Northern Governors Reject VAT Derivation Model, Demand Fair Tax Reform

By Jemimah Wellington, JKNewsMedia Reporter

REPRESENTING19 states across Nigeria, the Northern Governors’ Forum (NGF) has firmly opposed the proposed derivation-based Value-Added Tax (VAT) distribution model included in new tax reform bills before the National Assembly.

The governors argue that this model, which bases VAT revenue distribution on the location of goods and services consumption, would unfairly disadvantage Northern states.

Many essential products from the region are VAT-exempt yet widely consumed nationwide, leaving Northern states at a revenue disadvantage under the proposed system.

In a meeting chaired by Governor Muhammed Inuwa Yahaya of Gombe State, the Forum outlined its concerns over the perceived imbalance in revenue distribution under the new model.

Also in attendance were regional traditional leaders, led by the Sultan of Sokoto, H.E. Muhammadu Sa’ad Abubakar III, who supported the need for fairness in the tax system.

The Federal Government’s four proposed tax reform bills include the Nigeria Tax Bill, Nigeria Tax Administration Bill, Nigeria Revenue Service Bill, and the Joint Revenue Board Establishment Bill.

These reforms, according to the FG aim to streamline tax processes, eliminate redundancies, and harmonize tax administration across federal, state, and local levels.

According to Bayo Onanuga, Special Adviser to the President on Information and Strategy, these reforms emerged after a comprehensive review of Nigeria’s tax framework, with the goal of simplifying obligations for businesses and individuals while enhancing tax equity.

Among the key proposals, the Nigeria Revenue Service Bill seeks to rename the Federal Inland Revenue Service (FIRS) as the Nigeria Revenue Service (NRS) to emphasize its federal mandate.

Another major change is the establishment of the Office of Tax Ombudsman within the proposed Joint Revenue Board to address taxpayer complaints.

While the new tax distribution model seeks to reflect actual consumption, Northern leaders caution that the VAT derivation method could deprive Northern states of revenue essential for local development.

Currently, VAT revenue is allocated based on where it is remitted, which they argue fails to recognize the production contributions of Northern states.

President Tinubu and the Federal Executive Council endorse the reforms as part of a wider effort to modernize tax administration, minimize redundancies, and foster a fairer tax environment nationwide.

They insist the reforms are not intended to add new taxes but to consolidate existing ones, such as Company Income Tax (CIT), Personal Income Tax (PIT), and Petroleum Profits Tax (PPT), under a more cohesive structure.

Furthermore, the reforms aim to stimulate job creation by encouraging a growth-oriented economy while maintaining tax rates at current levels.

Also, as the National Assembly considers these proposals, Northern leaders urge a fair approach that accommodates the contributions of all regions to national revenue.

The Governors further argue that the VAT reform must address Nigeria’s regional disparities without marginalizing any part of the country.

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