The Nigeria Governors' Forum (NGF) has thrown its support behind the proposed tax reform bills currently at the national assembly, while proposing a different formula for sharing Value Added Tax (VAT) revenue from the one originally put forward by President Bola Tinubu.
In a meeting held on January 16, 2025, between the NGF and the presidential tax reform committee, the governors endorsed a revised VAT sharing formula that differs significantly from the president's original proposal. The governors recommended distributing VAT revenue as follows:
- 50% based on equality (distributed equally among states)
- 30% based on derivation (where goods and services are consumed)
- 20% based on population
This stands in contrast to Tinubu's original formula in the tax reform bills, which proposed:
- 60% based on derivation
- 20% based on equality
- 20% based on population
The governors' proposal shifts the emphasis from derivation to equality-based distribution, potentially benefiting states with lower consumption rates. While supporting the broader tax reform initiative, the governors also took a firm stance against any increase in the VAT rate or reduction in Corporate Income Tax (CIT), citing the need to maintain economic stability.
Additional recommendations from the governors included removing terminal clauses for TETFUND, National Agency for Science and Engineering Infrastructure (NASENI), and National Information Technology Development Agency (NITDA) in the sharing of development levies. They also advocated for continuing the exemption of essential goods and agricultural produce from VAT to protect citizens' welfare and promote agricultural productivity.
The Federal Government, through Minister of Information and National Orientation Muhammed Idris, expressed satisfaction with the governors' support for the bills and their counter-proposal on the VAT formula. However, he noted that the final decision rests with the National Assembly, which will consider all inputs and submissions, including those from a public hearing.
The tax reform bills, which include the Nigeria Tax Bill 2024, Nigeria Tax Administration Bill, Nigeria Revenue Service (Establishment) Bill, and Joint Revenue Board (Establishment) Bill, have faced varying reactions across the country. While southern leaders have generally supported the reforms, northern governors had initially opposed the bills, citing concerns about their region's interests. The current endorsement by the NGF represents a significant shift toward consensus, though with substantial modifications to the original proposal.
