Governors back tax reform bills, propose new VAT-sharing formula

Nigerian governors have expressed their support for the tax reform bills initiated by the federal government, proposing a new sharing formula for value-added tax, VAT.

This is coming after meeting of the Nigeria Governors’ Forum, NGF, and the Presidential Tax Reform Committee which was held on Thursday.

The governors’ forum, in a communique at the end of the meeting, emphasized 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,” they stated.

They proposed a revised VAT-sharing formula which they said would ensure equitable distribution of resources.

According to them, 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 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 communique read.

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 said they support the continuation of the legislative process at the National Assembly that would culminate in the eventual passage of the Tax Reform Bills.

Recall that 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.

However, President Tinubu vowed not to withdraw the bills, with the presidency assuring that they are not against any section of the country.