The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has reassured the 19 northern governors that the proposed Tax Reform Bill will benefit all tiers of government and all states of the federation.
In a post on X (formerly Twitter) on Tuesday, Oyedele said his committee shares the concerns raised by the northern governors regarding the “inequity inherent in the current model of derivation as a basis for distributing VAT revenue.”
During a meeting held in Kaduna on Monday, October 28, the Northern Governors’ Forum, along with traditional rulers and other stakeholders, firmly rejected the Tax Reform Bill sent to the parliament for enactment.
The governors argued that the proposed legislation undermines the interests of the North and other subnational entities, mainly because the suggested amendment shifts VAT distribution model to a derivation-based model.
The new proposed model aims to distribute VAT based on where goods and services are consumed rather than where they are produced. This has led to concerns that some states, especially those producing essential goods like food in the north, might be shortchanged.
Oyedele Offers “Win-Win”
In response, Oyedele tweeted, “This issue 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.”
He continued, “Our proposal aims to create a fairer system by devising a different form of derivation which considers the place of supply or consumption for relevant goods and services whether they are zero-rated, exempt or taxable at the standard rate.”
He provided an example: “A state that produces food shouldn’t lose out just because its products are VAT-exempt or consumed in other states. The states where the supply originates should be recognized for its contributions. The same principle should apply to services like telecommunications—VAT distribution should reflect where subscribers are located.”
Oyedele said the government is willing to “collaborate with all stakeholders to address this concern with a view to finding a balanced solution that achieves a win-win outcome for all“
Following the northern stakeholders meeting, there have been speculations about a possible rift between the North and President Bola Tinubu. It remains to be seen if Oyedele’s explanations are enough to get the cooperation of the north, which has a predominance of legislators in the national assembly.
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