Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, has dismissed reports suggesting that the committee is proposing a reduction in the federal government’s share of the Federation Account Allocation Committee (FAAC) to 10%.
In a statement on Sunday, Oyedele responded to claims suggesting that his committee is advocating for the federal government to receive only 10% of FAAC, while the remaining 90% would go to state and local governments.
He clarified that the report does not reflect the committee’s position, as their reforms focus solely on Value Added Tax (VAT) within the FAAC framework and do not encompass all revenue allocated to the government’s account.
“We did not recommend a reduction in the federal government’s share from the federation account.
“Our recommendation is in respect of VAT revenue, to increase the share of states and local governments from 85% to 90% and for states to discontinue with their other forms of consumption taxes which constitute multiple taxation on businesses and individuals,” Oyedele said.
Backstory
Earlier today, it was reported on various media outlets, (not Nairametrics) that the federal government is proposing a shift in the revenue allocation of the FAAC, with 90% of the distribution given to the State and local government.
The report claimed this represents a drastic departure from the current sharing formula, which allegedly allocates 52.68% to the federal government, 26.72% to states, and 20.60% to local governments.
Under the new proposal, the report alleged that Oyedele explained the distribution formula for the states and local governments would include a clause stipulating that 60% of their share would be based on the principle of derivation.
In practice, it was claimed that if N100 is available for distribution from FAAC, the federal government would take N10, all 36 states would share N36 equally, and N54 would be distributed based on derivation, favouring states with higher resource generation.
Meanwhile, Oyedele refuted this claim, stating that the bill only proposed the allocation of VAT revenue in the FAAC.
What you should know
According to the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) under the Presidency, the distribution of the country’s monthly revenue allocates 52.68% to the Federal Government, 26.72% to states, and 20.60% to local governments, disbursed through the Federation Account Allocation Committee (FAAC).
- Interestingly, funds for local governments are deposited into a joint account managed by state governments and local governments within their jurisdictions.
- However, these funds are rarely allocated to the local government chairmen, therefore bringing to question the effective practice of an independent local government.
- With the Supreme Court ruling on fiscal autonomy for local government, the payment of FAAC meant for the third tier of government will be directly allocated to each local government.
