Govs approves tax reform bills, propose new VAT-sharing formula

This decision was reached today during a meeting between the Nigeria Governors’ Forum (NGF) and the Presidential Tax Reform Committee.

In a communiqué issued after the meeting, the NGF emphasized its firm backing for the overhaul of Nigeria’s outdated tax laws, acknowledging the need to modernize the tax system to enhance fiscal stability and align with global standards.

The governors recommended a revised VAT-sharing formula to promote equitable resource distribution. The proposed formula allocates 50% based on equality, 30% based on derivation, and 20% based on population.

They also 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 exempting essential goods and agricultural produce from VAT to protect citizens’ welfare and boost agricultural productivity.

Additionally, the NGF recommended the removal of terminal clauses for 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 allocation of development levies outlined in the bills.

Despite controversies surrounding the tax reform bills, the governors reiterated their support for continuing the legislative process in the National Assembly to ensure the bills’ eventual passage.

President Bola Tinubu had introduced four tax reform bills to the National Assembly, including the Tax Administration Bill, Nigeria Tax Bill, and Joint Revenue Board Establishment Bill, along with a proposal to replace the Federal Inland Revenue Service (FIRS) with the Nigeria Revenue Service.

The proposals have faced resistance, particularly from northern governors and leaders who argue that the bills are unfavorable to the region. However, President Tinubu remains resolute, with the presidency assuring Nigerians that the reforms aim to improve lives and are not targeted at any specific region.