Rita Odafe
Governors Unite to Support Tinubu’s Tax Reforms
Thirty-six governors from Nigeria, as part of the Nigeria Governors’ Forum (NGF), have collaborated with the federal government regarding tax reform legislation proposed to the National Assembly by President Bola Tinubu. Their goal is to introduce a new taxation sharing method to facilitate the passage of these bills.
During a consultative meeting in Abuja led by Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, the governors expressed their backing for the ongoing legislative proceedings that will lead to the approval of the tax reform bills.
New VAT Sharing Formula Proposed
In a statement released by NGF Chairman and Kwara State Governor, Abdul Rahman Abdul Razaq, the Forum approved a modified Value Added Tax (VAT) distribution formula, proposing a 50% allocation based on equality, 30% based on derivation, and 20% based on population to ensure fair resource distribution.
Calls for Economic Stability
The governors have decided against any increase in the VAT rate or cuts to Corporate Income Tax (CIT) at this time to uphold economic stability. Additionally, they advocated for the continuous exemption of essential goods and agricultural products from VAT to protect citizen welfare and boost agricultural productivity.
No Terminal Clause Recommended
The meeting concluded with a suggestion to avoid a terminal clause for Tertiary Education Trust Fund (TETFUND), National Agency for Science and Engineering Infrastructure (NASENI), and National Information Technology Development Agency (NITDA) in the distribution of development levies outlined in the bills.
The communiqué noted, “As members of the Nigeria Governors’ Forum and the presidential tax reform committee, we convened on January 16, 2025, to discuss crucial national issues, including the overhaul of Nigeria’s fiscal and tax policy, leading to multiple resolutions.”
Support for Tax Reform Laws
The Forum reaffirmed its commitment to overhauling Nigeria’s outdated tax laws, recognizing the necessity to modernize the tax framework for greater fiscal stability and alignment with global standards. It specifically endorsed the revised VAT sharing formula.
In their resolutions, members agreed on maintaining the existing VAT rate and CIT levels to foster economic balance and insisted on the exemption of vital goods and agricultural items from VAT.
Continuation of Legislative Process
The meeting reaffirmed the need for ongoing legislative efforts in the National Assembly, paving the way for the eventual endorsement of the tax reform bills.
Background on Tax Reform Bills
Earlier, on October 3, 2024, President Tinubu submitted four tax reform bills to the National Assembly after recommendations from the Presidential Committee on Fiscal and Tax Reforms. These bills aim to revamp Nigeria’s taxation framework.
The bills encompass the Nigeria Tax Bill 2024, intended to establish a fiscal framework; the Tax Administration Bill, which seeks to clarify legal tax frameworks and alleviate disputes; the Nigeria Revenue Service Establishment Bill, designed to replace the Federal Inland Revenue Service Act with a new Nigeria Revenue Service; and the Joint Revenue Board Establishment Bill, aimed at forming a tax tribunal and an ombudsman.
It’s noteworthy that on the same day, the Senate and House of Representatives took a recess, while the National Economic Council, chaired by Vice President Kashim Shettima, agreed to request the withdrawal of the tax reform bills from the National Assembly for further consultation.
However, on October 31, 2024, President Tinubu responded positively to the suggestion, allowing the bills to proceed through legislative processes to provide Nigerians insight and the chance to contribute during public hearings.
Furthermore, the bills progressed to a second reading in the Senate on November 28, 2024.
