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Revised VAT Sharing Formula Gets Endorsement From Governors

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The Nigeria Governors’ Forum has once again expressed its resolute backing for the comprehensive reform of Nigeria’s long-overdue tax laws, recognizing the need for an overhaul to better align with current economic realities.

Additionally, the Forum approved a revised Value Added Tax (VAT) distribution formula, with 50% of the revenue now earmarked for equal allocation. This step is seen as a major move toward addressing disparities in resource distribution among the states and ensuring a more balanced fiscal policy.

The Nigeria Governors’ Forum, through a statement issued by its Chairman, Governor AbdulRahman AbdulRazaq of Kwara State, expressed its unwavering commitment to the modernization of Nigeria’s tax system. The communiqué highlighted the urgency of reforming the tax laws to better reflect the evolving economic landscape and promote fiscal stability.

Following the subnational consultation and engagement with the Presidential Tax Reform Committee on Thursday, a statement shared with journalists in Abuja underscored the importance of revising Nigeria’s tax framework. The communiqué outlined that modernizing the tax system is a vital step toward improving fiscal stability and aligning the country’s practices with global standards, ensuring Nigeria’s economic resilience in a changing world

After receiving the green light from the Federal Executive Council, President Bola Tinubu took the significant step of sending four tax reform bills to the National Assembly for deliberation in October 2024. This move is seen as a critical part of his administration’s broader efforts to overhaul Nigeria’s tax system and drive fiscal modernization, laying the groundwork for sustainable economic growth.

In its explanation, the Federal Government revealed that the bills are geared towards revamping Nigeria’s tax system to meet global standards and enhance revenue collection. These include the Nigeria Tax Bill 2024, the Nigeria Tax Administration Bill, the Nigeria Revenue Service (Establishment) Bill, and the Joint Revenue Board (Establishment) Bill, all of which aim to modernize tax administration and create a more effective, transparent system.

Read also: FG, Senate Collaborate On Tax Bills, Public Input Sought

However, the bills sparked diverse opinions across the country with northern leaders opposed to its passage over the Value Added Tax provisions.

On October 29, the Northern Governors Forum opposed the proposed tax amendment bills.

In a communique issued after a joint meeting with the Northern Traditional Rulers Council at the Government House in Kaduna, the governors called on the National Assembly to reject any bill that could threaten the welfare of their citizens.

Additionally, on October 31, the National Economic Council advised Tinubu to promptly withdraw the Tax Reforms Bills from the National Assembly to facilitate broader consultations and consensus-building.

Prominent critics, such as the 2023 Peoples Democratic Party Presidential candidate, former Vice President Atiku Abubakar, Chairman of the PDP Governors Forum, Bauchi State Governor, Bala Mohammed, Borno State Governor Babagana Zulum, and former Sokoto State Governor Aminu Tambuwal, among others, also raised concerns about the bill’s potential socioeconomic impact on the northern region, which is already grappling with economic difficulties, high poverty levels, and security challenges.

On the other hand, southern leaders and lawmakers backed the reforms, believing they could lead to positive changes.

Notably, on December 5 and 10, South-South Senators and leaders of the Southern caucus in the House of Representatives expressed strong support for the passage of the tax reform bills, stating that they are beneficial for Nigeria and people-oriented.

Additionally, several Southern leaders, including elder statesman and Pan Niger- Delta Forum leader, Chief Edwin Clark, Chairman of the South-West Governors Forum and Lagos State Governor Babajide Sanwo-Olu, former Bayelsa State Governor, Senator Henry Dickson, and the pan-Yoruba socio-political organization, Afenifere, along with other groups and individuals, have consistently expressed full support for the tax reform bills.

The Eastern Updates 

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