BREAKING: Governors Endorse Tax Reform Bills, Oppose VAT Hike

The Nigeria Governors’ Forum (NGF) has officially endorsed the tax reform bills submitted by President Bola Tinubu to the National Assembly. 

However, the governors firmly rejected any increase in the Value-Added Tax (VAT) rate, proposing instead a more equitable sharing formula.

Communique Highlights

In a statement released on Thursday following their meeting with Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, the NGF expressed their unified stance on the reforms. The communique, signed by NGF Chairman and Kwara State Governor Abdulrahman Abdulrazaq, detailed key resolutions:

1. Revised VAT Sharing Formula:
   The governors proposed a new formula to ensure a fair distribution of VAT revenue:

   • 50% based on equality among states.
   • 30% based on derivation (where the VAT is generated).
   • 20% based on population.

2. Opposition to VAT Increase:
   The NGF opposed any increase in the VAT rate or reduction in the Corporate Income Tax (CIT), emphasizing the need to maintain economic stability. They also called for essential goods and agricultural products to remain exempt from VAT to protect citizens and boost agricultural productivity.

3. Support for Reform Continuation:
   The governors pledged their support for the ongoing legislative process aimed at passing the tax reform bills, which they see as essential for modernizing Nigeria’s fiscal policies and aligning them with global standards.

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Other Key Resolutions

• The NGF opposed terminal clauses for key agencies such as the Tertiary Education Trust Fund, the National Agency for Science and Engineering Infrastructure, and the National Information Technology Development Agency in the allocation of development levies.
  
  

• Members highlighted the importance of maintaining fiscal stability and enhancing the efficiency of Nigeria's tax system through comprehensive reform.

Background on the Tax Reform Bills

President Tinubu submitted four tax reform bills to the National Assembly on October 3, 2024, following recommendations by the Presidential Committee on Fiscal and Tax Reforms. These include:

1. Nigeria Tax Bill 2024: Establishes a fiscal framework for taxation.
2. Tax Administration Bill: Provides a clear legal framework for tax collection and dispute resolution.
3. Nigeria Revenue Service Establishment Bill: Repeals the Federal Inland Revenue Service Act and establishes a new Nigeria Revenue Service.
4. Joint Revenue Board Establishment Bill: Establishes a tax tribunal and ombudsman for resolving disputes.

These reforms aim to modernize Nigeria's tax laws, boost revenue generation, and enhance transparency.

FAQs

• What is the proposed VAT sharing formula?

The governors suggest allocating VAT revenue as follows: 50% based on equality among states, 30% based on derivation, and 20% based on population.

• Why did the governors reject a VAT increase?

The NGF believes increasing VAT at this time could destabilize the economy and negatively impact citizens. Instead, they advocate for exemptions on essential goods and agricultural products.

• What is the goal of the tax reform bills?

The tax reform bills aim to modernize Nigeria’s tax system, align it with global best practices, and provide a clear framework for taxation to enhance fiscal stability.