The League of Northern Democrats (LND) has picked a hole in the state governors’ endorsement of a revised Value Added Tax (VAT) sharing formula.
The governors after a meeting with the Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr Taiwo Oyedele, on January 16, said they agreed on the sharing based on 50 per cent equality, 30 per cent derivation and 20 per cent population.
LND in a statement issued by its spokesperson, Dr Ladan Salihu, said the endorsement “Aligns substantially with the recommendations of LND’s Technical Committee on Tax and Fiscal Reforms, publicly presented on December 19, 2024.”
It welcomed the governors’ recognition of the need for comprehensive tax reforms to modernise Nigeria’s fiscal system, enhance stability and align with global best practices.
The LDN however noted that there is ambiguity in the word ‘derivation’, stating that for any tax reform to achieve equity, fairness and sustainability, what means derivation must be clearly and unambiguously defined to mean the place of consumption.
The league added that without this definition, the proposed increase of derivation to 30 per cent “risks perpetuating regional inequalities, where certain areas benefit disproportionately at the expense of others, particularly the North.”
According to the LND, the absence of clarity on this matter undermines the principles of equity that the reform is said to seek to achieve.
It stated that tying derivation to the area of consumption will ensure that resources are distributed based on actual economic activity and contribution.
“This approach not only aligns with the realities of modern taxation but also promotes accountability and incentivises regions to develop their economy,” the league said.
The LND stated that until the issue is resolved, it will withhold its full support for the tax reform agenda.
“We urge the NGF and the Presidential Tax Reform Committee to incorporate this fundamental clarification, and all other amendments made by the LND, including the inheritance tax clause, into their framework to guarantee that the reforms deliver equitable and beneficial outcomes for all Nigerians.
“As stakeholders in the Nigerian project committed to our regional and national development, LND reiterates its readiness to work collaboratively with all parties to ensure these reforms succeed in fostering fairness, growth and prosperity for our people,” it added.
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