VAT Distribution Reform: Oyedele Addresses Concerns Of Northern Governors

We Proposed Complete Removal Of VAT Not 10% Increase - Oyedele

The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has reassured the 19 northern governors that the forthcoming Tax Reform Bill will yield positive results for all levels of government.

In a post on X on Tuesday, Oyedele acknowledged the concerns voiced by the Northern governors regarding the perceived inequities in the current VAT revenue distribution model based on derivation.

Naija News reports that the Northern Governors’ Forum expressed their rejection of the Tax Reform Bill, which was sent to the National Assembly, during a meeting with traditional rulers and other key stakeholders on Monday.

The governors argued that the proposed legislation did not serve the interests of the North or other sub-national entities, particularly the suggested shift to a derivation-based model for VAT distribution.

In response, Oyedele emphasized, “This issue, in fact, affects many states across all geopolitical zones because the current derivation is mainly determined based on where VAT is remitted, rather than where goods or services are supplied or consumed.

“Our proposal aims to create a fairer system by devising a different form of derivation which takes into account the place of supply or consumption for relevant goods and services whether they are zero-rated, exempt or taxable at the standard rate.

“For example, a state that produces food shouldn’t lose out just because its products are VAT-exempt or consumed in other states. The state where the supply originates should be recognised for its contributions. The same principle should apply to services like telecommunications—VAT distribution should reflect where subscribers are located.

“We will collaborate with all stakeholders to address this concern with a view to finding a balanced solution that achieves a win-win outcome for all.”