Tayo Busayo, Abuja
DAILY COURIER - Nigerian governors have endorsed the Federal Government’s tax reform bills while proposing a new formula for sharing value-added tax (VAT). This was the outcome of a crucial meeting between the Nigeria Governors’ Forum (NGF) and the Presidential Tax Reform Committee held on Thursday.
The Federal Government's tax reform initiative has been a cornerstone of President Bola Tinubu’s economic agenda since his inauguration in May 2023. As part of efforts to streamline tax collection, modernize Nigeria’s fiscal framework, and improve revenue generation, Tinubu forwarded four key tax reform bills to the National Assembly in 2024. These include the Tax Administration Bill, Nigeria Tax Bill, and the Joint Revenue Board Establishment Bill. Among the most significant proposals is the replacement of the Federal Inland Revenue Service (FIRS) with the Nigeria Revenue Service, designed to increase efficiency and accountability in tax administration.
However, the reforms have sparked nationwide debates, with northern governors and some regional leaders expressing concerns about the potential impact on their regions. While they argue that the proposed changes might disadvantage the North economically, the presidency has defended the reforms, emphasizing their aim to improve fiscal stability, reduce tax evasion, and ensure the equitable distribution of resources. These tensions have underscored the urgent need for consensus among stakeholders as the legislative process continues.
In a communique issued by the NGF Chairman, Governor Abdul Rahman Abdul Razaq of Kwara State, the forum expressed strong support for overhauling Nigeria’s outdated tax laws, emphasizing the importance of fiscal stability and alignment with global best practices.
The governors proposed a revised VAT-sharing formula designed to ensure equitable distribution of resources across the federation. The proposed formula allocates 50% of VAT based on equality among states, 30% on derivation, and 20% on population.
“The governors unanimously agreed that maintaining economic stability is crucial,” the communique read. “There should be no increase in the VAT rate or reduction in Corporate Income Tax (CIT) at this time.”
The NGF also advocated for the continued exemption of essential goods and agricultural produce from VAT to protect citizens’ welfare and support agricultural productivity.
Further recommendations by the NGF include retaining the roles of the Tertiary Education Trust Fund (TETFUND), the National Agency for Science and Engineering Infrastructure (NASENI), and the National Information Technology Development Agency (NITDA) in sharing development levies in the bills.
Despite controversies surrounding the tax reform bills, including resistance from northern governors who labeled them as “anti-north,” the NGF supported the continuation of the legislative process at the National Assembly to ensure the eventual passage of the bills.
President Bola Tinubu had, last year, introduced four tax reform bills to the National Assembly, including the Tax Administration Bill, Nigeria Tax Bill, and Joint Revenue Board Establishment Bill. He also proposed repealing the Federal Inland Revenue Service (FIRS) Act, replacing it with the Nigeria Revenue Service.
While opponents argue that the reforms could marginalize specific regions, the presidency assured Nigerians that the bills aim to improve national revenue generation and the lives of citizens.
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