Governors’ forum supports tax reform bills, proposes new VAT sharing formula

• The Nigeria Governors’ Forum has supported the tax reform bills
• The forum also proposed a new Value Added Tax sharing formula
• The NGF called for continued exemption of essential goods and agricultural products from VAT

The Nigeria Governors’ Forum (NGF) says it is in support of the tax reform bills submitted by President Bola Tinubu to the National Assembly and proposed a new Value Added Tax (VAT) sharing formula.

The NGF disclosed this in a communiqué issued at the end of a meeting with the Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, in Abuja, on Thursday, January 16.

The communiqué, signed by the NGF Chairman and Governor of Kwara State, Abdulrahman Abdulrazaq, noted the forum’s support for the modernisation of Nigeria’s outdated tax laws.

It stated that the NGF proposed an equitable VAT, noting that the revised VAT sharing formula must ensure equitable distribution of resources of 50 per cent based on equality, 30 per cent based on derivation, and 20 per cent based on population.

The NGF also urged that the VAT rate should not be increased, nor a reduction in Corporate Income Tax (CIT), and the continued exemption of essential goods and agricultural produce from VAT.

The communiqué read, “We, members of the Nigeria Governors’ Forum and Presidential Tax Reform Committee, convened on the 16th of January 2025 to deliberate on critical national issues, including the reform of Nigeria’s fiscal policies and tax system, and arrived at the following resolutions:

“The Forum reiterated its strong support for the comprehensive reform of Nigeria’s archaic tax laws. Members acknowledged the importance of modernising the tax system to enhance fiscal stability and align with global best practices.

“The Forum endorsed a revised Value Added Tax (VAT) sharing formula to ensure equitable distribution of resources: 50 per cent based on equality, 30 per cent based on derivation, and 20 per cent based on population.

“Members agreed that there should be no increase in the VAT rate or reduction in Corporate Income Tax (CIT) at this time to maintain economic stability. 

“The Forum advocated for the continued exemption of essential goods and agricultural produce from VAT to safeguard the welfare of citizens and promote agricultural productivity.”

Tax reform bills: The journey so far

The tax reform bills formed part of the economic policies that defined Nigeria in 2024.

It would be recalled that in October 2024, President Tinubu sent the four tax bills to the National Assembly for approval, which are the Nigeria Tax Bill 2024, the Tax Administration Bill, the Nigeria Revenue Service Establishment Bill, and the Joint Revenue Board Establishment Bill.

The Nigeria Tax Bill 2024 is expected to provide the fiscal framework for taxation in the country, the Tax Administration Bill will provide a legal framework for all taxes in the country and reduce disputes, the Nigeria Revenue Service Establishment Bill will repeal the Federal Inland Revenue Service Act and establish the Nigeria Revenue Service, and the Joint Revenue Board Establishment Bill is expected to create a tax tribunal and a tax ombudsman.

Among other things, the bills seek to review the sharing formula of the Value Added Tax (VAT) to accommodate what each state gets VAT for what it generates within its territory, as well as remove VAT from essential consumption, education, healthcare, transportation, and accommodation to benefit low-income earners.

Tax reform bills faced criticisms and opposition

However, the bills have been greeted with controversies and criticisms from different quarters, with some calling for wider consultations before passage, while others, like the Afenifere, have endorsed the bills.

During a meeting in October, the Northern Governors Forum said some aspects of the bills, especially the VAT components, are skewed against the interests of the North, even as the National Economic Council challenged the bills, asking President Tinubu to withdraw the bills from the National Assembly for further consultations.

In early December, President Tinubu directed the Federal Ministry of Justice to work with the National Assembly to ensure that “genuine concerns” associated with the Tax Reform Bills are addressed before their passage by the lawmakers, but due to public agitation and objections to the bills, the Senate paused public hearing of the tax reform bills after it passed second reading.

No regrets over subsidy removal, tax reforms will proceed, Tinubu says

Meanwhile, TheRadar earlier reported that President Bola Tinubu said there is no turning back on his administration’s tax reform plans, which have sparked significant controversy across the country. 

Speaking during a media chat in Lagos on Monday, December 23, Tinubu stressed that the reforms were necessary to eliminate colonial-era assumptions in Nigeria's tax system and were part of his broader economic agenda.