federal Government’s tax reform bills. However, they are proposing a new sharing formula for value-added tax (VAT).

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

In a communique at the end of the meeting, the governors’ 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 governors proposed a revised VAT-sharing formula which they said would ensure equitable distribution of resources.

According to the NGF, the new sharing formula will be 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 communique issued by the Chairman of the NGF and Governor of Kwara State Abdul Rahman Abdul Razaq read.

“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 NGF recommended that there should be no terminal clause for the 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.

Despite the heated debates that the tax reform bills have generated, the governors say they support the “continuation of the legislative process at the National Assembly that will culminate in the eventual passage of the Tax Reform Bills”.

Last year, President Bola Tinubu sent four tax reform bills to the National Assembly, asking the lawmakers to consider and pass them.

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

Tinubu also wants to repeal the law establishing the Federal Inland Revenue Service (FIRS) which he is seeking to replace with the Nigeria Revenue Service.

But the move has been met with pushback from several sections of the country notably the northern governors and some leaders in that part of Nigeria.

They asked the National Assembly to reject the bills, claiming they were against the region. Some labelled them anti-north.

President Tinubu, however, vowed not to withdraw the bills with the presidency assuring that they are not against any section of the country. It said, rather, they are to improve the lives of Nigerians.