Nasarawa State Governor, Abdullahi Sule, has stated most Northerners were misled into believing the proposed 2024 Tax Reform Bills would introduce additional taxes.
Governor Sule shared this perspective during his appearance on Politics Today on Channels Television on Thursday.
He emphasized that the tax reforms, which were endorsed by the Nigeria Governors’ Forum (NGF) on Thursday, are not about introducing new taxes but rather about eliminating inefficiencies and creating a fairer tax system.
Sule stated, “Most of the people in the North have been sold the idea that there are going to be additional taxes. Today, by this agreement, there is no additional tax.”
He emphasized that the endorsement of the revised Value Added Tax (VAT) sharing formula would reassure the public and dispel any notion of a divide between the Northern governors and President Bola Tinubu’s administration.
“Definitely it will settle the dust because most of the people in the North have been sold the idea that there are going to be additional taxes. And if you look at most of the debates, people are saying ‘We don’t want additional taxes’. We are saying today that by this, there are no additional taxes.
“And it also put people who want to put heads between the president and some other people to rest. Now, they can understand that what those other people have done is actually in the interest of Nigeria.”
Key Elements of the Tax Reforms
Governor Sule noted that the reforms go beyond VAT and touch on critical areas such as stamp duties and royalties. These adjustments aim to encourage businesses to remain in Nigeria while fostering a more investment-friendly environment.
“The bigger picture is to get the reforms passed in Nigeria’s interest,” Sule said.
“Part of the reform is actually the attraction of additional investment into Nigeria. That is why you are eliminating multiple taxation in the first place. You are also going to look at stamp duties. You are also going to look at royalties and the rest of them and addressing them. This will encourage some of these companies that are running away from Nigeria to stay,” the governor stated.
Governors’ Forum Endorses Revised VAT Formula
The NGF has endorsed a revised VAT-sharing formula that promises to ensure equitable resource distribution. This decision follows months of deliberation and concerns raised by several governors over the proposed tax reform bills.
The governors proposed a revised VAT-sharing formula to ensure a fairer distribution of resources across states:
- 50% based on equality among states,
- 30% based on derivation (revenue generated from a state), and
- 20% based on population.
In a communiqué signed by AbdulRahman AbdulRazaq, Chairman of the NGF and Governor of Kwara State, the forum backed the bills to enhance Nigeria’s fiscal landscape. The reforms stem from recommendations by the Presidential Committee on Tax Reform, led by fiscal policy expert Taiwo Oyedele.
Highlights of the Tax Reform Bills
The proposed 2024 Tax Reform Bills include:
- Nigeria Tax Bill (NTB): A comprehensive tax code to harmonize and simplify Nigeria’s tax system.
- Nigeria Tax Administration Bill (NTAB): A framework to improve tax collection efficiency.
- Nigeria Revenue Service Establishment Bill (NRSEB): Establishes a unified revenue service to oversee federal tax collection.
- Joint Revenue Board Establishment Bill (JRBEB): Facilitates collaboration among revenue-collecting agencies across federal, state, and local levels.
Additionally, the NGF recommended removing terminal clauses for the Tertiary Education Trust Fund (TETFUND), National Agency for Science and Engineering Infrastructure (NASENI), and National Information Technology Development Agency (NITDA) in the allocation of development levies under tax reform bills.
What This Means for Nigeria
The tax reform bills are expected to:
- Eliminate the burden of multiple taxation on businesses.
- Address inefficiencies in stamp duties and royalties collection.
- Encourage businesses to remain in Nigeria, boosting local investment.
- Harmonize the tax system to foster economic growth and equitable resource distribution.
What You Should Know
- These 2024 tax reform bills have sparked controversy, with northern elites openly rejecting them, arguing that the changes may not favor their region.
- Under the current Section 40 of the VAT Act, VAT revenue is allocated as follows: 15% to the Federal Government, 50% to the States and Federal Capital Territory (FCT), and 35% to Local Governments. The allocation to states and local governments incorporates a derivation principle of at least 20%.
- The reforms aim to balance revenue generation with creating a conducive business environment.
- Governors initially opposed the bills due to concerns over fairness and allocation of resources.
- With the NGF’s endorsement, the bills are set to advance to the legislative stage for approval.
