The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has denied a media report suggesting a proposal to reduce the Federal Government’s share of the Federation Account Allocation Committee (FAAC) funds. Oyedele clarified the committee’s recommendations in a statement on X.com (formerly Twitter) on Sunday, responding to an article by an online news platform.
Clarification on VAT Revenue Recommendation
Oyedele explained that the committee’s recommendation focused solely on Value-Added Tax (VAT) revenue and not on the general distribution of FAAC funds. He noted that the committee recommended increasing the share of VAT revenue allocated to states and local governments from 85% to 90%. Additionally, the committee suggested that states and local governments discontinue the imposition of “consumption taxes” to avoid multiple taxation.
In his tweet, Oyedele stated, “We did not recommend a reduction in the Federal Government’s share from [the] federation’s account. Our recommendation is with respect to VAT revenue, to increase the share of states and local governments from 85% to 90%, and for states to discontinue their other forms of consumption taxes which constitute multiple taxation on businesses and individuals.”
FAAC Fund Allocation Process
The Federation Account Allocation Committee (FAAC) is responsible for determining the distribution of funds among the Federal Government, states, and local governments. At the September 2024 FAAC meeting in Abuja, the committee, through a statement by its Director of Press and Public Relations, Bawa Mokwa, announced the disbursement of N1.2 trillion earned as revenue in August 2024.
Proposal for a New Distribution Formula
The report in question included a reference to a new proposal by Oyedele regarding the distribution formula for states and local governments. According to the proposal, 60% of the states’ and local governments’ share would be based on the principle of derivation. This means that states with higher resource generation would receive a larger portion of the funds.
“For example, if N100 is available for distribution from FAAC, the Federal Government would take N10, while N36 would be shared equally among the 36 states, and N54 would be distributed based on derivation,” the report explained.
Aim of the Reforms: Streamlining Tax Collection
Oyedele also emphasized that the proposed changes are part of broader reforms aimed at eliminating “nuisance taxes” and streamlining the tax collection process. These reforms are designed to simplify the tax system and promote fiscal federalism, granting states and local governments more control over their revenues.
“The new approach not only simplifies tax collection but also lays the foundation for fiscal federalism, giving states and local governments more autonomy over their revenues,” Oyedele was quoted as saying.
