Governors Back Tinubu's Tax Reform, Propose Bold New VAT-Sharing Formula

By Achimi muktar

In a move signaling alignment with President Bola Tinubu’s tax reform agenda, Nigerian governors have thrown their weight behind the federal government’s tax reform bills, proposing a new formula for sharing Value Added Tax (VAT).

The governors’ endorsement came during a high-stakes meeting between the Nigeria Governors’ Forum (NGF) and the Presidential Tax Reform Committee on Thursday. Their communique emphasized the importance of modernizing Nigeria’s tax framework to enhance fiscal stability and align with global best practices.

A Game-Changing VAT Formula

The governors unveiled a proposed VAT-sharing formula designed to ensure equitable distribution of resources. Under the new formula:

50% of VAT would be allocated equally across all states.

30% would be distributed based on derivation (states’ contribution to VAT revenue).

20% would be shared based on population.

The NGF also recommended maintaining the current VAT rate and Corporate Income Tax (CIT) levels to safeguard economic stability. “Essential goods and agricultural produce must remain exempt from VAT to protect citizens’ welfare and promote agricultural productivity,” the governors added.

Support for Strategic Agencies

In their communique, the NGF advocated for retaining key development agencies, such as 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. They argued against terminating these agencies, citing their importance in driving Nigeria’s development.

A Reform Riddled with Controversy

The tax reform bills, initially sent to the National Assembly by President Tinubu, include the Tax Administration Bill, Nigeria Tax Bill, and Joint Revenue Board Establishment Bill. Tinubu also seeks to replace the Federal Inland Revenue Service (FIRS) with the Nigeria Revenue Service.

While the reforms are designed to streamline tax administration and improve efficiency, they have faced pushback, particularly from northern governors and leaders, who claim the bills could disadvantage their region. Some critics have labeled the reforms as “anti-north.”

Despite the opposition, the NGF has voiced support for the continuation of the legislative process to ensure the bills’ passage.

Tinubu’s Resolve

President Tinubu remains resolute, refusing to withdraw the bills and reassuring the nation that the reforms are not targeted at any region. The presidency has emphasized that the reforms are essential for Nigeria’s fiscal sustainability and economic growth.

A Step Toward Economic Transformation

The governors’ endorsement marks a significant milestone in Nigeria’s journey toward overhauling its outdated tax laws. If implemented, the reforms could enhance revenue generation, foster equitable resource distribution, and promote economic stability.

With the proposed VAT-sharing formula and sustained dialogue among stakeholders, the nation inches closer to a more inclusive and modernized tax system.