- Call For Revised VAT Sharing Formula
By Abiola Olawale
After several back and forths, the Nigerian Governors’ Forum (NGF) has finally endorsed the Tax Reform Bills proposed by President Bola Ahmed Tinubu’s administration.
The 36 Governors, however, made specific recommendations regarding the sharing formula for Value Added Tax (VAT).
The governors proposed a revised VAT sharing formula aimed at ensuring equitable distribution of resources, suggesting: 50% based on equality, 30% based on derivation, and 20% based on population.
This was contained in a communique issued by Governor AbdulRahman AbdulRazaq of Kwara State, who also doubles as the Chairman of the Nigeria Governors’ Forum.
The communique noted that the resolution was reached at a meeting held on Thursday.
During the meeting, the governors also strongly opposed any increase in the VAT rate or reduction in Corporate Income Tax (CIT) at this time, emphasizing the need to maintain economic stability.
Additionally, they advocate for the continued exemption of essential goods and agricultural produce from VAT to safeguard the welfare of citizens and promote agricultural productivity.
The governors also recommended that there should be no terminal clause for TETFUND, NASENI, and NITDA in the sharing of development levies as proposed in the bills.
The communique reads in part: “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:
1. 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.
2. The Forum endorsed a revised Value Added Tax (VAT) sharing formula to ensure equitable distribution of resources:
o 50% based on equality,
o 30% based on derivation, and
o 20% based on population.
3. Members 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.
4. The meeting recommended that there should be no terminal
clause for TETFUND, NASENI, and NITDA in the sharing of
development levies in the bills.
5. 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.”
