The 36 state governors of Nigeria, under the Nigeria Governors’ Forum, have expressed support for the tax reform bills forwarded to the National Assembly by President Bola Tinubu while proposing a new Value Added Tax sharing formula to ensure equitable resource distribution.
The governors convened in Abuja on Thursday for a meeting of subnational consultations and engagement with the Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele. At the end of the meeting, they endorsed the continuation of the legislative process that would lead to the passage of the tax reform bills.
In a communiqué issued by NGF Chairman and Kwara State Governor AbdulRahman AbdulRazaq, the Forum proposed a revised VAT sharing formula of 50% based on equality, 30% based on derivation, and 20% based on population.
The governors resolved to maintain economic stability by opposing any increase in the VAT rate or reduction in Corporate Income Tax at this time. They also advocated for the continued exemption of essential goods and agricultural produce from VAT, highlighting the need to safeguard citizens’ welfare and promote agricultural productivity.
Furthermore, the Forum recommended that development levies shared by Tertiary Education Trust Fund, the National Agency for Science and Engineering Infrastructure, and the National Information Technology Development Agency should not have a terminal clause.
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, emphasizing the need to modernize the tax system to enhance fiscal stability and align with global best practices.
– Members endorsed a revised Value Added Tax sharing formula: 50% based on equality, 30% based on derivation, and 20% based on population.
– It was agreed that there should be no increase in the VAT rate or reduction in CIT at this time to maintain economic stability.
– The Forum advocated for continued exemption of essential goods and agricultural produce from VAT.
– It was recommended that there should be no terminal clause for TETFUND, NASENI, and NITDA in the sharing of development levies in the bills.
– The Forum supported the continuation of the legislative process at the National Assembly that will culminate in the eventual passage of the Tax Reform Bills.”
On October 3, 2024, President Tinubu transmitted four tax reform bills to the National Assembly following the recommendations of the Presidential Committee on Fiscal and Tax Reforms chaired by Taiwo Oyedele.
The bills include:
1. Nigeria Tax Bill 2024: Provides the fiscal framework for taxation in Nigeria.
2. Tax Administration Bill: Establishes a clear legal framework for all taxes to reduce disputes.
3. Nigeria Revenue Service Establishment Bill: Repeals the Federal Inland Revenue Service Act to establish the Nigeria Revenue Service.
4. Joint Revenue Board Establishment Bill: Creates a tax tribunal and a tax ombudsman.
The tax reform bills faced initial resistance. On October 3, 2024, the National Economic Council, chaired by Vice President Kashim Shettima, recommended their withdrawal for wider consultation. However, President Tinubu responded on October 31, 2024, stating that the bills should pass through the legislative process, allowing for public input during hearings.
The Senate passed the bills for second reading on November 28, 2024.
With the governors’ backing, the bills now have renewed momentum, paving the way for potential reforms aimed at modernizing Nigeria’s tax system.
