Mr. Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, has clarified that the proposed Value Added Tax (VAT) distribution model aims to promote fairness.
His comments came after the Northern Governors’ Forum rejected President Bola Ahmed Tinubu’s recently presented Nigeria Tax Reform Bill to the National Assembly.
The 19 northern state governors opposed the bill, particularly the amendment proposing VAT distribution based on where goods and services are consumed rather than where companies are headquartered. Governor Inuwa Yahaya, Chairman of the Northern Governors’ Forum, expressed that the current system could harm the region. VAT is often remitted when companies have headquarters, not where products are consumed.
In their joint statement, the forum called on National Assembly members to reject any measure that could impact Northern states negatively. However, Oyedele highlighted the committee’s intention to create a more equitable VAT system that reflects actual consumption locations. “We understand the concerns about inequity in the current VAT model,” Oyedele said. “This issue affects states across all regions, as VAT is distributed based on remittance location rather than where goods or services are consumed.”
Oyedele proposed a shift toward a supply-based approach, where VAT distribution recognizes both zero-rated and taxable goods, and states producing goods could benefit, even if the products are VAT-exempt or consumed elsewhere. He also advocated for service-related VAT, such as telecommunications, to be directed to the state where services are used, ensuring more balanced revenue distribution.
Meanwhile, Senator Ali Ndume, representing Borno South, urged the government to refrain from increasing taxes, arguing that Nigerians, especially the middle class, are struggling. “We’re losing the middle class,” Ndume stated. “If Nigerians are financially stable, increased taxes might work. However, further taxes are not a viable solution given the current challenges. We should instead focus on taxing wealthier individuals and corporations who can afford it.”
Ndume pointed out that poverty is more widespread in Northern states and stressed that new tax policies should consider the needs of poorer populations.
