Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele has reassured the 19 Northern State governors that the proposed Tax Reform Bills will ensure a fair distribution of Value Added Tax (VAT) revenue for all tiers of government. This comes after the Northern State Governors’ Forum expressed concerns about the new VAT distribution model based on the derivation principle.
The governors had rejected the Tax Reform Bills sent to the National Assembly, arguing that it wasn’t in the interest of the North and other sub-national entities. Their main objection was premised on the proposed shift to a derivation-based model for VAT distribution.
However, Oyedele clarified that the proposed reforms would benefit all states, not just a few. He explained that the current derivation model is mainly determined by where VAT is remitted, rather than where goods or services are supplied or consumed.
The new proposal aims to create a fairer system, taking into account the place of supply or consumption for relevant goods and services.
Oyedele used the example of a state that produces food, saying it shouldn’t lose out just because its products are VAT-exempt or consumed in other states, emphasizing that the state where the supply originates should be recognized for its contributions. The same principle should apply to services like telecommunications, with VAT distribution reflecting where subscribers are located.
‘’The committee is committed to working with all stakeholders to find a balanced solution, ensuring a win-win outcome for all. The Tax Reform Bills aim to address discrepancies in the current VAT system, promoting equitable distribution of revenue and ensuring all states benefit from their economic activities and contributions to the national economy,’’ Oyedele assured.
