Governors Endorse Tax Reform Bills, Advocate Overhauled VAT Distribution Framework

In a significant triumph for proponents of fiscal modernization, Nigerian governors have expressed robust support for the Federal Government’s tax reform initiatives. However, they have proposed an adjusted formula for the distribution of Value-Added Tax (VAT) to ensure a more equitable allocation of national resources.
The resolution emerged from a high-level engagement between the Nigeria Governors’ Forum (NGF) and the Presidential Tax Reform Committee on Thursday.
A communiqué released at the conclusion of the deliberations emphasized the governors’ unwavering endorsement of a thorough revision of Nigeria’s outdated tax regulations. The NGF acknowledged the urgent necessity of aligning the nation’s tax framework with contemporary global standards to bolster fiscal sustainability.
The governors proposed a recalibrated VAT-sharing model, allocating 50% based on equal distribution, 30% according to derivation, and 20% based on population. They asserted that this structure would foster equitable resource distribution while addressing regional disparities.
Moreover, the forum dismissed any proposition to increase the VAT rate or reduce the Corporate Income Tax (CIT) at this juncture, citing the imperative of preserving economic stability amidst prevailing uncertainties.
The communiqué, issued by the NGF Chairman and Kwara State Governor Abdul Rahman Abdul Razaq, further called for the continued exemption of essential commodities and agricultural products from VAT. This, the governors argued, would protect citizens’ welfare while incentivizing agricultural output.
The NGF also advocated the removal of terminal clauses for key development agencies, including the Tertiary Education Trust Fund (TETFUND), the National Agency for Science and Engineering Infrastructure (NASENI), and the National Information Technology Development Agency (NITDA). This recommendation seeks to ensure their uninterrupted participation in the distribution of development levies under the proposed legislation.
Despite fervent debates surrounding the tax reform bills, the governors affirmed their backing for the legislative process currently unfolding in the National Assembly, which they anticipate will culminate in the bills’ eventual enactment.
Last year, President Bola Tinubu submitted four tax reform bills to the National Assembly, urging lawmakers to prioritize their passage. These proposals encompass the Tax Administration Bill, the Nigeria Tax Bill, and the Joint Revenue Board Establishment Bill.
Additionally, the President has recommended repealing the Federal Inland Revenue Service (FIRS) Act, suggesting its replacement with the Nigeria Revenue Service.
The reforms have encountered resistance, particularly from northern governors and leaders, some of whom argue that the bills are prejudicial to their region. Despite the backlash, President Tinubu has stood firm, insisting that the bills aim to enhance the lives of all Nigerians, with assurances from the presidency that no section of the nation stands to be marginalized.