After weeks of intense debate, the governors of the 36 states and the Presidential Tax Reform Committee reached an agreement on Thursday regarding the distribution of Value Added Tax (VAT).
Following their meeting, the governors endorsed a VAT sharing model that maintains the existing 50 per cent equality allocation, increases the derivation share from 20 per cent to 30 per cent, and adopts the 20 per cent population-based allocation, a reduction from the current 30 per cent. This proposal was put forth by the Presidential Tax Reform Committee, led by Mr. Taiwo Oyedele.
A communique from the closed-door meeting between the governors and the Presidential Tax Reform Committee in Abuja was signed by Alhaji Abdul Rahman Abdul Razaq, Chairman of the Nigeria Governors’ Forum (NGF) and Governor of Kwara State.
The communique stated, “The Forum has endorsed a revised Value Added Tax (VAT) sharing formula to ensure equitable resource distribution: 50 per cent based on equality, 30 per cent based on derivation, and 20 per cent based on population.
“The Forum reaffirmed its commitment to overhauling Nigeria’s outdated tax laws. Members acknowledged the need for a modernised tax system that enhances fiscal stability and aligns with global best practices.
“We, the members of the Nigeria Governors’ Forum (NGF) and the presidential tax reform committee, convened on 16th January 2025 to address critical national issues, including the reform of Nigeria’s fiscal policies and tax system, and adopted additional resolutions.
“Members agreed there should be no increase in the VAT rate or reduction in Corporate Income Tax (CIT) at this juncture, to uphold economic stability.
“The Forum advocated for the continued exemption of essential goods and agricultural products from VAT to protect citizens’ welfare and bolster agricultural productivity.
“The meeting also recommended that there be no terminal clauses for TETFUND, NASENI, and NITDA in the allocation of development levies in the bills.
“The meeting supports the ongoing legislative processes in the National Assembly that will ultimately lead to the passage of the Tax Reform Bills.”
Thursday’s dialogue between the governors and presidential committee marked a significant breakthrough, especially given that governors, emirs, and chiefs from the northern states had previously rejected the proposed tax amendment bills sent to the National Assembly by the federal government.