Without necessarily muscling anyone, save the unbridled attack by presidential aides on the Bauchi governor, Senator Bala Mohammed, who had expressed misgivings about the bills, the coast appears to be clearing gradually for President Bola Tinubu’s tax reform plans.
The proposed four laws — Nigeria Tax Bill, Nigeria Tax Administration Bill, Nigeria Revenue Service (Establishment) Bill, and the Joint Revenue Board Establishment Bill — which President Tinubu initiated last year and submitted to the National Assembly as Executive Bills have pitted one section of the country against another so much so that religious and traditional rulers have had to come in to calm frayed nerves.
But last week, the ice thawed as governors of the 36 states under the egis of Nigeria Governors Forum, NGF, declared their support for the reform bills. They, however, rejected the Federal Government’s move to increase Value-Added Tax, VAT.
The nod by the governors for the president’s plan was announced at the end of a meeting with the Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, on January 16, 2025 in Abuja.
In the communique signed by the Chairman of the NGF and governor of Kwara State, Abdulrahman Abdulrazaq, the governors acknowledged the importance of improving the tax system to enhance fiscal stability and align with global best practices.
It read in part: “We, members of the Nigeria Governors’ Forum and Presidential Tax Reform Committee, convened on the 16th of January 2025 to deliberate on critical national issues, including the reform of Nigeria’s fiscal policies and tax system, and arrived at the following resolutions:
“The Forum reiterated its strong support for the comprehensive reform of Nigeria’s archaic tax laws. Members acknowledged the importance of modernising the tax system to enhance fiscal stability and align with global best practices.
“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 Forum advocated for the continued exemption of essential goods and agricultural produce from VAT to safeguard the welfare of citizens and promote agricultural productivity.”
Opposition to the planned fiscal reform was pronounced in the northern part of the country where, last October, governors of the 19 states rejected the tax reform bills over fears that the laws would be disadvantageous to the regions and other less industrialised zones.
They demanded equity and fairness in national policy implementation, saying no geopolitical zone should be shortchanged in any way.
We appreciate the federal government’s wide consultations in the past few months with a view to carrying along all segments of the polity and understand that the executive bills on tax reforms pending before the National Assembly aim to address issues of gross imbalance and deficiency in the country’s tax system.
But more importantly, the bills seek to stimulate the national economy and specifically encourage the states to maximise and reap from their economic potential rather than remain largely complacent about revenue generation, thereby reshaping their economy and becoming less dependent on hand-outs from the federation account at the centre.
However, we call for open and proper scrutiny of the various aspects of the bills. For instance, experts must examine the concerns raised by the Revenue Mobilisation, Allocation and Fiscal Commission, RMAFC, in which it outlined a range of legal, constitutional, and technical objections to the proposed legislations.
The RMAFC Chairman, Mohammed Bello Shehu, emphasised that Section 162(2) of the 1999 Constitution (as amended) grants the Commission the sole authority to determine the formula for equitable revenue sharing among the three tiers of government. The mandate also includes ensuring that the formula reflects principles of fairness and justice.
The body said: “The Constitution designates RMAFC as the final authority on matters of revenue allocation.
“As such, no Act of Parliament, including the VAT Act, can infringe upon this constitutional responsibility. Any such attempt would constitute a violation of the Constitution.”
If there is anything that has divided Nigerians so sharply along state, regional and ethnic lines in the past one year, it has been the tax policy of the President Tinubu administration.
We believe that both the executive and legislature should do a thorough job on the issues to finally douse the tension the four Bills seeking to reform the taxation system and tax administration in the country have generated in the past few months.
“… there should be no increase in the VAT rate or reduction in Corporate Income Tax (CIT) at this time to maintain economic stability.”