The National Economic Council (NEC) of Nigeria has recommended the withdrawal of the Tax Reforms Bill currently under consideration in the National Assembly. This decision was made during the council’s 145th meeting in Abuja, chaired by Vice President Kashim Shettima. The recommendation follows a presentation by Mr. Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, which emphasized the need for more extensive stakeholder consultations to address the potential impacts of the proposed reforms.
Vice President Shettima noted that the tax reforms initiated by President Bola Ahmed Tinubu’s administration aim to broaden the nation’s revenue base, enhance economic stability, and reduce dependency on specific sectors. He acknowledged the opportunity these reforms present to address concerns, particularly regarding Value Added Tax (VAT) and its effects on sub-national revenues.
Governor Seyi Makinde of Oyo State echoed the council’s emphasis on the necessity of alignment among stakeholders regarding the tax reforms. He pointed out the spread of misinformation around the bill and highlighted the importance of consensus-building. Governor Umaru Zulum of Borno State confirmed the NEC’s recommendation to withdraw the bill to foster a more collaborative approach.
The recommendation comes amid opposition from the 19 Northern state governors, traditional rulers, and regional stakeholders, particularly concerning the proposed derivation-based model for VAT distribution. In response to this opposition, Taiwo Oyedele explained that the current VAT distribution model, which allocates revenues among federal, state, and local governments, is perceived as unjust by various stakeholders, including those in the North.
Under the existing VAT Act, the revenue sharing formula allocates 15% to the Federal Government, 50% to states and the Federal Capital Territory (FCT), and 35% to local governments, with a minimum of 20% distributed based on the location of VAT generation. Additional factors influencing distribution include equal allocation and population-based criteria, alongside collection fees for the Federal Inland Revenue Service (FIRS) and the Nigeria Customs Service (NCS).
The NEC’s recommendation reflects a significant hurdle for the tax reform bill, which has already passed its first reading in the Senate.