Governors Reject VAT Increase, Approve New Sharing Formula
Governors under the umbrella of the Nigerian Governors Forum (NGF) have unanimously opposed any increase in the Value Added Tax (VAT) rate, stressing the need for policies that maintain economic stability and protect citizens’ welfare amid ongoing fiscal reforms.
This stance was made public in a communiqué following a high-level meeting between the governors and the Presidential Tax Reform Committee on Thursday in Abuja.
The governors also approved a revised VAT sharing formula aimed at ensuring a fairer distribution of resources across the country. Under the new formula, 50% of VAT revenues will be shared equally among all states, 30% will be allocated based on derivation, and 20% will be distributed according to population. This adjustment seeks to address resource allocation disparities, support smaller states, and encourage subnational revenue generation.
In their firm objection to an increase in VAT rates, the governors cited the potential negative impact on consumers and businesses, particularly during the current period of economic challenges. They also advocated for the continued exemption of essential goods and agricultural products from VAT, emphasizing the importance of protecting the most vulnerable and promoting food security.
Further, the governors endorsed the ongoing legislative efforts in the National Assembly to pass comprehensive Tax Reform Bills. They also called for the retention of development levies for key national agencies, including the Tertiary Education Trust Fund (TETFund), National Agency for Science and Engineering Infrastructure (NASENI), and the National Information Technology Development Agency (NITDA), without any terminal clauses that could limit their scope and funding.
The Chairman of the NGF and Governor of Kwara State, AbdulRahman AbdulRazaq, reiterated the forum’s commitment to tax reform and modernization to enhance fiscal stability and align with global best practices. He emphasized that, at this juncture, no increase in VAT rates or reduction in Corporate Income Tax (CIT) should be pursued to avoid destabilizing the economy.
AbdulRazaq also stressed that there should be no terminal clauses for TETFund, NASENI, and NITDA, and the governors expressed their strong support for the continuation of the legislative process leading to the eventual passage of the Tax Reform Bills.
The communiqué concluded with a call for all levels of government to collaborate in ensuring that the tax system is reformed in a way that strengthens the economy and benefits all Nigerians.
