Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has assured the 19 Northern State governors that the proposed Tax Reform Bills will ensure a fair distribution of Value Added Tax (VAT) revenue for all tiers of government.
Oyedele provided the assurance following concerns raised by the Northern State Governors’ Forum regarding the new VAT distribution model based on derivation principle.
In a post shared on X (formerly Twitter) on Tuesday, Oyedele acknowledged the governors’ concerns over the “inequity inherent in the current model of derivation” used for VAT revenue distribution.
LEADERSHIP reports that the northern governors during a meeting with traditional rulers and stakeholders in Kaduna on Monday, had rejected the Tax Reform Bills sent to the National Assembly, arguing that it was not in the interest of the North and other sub-national entities. Their main objection centered on the proposed shift to a derivation-based model for VAT distribution.
However, Oyedele responded, assuring that the proposed reforms would benefit all states, and not just a few. “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,” he explained.
“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,” Oyedele added.
He further clarified that states contributing to the national economy should not lose out due to technicalities in VAT exemptions. “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,” he said.
Oyedele emphasised the committee’s commitment to working with all stakeholders to find a balanced solution. “We will collaborate with all stakeholders to address this concern with a view to finding a balanced solution that achieves a win-win outcome for all,” he concluded.
The Tax Reform Bills aimed to address discrepancies in the current VAT system and promote equitable distribution of revenue, ensuring that all states benefit from their economic activities and contributions to the national economy.
