Governors, FG reach common ground on tax reform

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Rising from its meeting with the Presidential Committee on Fiscal and Tax Reforms in Abuja yesterday, the Nigeria Governors’ Forum (NGF) agreed on the modalities for sharing the value added tax (VAT).

The NGF, made up of the 36 state chief executives, agreed that the VAT revenue should be shared 50 per cent based on equality, 30 per cent on derivation and 20 per cent based on population to guarantee a fair distribution of resources.

The governors and the federal government also reached a consensus to shelve the planned increase of VAT rates and instead, introduce a more equitable revenue-sharing formula.

The decisions are contained in a communiqué issued at the end of a meeting with members of the Presidential Tax Reform Committee and signed by the chairman of the NGF and governor of Kwara State, Mr AbdulRahman AbdulRazaq.

The document stated: “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 VAT sharing formula to ensure equitable distribution of resources: 50 per cent based on equality, 30 per cent based on derivation, and 20 per cent 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.”

Section 146 of the Nigeria Tax Bill provides for a gradual increase in the VAT rate from the current 7.5% to 10% in 2025, 12.5% in 2026, and further increments until it reaches 15% by 2030.

The Forum also suggested that no terminal clause should be applied to the Tertiary Education Trust Fund (TETFund, the National Agency for Science and Engineering Infrastructure (NASENI), and the National Information Technology Development Agency (NITDA) in the allocation of development levies in the bills.

“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.

“The meeting recommended that there should be no terminal clause for TETFund, NASENI, and NITDA in the sharing of development levies in the bills,” it stressed.

The Forum also announced its resolve to support the “continuation of the legislative process at the National Assembly that will culminate in the eventual passage of the Tax Reform Bills.”