Nigerian governors advocate for modern tax system, introduce new VAT sharing formula
The Nigeria Governors’ Forum (NGF) has recently expressed a strong desire for the modernization of Nigeria’s tax system.
This is part of a broader effort to reform the country’s fiscal policies and align them with global best practices.
The governors convened on Thursday January 16, 2025, to discuss critical national issues, including tax reforms proposed by President Bola Ahmed Tinubu.
Support for tax reform bills
During this meeting, the governors voiced their support for four tax reform bills that were transmitted to the National Assembly by President Tinubu in October 2024. These bills include:
Nigeria Tax Bill 2024: Aims to provide a comprehensive fiscal framework for taxation in Nigeria.
Tax Administration Bill: Intended to establish a clear legal framework for all taxes and resolve disputes related to tax collection.
Nigeria Revenue Service Establishment Bill: Seeks to repeal the existing Federal Inland Revenue Service Act and create a new entity known as the Nigeria Revenue Service.
Joint Revenue Board Establishment Bill: Proposes the establishment of a tax tribunal and a tax ombudsman.
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The governors emphasized the importance of these reforms in enhancing fiscal stability and ensuring that Nigeria’s tax laws are modernized.
Proposed Value Added Tax sharing formula
One of the significant resolutions from this meeting was the endorsement of a revised Value Added Tax (VAT) sharing formula aimed at promoting equitable distribution of resources among states. The proposed formula allocates VAT revenues as follows:
50% based on equality
30% based on derivation
20% based on population
This approach is designed to ensure that all states receive fair compensation relative to their contributions and needs.
Economic stability measures
In addition to supporting the VAT sharing formula, the governors agreed on several measures intended to maintain economic stability:
There will be no increase in the current VAT rate or reduction in Corporate Income Tax (CIT) at this time.
Essential goods and agricultural products will continue to be exempt from VAT, which aims to protect citizens’ welfare and promote agricultural productivity.
The NGF also recommended that there should be no terminal clause for TETFUND (Tertiary Education Trust Fund), NASENI (National Agency for Science and Engineering Infrastructure), and NITDA (National Information Technology Development Agency) concerning development levies included in these bills.
Overall, the governors have shown a unified front in advocating for comprehensive reforms of Nigeria’s archaic tax laws while proposing an equitable VAT sharing formula which they believe reflects fairness across different states.
Their collective decisions underscore their commitment to improving Nigeria’s fiscal landscape while safeguarding economic stability.
