Nigerian governors finally back tax reform bills but kick against VAT increase

The Nigeria Governors’ Forum (NGF) has finally thrown its weight behind the proposed tax reform bills currently at the national assembly.

In a statement on Thursday, the group proposed an “equitable” sharing formula for value-added tax (VAT).

The development was an outcome of a meeting between the NGF and the presidential tax reform committee, convened on January 16, 2025, to deliberate on critical national issues, including the reform of Nigeria’s fiscal policies and tax system.

According to the statement, the governors recommended that there should be no terminal clause for TETFUND, National Agency for Science and Engineering Infrastructure (NASENI), and National Information Technology Development Agency (NITDA) in the sharing of development levies in the bills.

They also supported the continuation of the legislative process at the national assembly that will culminate in the eventual passage of the tax reform bills.

“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,” the statement reads.

“The Forum endorsed a revised Value Added Tax (VAT) sharing formula to ensure equitable distribution of resources: 50% based on equality,
30% based on derivation, and 20% based on population.

“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 group advocated for the continued exemption of essential goods and agricultural produce from VAT to safeguard the welfare of citizens and
promote agricultural productivity.

On October 13, 2024, President Bola Tinubu asked the national assembly to consider and pass four tax reform bills.

The proposed legislations are the Nigeria tax bill, tax administration bill, and joint revenue board establishment bill.

The president is also seeking to repeal the law establishing the Federal Inland Revenue Service (FIRS) and replace it with the Nigeria Revenue Service.

However, the northern governors urged the national assembly to reject any legislation that may harm the region’s interests, calling for equitable and fair implementation of national policies and programmes to prevent marginalisation of any geopolitical zone.

The presidency, on October 31, 2024, assured the northern governors that the proposed laws were not recommended by Tinubu to disadvantage any part of the country as they were designed to improve the lives of Nigerians and optimise existing tax frameworks.