Taiwo Oyedele to northern governors: Proposed amendment to VAT distribution will ensure equity

Taiwo Oyedele, the chairman of the presidential committee on fiscal policy and tax reforms, says the proposed amendment to value-added tax (VAT) distribution will create a fair system.

In response to the recent rejection of the proposed tax amendment bill by the Northern States Governors Forum (NSGF), Oyedele said the current model for distributing VAT affects many states.

In a post on X on Tuesday, he said the current model for distributing VAT is based on the location where the tax is remitted, rather than the place where goods and services are supplied or consumed.

“We share the sentiment expressed by the Northern governors regarding the inequity inherent in the current model of derivation as a basis for distributing VAT revenue,” the chairman 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.”

Oyedele said the committee will collaborate with all stakeholders to address the issue with a view to finding a balanced solution that achieves a win-win outcome for all.

On October 13, 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.

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.