Tax Reform: NGF rejects VAT increase, backs revised sharing formula

By Matthias Ogbagah

DELTA – The Nigeria Governors’ Forum (NGF) has rejected any immediate increase in the Value Added Tax (VAT), citing potential economic pressure on businesses and households already dealing with inflation.

The Forum expressed overwhelming support for the continuation of the legislative process at the National Assembly that will culminate in the eventual passage of the Tax Reform Bills.

The decision was made during a meeting with the Presidential Tax Reform Committee in Abuja on Thursday.

In a communique issued after the meeting, the governors expressed support for the ongoing legislative process to modernise Nigeria’s tax laws but opposed a hike in VAT from the current 7.5%. They endorsed a revised VAT sharing formula that allocates 50% of revenue based on equality, 30% on derivation, and 20% on population.

“We recognise the importance of fiscal reforms, but raising VAT at this time would place undue pressure on businesses and citizens,” NGF Chairperson and Kwara State Governor, AbdulRahman AbdulRazaq, said.

The governors also advocated for the continued exemption of essential goods and agricultural produce from VAT to protect citizens and promote food security.

They rejected terminal clauses for development levies in the Tax Reform Bills, emphasising the need for sustained funding for agencies like TETFUND, NASENI, and NITDA to support national development.

The tax reform bill was proposed to the National Assembly by President Bola Tinubu on October 3, 2024, they included the Nigeria Tax Bill 2024, the Nigeria Tax Administration Bill, the Nigeria Revenue Service Establishment Bill, and the Joint Revenue Board Establishment Bill.

These bills aim to overhaul tax administration and revenue generation in the country.

The bills are products of a year-long effort by the Taiwo Oyedele-led Presidential Committee on Fiscal Policy and Tax Reforms, inaugurated by President Tinubu in August 2023.

Meanwhile, before the agreement of the NGF, the Senate’s Ad-hoc Committee on tax reform, led by Senator Abba Moro on Monday, announced progress in deliberations on the bills.

“We have reached some agreements after thorough discussions with government officials. Our goal is to deliver a law that meets the needs of all Nigerians,” Moro said.

The Communiqué reads: “We, members of the Nigeria Governors’ Forum (NGF) 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.

“Members acknowledged the importance of modernizing the tax system to enhance fiscal stability and align with global best practices.

“The Forum endorsed a revised Value Added Tax (VAT) sharing formula to ensure equitable distribution of resources: 50% based on equality, 30% based on derivation, and 20% based on population.”

The Governors also agreed that there should be no increase in the VAT rate or reduction in Corporate Income Tax (CIT) at this time, to maintain economic stability.

“The Forum advocated for the continued exemption of essential goods and agricultural produce from VAT to safeguard the welfare of citizens and promote agricultural productivity.”

The stakeholders also recommended that there should be no terminal clause for TETFUND, NASENI, and NITDA in the sharing of development levies in the bills.

“The meeting supports the continuation of the legislative process at the National Assembly that will culminate in the eventual passage of the Tax Reform Bills.”

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