The National Economic Council (NEC) has recommended the withdrawal of the proposed Tax Reform Bills currently before the National Assembly. The decision follows mounting concerns over the bills’ potential impact and the need for broader stakeholder engagement.
The NEC, chaired by Vice President Kashim Shettima and including Nigeria’s state governors, held a meeting on Thursday where it addressed controversies surrounding the bills. Speaking to State House correspondents, Governor Seyi Makinde of Oyo State confirmed the council’s decision to recommend the bills’ withdrawal, allowing time to address stakeholder concerns.
The tax reform debate took a new turn following a meeting of the Northern Governors’ Forum (NGF) on Sunday. Chaired by Gombe State Governor Inuwa Yahaya, the NGF voiced opposition to a proposed derivation-based model for Value Added Tax (VAT) distribution included in the new tax bills.
Governor Abdullahi Sule of Nasarawa State clarified the Northern governors’ position, stressing that their stance is not an opposition to President Bola Ahmed Tinubu but a response to perceived inequities in the VAT proposal. “We can’t bring in President Tinubu and then oppose him,” Sule said, explaining that the decision was reached collectively by a cross-party group of governors and other stakeholders, including traditional rulers.
The Northern governors argue that the derivation-based model would disadvantage northern states that generate less VAT revenue. “By the time you implement a derivation model similar to the 13% formula used in oil revenue, states with low VAT contributions will receive less from the Federal Account Allocation Committee (FAAC),” Sule added. “Currently, the 19 northern states contribute relatively little in VAT. Under the new model, they would end up on the short end of the stick.”
The debate intensified further after Bayo Onanuga, Special Adviser to the President on Information and Strategy, addressed the “misunderstandings and misgivings” surrounding the proposed tax reforms. Onanuga highlighted the administration’s goal to establish a fairer VAT system, explaining that the current distribution model is based on where VAT is remitted rather than where goods and services are actually supplied or consumed.
“The reform seeks to correct inequities in the existing VAT distribution model,” Onanuga stated. “The new proposal considers the place of supply or consumption of goods and services, meaning states in the North that produce essential goods shouldn’t miss out on VAT simply because their products are consumed elsewhere.”
As the bills continue to face scrutiny, the NEC’s call for their withdrawal underscores the complexity of VAT reform and the balancing act required to accommodate diverse regional economic realities.
