Stakeholders Reject Governors’ Proposed VAT Sharing Formula, Advocate for Productivity-Based Approach
A group of stakeholders from across the country convened in Abuja on Friday to oppose the VAT sharing formula proposed by the Nigeria Governors Forum (NGF) in the tax reform bills submitted to the National Assembly by President Bola Ahmed Tinubu.
The governors had earlier met with the Presidential Fiscal Policy and Tax Reforms Committee, chaired by Taiwo Oyedele, where they agreed not to increase VAT and proposed a revised sharing formula. According to the NGF communique, signed by its Chairman and Kwara State Governor AbdulRahman AbdulRazaq, the formula would allocate 50% of VAT revenue based on equality, 30% based on derivation, and 20% based on population.
Stakeholders’ Opposition
In a communique signed by 47 members and read by Okorie Ikechukwu Raphael, the stakeholders criticized the proposed formula as inequitable and counterproductive. They emphasized that it fails to reward states for their productivity and economic growth contributions to the nation.
The communique read:
“We, the undersigned representatives of the Nigerian populace, driven by our collective aspiration for equity, justice, and economic progress, have gathered to express our unified position on the Tax Reform Bill currently before the National Assembly.
“We categorically reject the Nigeria Governors Forum’s proposed VAT sharing formula, which allocates 50% based on equity, 30% based on derivation, and 20% based on population.
“This formula does not take into account productivity and economic growth, which are critical factors in determining a state’s contribution to the national economy.
“By ignoring productivity, this formula may inadvertently penalize states that are making concerted efforts to diversify their economies and promote economic growth.”
Call for a New Formula
The stakeholders called on the National Assembly to reconsider the NGF’s proposal and adopt a system that incentivizes and rewards economic productivity. They argued that an approach tied to performance and economic contribution would drive sustainable development and fairness across the federation.
The proposed reforms are part of broader tax and fiscal policy changes initiated by President Tinubu’s administration to address economic challenges. However, the VAT sharing formula has sparked debates about balancing equality, derivation, population, and productivity to achieve equitable resource allocation among states.
The National Assembly is expected to deliberate further on the proposed formula and other aspects of the tax reform bills in the coming weeks.
