The Federal Government of Nigeria said its recent tax reform bill, which was recently transmitted to the National Assembly, will bring about a fairer tax system in the country.
The chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, disclosed this in a statement through his official X account on Tuesday.
This comes after northern governors on Monday, in a communiqué signed by the chairman of the Northern Governors’ Forum, Muhammadu Inuwa, the governor of Gombe State, rejected President Bola Ahmed Tinubu’s tax reform bill.
The governors had rejected the bill on the ground that its proposed amendment to the distribution of value-added tax, VAT, to a derivative-based model.
However, Oyedele explained that the proposed VAT derivation-based model takes into account the place of supply or consumption for goods and services rather than where VAT is remitted.
“We share the sentiment expressed by the Northern Governors regarding the inequity inherent in the current model of derivation as a basis for distributing VAT revenue. This issue, in fact, affects many states across all geopolitical zones because the current derivation is mainly determined based on where VAT is remitted rather than where goods or services are supplied or consumed.
“Our proposal aims to create a fairer system by devising a different form of derivation that takes into account the place of supply or consumption for relevant goods and services, whether they are zero-rated, exempt, or taxable at the standard rate.
“For example, a state that produces food shouldn’t lose out just because its products are VAT-exempt or consumed in other states. The state where the supply originates should be recognised for its contributions. The same principle should apply to services like telecommunications—VAT distribution should reflect where subscribers are located,” he explained.
He added that the government plans to collaborate with all stakeholders to find a balanced solution that is beneficial to all.
“We will collaborate with all stakeholders to address this concern with a view to finding a balanced solution that achieves a win-win outcome for all,” he stated.
Tinubu forwarded tax reform bills to the National Assembly on October 3, 2024.