Nigerian governors have thrown their full support behind President Bola Tinubu’s tax reform bills but are pushing for a new value-added tax (VAT) sharing formula to guarantee fairer resource distribution. This demand followed a meeting between the Nigeria Governors’ Forum (NGF) and the Presidential Tax Reform Committee on Thursday.
Governors Propose New VAT Sharing Formula
In a communique released after the meeting, the NGF declared its “strong support for the comprehensive reform of Nigeria’s archaic tax laws.” The governors admitted that updating the tax system is crucial for fiscal stability and aligning with global standards. However, they insisted that the VAT sharing formula must change to reflect equity. The governors proposed a new formula: 50% allocation based on equality, 30% on derivation, and 20% on population.
The NGF also rejected any plans to increase the VAT rate or reduce Corporate Income Tax (CIT), citing the need to maintain economic stability. “There should be no increase in VAT or reduction in CIT at this time,” NGF Chairman and Kwara State Governor Abdul Rahman Abdul Razaq stated. The forum further called for the continued exemption of essential goods and agricultural products from VAT to protect citizens’ welfare and boost agriculture.
NGF’s Support for Tax Reform Bills
In addition, the governors demanded the removal of any terminal clauses for agencies like 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 sharing of development levies. They argued that consistent funding for these agencies is vital for Nigeria’s development.
Despite the heated criticism of the tax reform bills, the governors endorsed the ongoing legislative process at the National Assembly. They expressed hope that the process would lead to the eventual passage of the bills. However, the proposed reforms have faced strong opposition from northern governors and leaders, who claim the bills are “anti-north” and harmful to their region.
Bottom Line
President Bola Tinubu, undeterred by the backlash, has refused to withdraw the bills. The presidency insists that the reforms aim to improve the lives of all Nigerians, not to target any region. Tinubu’s proposed reforms include the tax administration bill, the Nigeria tax bill, and the joint revenue board establishment bill. He also seeks to abolish the Federal Inland Revenue Service (FIRS) and replace it with the Nigeria Revenue Service.
