A Civil Society Organisation (CSO), Citizens Network for Peace and Development in Nigeria, has rejected the Nigeria Governors Forum’s (NGF) proposed VAT sharing formula, ahead of the public hearing on the contentious tax reform bills.
The NGF at the end of their meeting with the Presidential Tax Reform Committee penultimate week, agreed to give support to the proposed legislation.
The Governors in a communique signed by Kwara State Governor and Chairman of the Forum, Abdulrahman Abdulrasaq, “endorsed a revised Value Added Tax (VAT) sharing formula to ensure equitable distribution of resources: 50% based on equality, 30% based on derivation, and 20% based on population.”
But addressing newsmen in Abuja, the CNPD, argued that the formula which allocates 50% based on equity, 30% based on derivation, and 20% based on population would not encourage productivity.
National Coordinator of the Forum, Okorie Ikechukwu Raphael, urged the National Assembly not to accept the formula proposed by the Forum of 36 state governors as he declared that states seizing the initiative to diversify their revenue base would be discouraged.
He said, “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. We urge the National Assembly to reconsider this proposal and adopt a more nuanced approach that rewards productivity and economic growth.”
The group also appealed to Nigerians to give necessary support to the proposed legislation before the National Assembly as they noted that it would ultimately, reduce the tax burden on the poor and ensure that funds are available for public services that benefit marginalised communities.
“Gentlemen of the press, there is no gainsaying the fact that this bill has the potential to ensure that revenues derived from taxes are channelled into critical sectors such as education, healthcare, and rural development, thereby reducing poverty and inequality. As we all know, the wealth of a nation lies in the health of its people.
“The proposed law focuses on inclusive taxation. Consequently, this reform is aimed at stimulating small and medium-scale enterprises (SMEs), encouraging grassroots entrepreneurship, and fostering economic diversification, as well as sustainable growth for future generations.
“Specifically, we commend the tax reform bill’s provisions that exempt individuals and households earning less than N1 million per year and companies earning less than 50 million per year from taxation. This bold initiative demonstrates the government’s commitment to alleviating poverty and promoting economic inclusivity.
“By shielding low-income earners and small businesses from the tax burden, the bill will undoubtedly stimulate economic growth, create jobs, and improve living standards. Given its pro-poor orientation, we strongly advocate for an accelerated passage of the tax reform bill to ensure its timely implementation and realisation of its benefits for the most vulnerable segments of our society.”
While it noted that the credibility challenge of the government was responsible for the lack of buy-in of Nigerians, the Forum also appealed to the federal government to “ensure that revenues generated through this reform must be transparently managed and accounted for to ensure they serve their intended purpose. Thus, the bill represents national interest and must not be reduced to divisive politics or regional disagreements.”
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