‘It doesn’t reward productivity’ — group rejects NGF’s proposed VAT sharing formula

The Citizens Network for Peace and Development in Nigeria (CNPDN), a civil society organisation (CSO), has rejected the value-added tax (VAT) sharing formula proposed by the Nigeria Governors’ Forum (NGF).

The group’s opposition follows the NGF’s endorsement of the federal government’s proposed tax legislation before the national assembly.

Last week, the NGF issued a statement after a meeting with the presidential tax reform committee, suggesting an “equitable” VAT-sharing formula.

The NGF proposed that VAT revenue be shared as follows: 50 percent based on equality, 30 percent on derivation, and 20 percent on population.

This differs from the federal government’s recommendation of 60 percent on equality, 20 percent on derivation, and 20 percent on population.

‘FORMULA LACKS REWARDS FOR PRODUCTIVITY’

In a communique jointly signed by Ralpheal Okorie, CNPDN national coordinator, and Chijioke Nwachukwu, a member, the group expressed dissatisfaction with the NGF’s proposal, stating that it neglects productivity and economic growth—key factors in assessing a state’s contribution to the national economy.

“We categorically reject the Nigeria Governors’ Forum’s proposed VAT sharing formula, which allocates 50 percent based on equality, 30 percent based on derivation, and 20 percent based on population,” the communique reads.

“This formula does not account for productivity and economic growth, which are critical in determining a state’s contribution to the national economy.

“By ignoring productivity, this formula may inadvertently penalize states that are making concerted efforts to diversify their economies and promote economic growth.

“We urge the national assembly to reconsider this proposal and adopt a more nuanced approach that rewards productivity and economic growth.”

The group said the tax reform bills offer an opportunity for the government to prioritise underprivileged citizens’ needs through progressive taxation.

“This will definitely reduce the tax burden on the poor and ensure that funds are available for public services that benefit marginalized communities,” the group said.

“In addition to making the rich pay more taxes, the bill seeks to promote equity and fairness.

“This proposed game changer is designed to ensure that high-income earners and large corporations contribute proportionally to national development.

“It no doubt corroborates the assertion that from whom much is given, much is expected.

“There is no gainsaying the fact that this bill has the potential to ensure that revenues derived from taxes are channelled into critical sectors such as education, healthcare, and rural development, thereby reducing poverty and inequality. As we all know, the wealth of a nation lies in the health of its people.

“Specifically, we commend the tax reform bills’ provisions that exempt individuals and households earning less than N1 million per year and companies earning less than 50 million per year from taxation.

“This bold initiative demonstrates the government’s commitment to alleviating poverty and promoting economic inclusivity.

“By shielding low-income earners and small businesses from the tax burden, the bill will undoubtedly stimulate economic growth, create jobs, and improve living standards.

“Given its pro-poor orientation, we strongly advocate for an accelerated passage of the tax reform bills to ensure its timely implementation and realization of its benefits for the most vulnerable segments of our society.”