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President Bola Tinubu’s efforts to comprehensively reform Nigeria’s tax system got a major boost on Thursday when the Nigeria Governors’ Forum (NGF) declared “strong support” for it.
The NGF, in a statement signed by its chairperson, AbdulRahman AbdulRazaq, “reiterated its strong support for the comprehensive reform of Nigeria’s archaic tax laws.”
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After a meeting with the Presidential Tax Reform Committee, the NGF said it took the position to “deliberate on critical national issues, including the reform of Nigeria’s fiscal policies.”
President Tinubu’s tax reform proposal is currently at the National Assembly but has faced strong opposition, mainly from political, religious and traditional leaders in northern Nigeria.
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In the statement, the NGF said it supports the current legislative process in the parliament but suggested amendments to the tax bills.
The governor’s endorsement of the bills is based on the condition that the sharing formula for VAT is reviewed.
They maintained that VAT should be shared as follows: 50 per cent based on equality, 30 per cent on derivation, and 20 per cent on population.
The bill proposes that 60 per cent be allocated based on derivation, while population and equality are allocated 20 per cent each.
The sharing of VAT has been the most contentious part of the bill.
Several governors, particularly those from the North, have openly opposed the bill, stating that it would prevent them from paying salaries in their states.
Many have called for the withdrawal of the legislation pending further consultation.
Although the Chairman of the Presidential Tax Reform Committee, Taiwo Oladele, stated that the committee held extensive consultations with the governors, he noted that they (governors) turned down requests for further engagement.
President Tinubu has remained adamant about the bill but has expressed openness to compromise. It is unclear if the president will comply with the conditions set by the governors.
Other Conditions
Another condition given by the governors is that the federal government should not increase VAT or reduce the Corporate Income Tax (CIT) at this time.
They recommended that the bill’s section proposing the termination of funding for certain agencies through development levies should be discarded.
“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.
“The meeting recommended that there should be no terminal clause for TETFUND, NASENI, and NITDA in the sharing of development levies in the bills,” the statement said.
The governors added that they support “the continuation of the legislative process at the National Assembly that will culminate in the eventual passage of the Tax Reform Bills.”
President Tinubu transmitted the four tax bills to the legislature for consideration in October last year. They are the Nigeria Tax Bill 2024, the Tax Administration Bill, the Nigeria Revenue Service Establishment Bill, and the Joint Revenue Board Establishment Bill.
Bills’ status
Meanwhile, the bills have since passed a second reading in the Senate and have been referred to the Committee on Finance for further legislative action. They are yet to be debated in the House of Representatives.
Senators from the South-east have said they are not against the bills but need to consult with their governors and other stakeholders in the region.
South-south senators warned people opposed to the tax bills to desist from introducing regional, ethnic or tribal sentiments when criticising them.
However, the Senate President, Godswill Akpabio, has assured that the National Assembly will do everything within its ability to ensure the passage of the tax bills.
The Speaker of the House, Abbas Tajudeen, also expressed confidence in passing the bills on Tuesday.
