The chairman of the presidential committee on fiscal policy and tax reforms, Taiwo Oyedele, has reacted to the rejection of Northern States Governors Forum (NSGF) on the Value Added Tax (VAT) sharing proposal in President Bola Ahmed Tinubu’s Tax Reform Bill.
Oyedele explained that the proposed amendment to value-added tax (VAT) distribution will create a fair system
He further disclosed that there will be collaboration with all stakeholders to address various concerns with a view to finding a balanced solution that achieves a win-win outcome for all.
the President a few days ago sent an Executive Tax Reform Bill to the National Assembly for consideration and passage.
The comprehensive outlay of tax plans, billed to go into effect from January 1, is targeted at taxing the upper class more than the middle and lower classes.
The VAT is planned to be imposed on luxury items and increased to 15 per cent. Tax on items is currently 7.5 per cent.
But the Governors and the Northern States Council of Emirs and Chiefs said the new arrangement on tax sharing is against the interest of the North.
Responding to their rejection, Oyedele via his official ‘X’ handle (formerly Twitter) on Tuesday said: “We share the sentiment expressed by the Northern Governors regarding the inequity inherent in the current model of derivation as a basis for distributing VAT revenue.
“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.
“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.
“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.
“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.”
