The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has assured the 19 northern governors that the proposed Tax Reform Bill will be a win-win for all the tiers of government.
In a Tuesday post on X (formerly Twitter), Oyedele said his committee shared the sentiment expressed by the Northern governors regarding the “inequity inherent in the current model of derivation as a basis for distributing VAT revenue”.
On Monday, at a meeting with traditional rulers and other stakeholders, the Northern Governors’ Forum rejected the Tax Reform Bill that was forwarded to the National Assembly.
The 19 governors said the proposed law was against the interests of the North and other sub-nationals, especially the proposed amendment to the distribution of Value Added Tax (VAT) to a derivation-based model.
Responding, Oyedele said, “This issue, in fact, affects many states across all geopolitical zones because the current derivation is mainly determined based on where VAT is remitted, rather than where goods or services are supplied or consumed.
“Our proposal aims to create a fairer system by devising a different form of derivation which takes into account the place of supply or consumption for relevant goods and services whether they are zero-rated, exempt or taxable at the standard rate.
“For example, a state that produces food shouldn’t lose out just because its products are VAT-exempt or consumed in other states. The state where the supply originates should be recognised for its contributions. The same principle should apply to services like telecommunications—VAT distribution should reflect where subscribers are located.
“We will collaborate with all stakeholders to address this concern with a view to finding a balanced solution that achieves a win-win outcome for all.”
