The Centre for Anti-Corruption and Open Leadership (CACOL) has said President Bola Tinubu’s Tax Reform Bills must reflect the principles of equity, justice and fairness. In a statement to mark 2024 International Anti-corruption Day, Chairman Debo Adeniran, said the bills must have the necessary ingredients for maintaining stability and fairness in allocating resources to support weaker state economies and promote national cohesion.
Adeniran also asked the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) to address the contentious issues of derivation.
According to the group, onlyRMAFC has the constitutional mandate to decide the Value Added Tax (VAT) sharing formula and other revenues, stressing that any deviation from another process is both inappropriate and potentially unconstitutional.
It said: “It should be noted that the Constitution, being supreme, does not envisage that any other Act of Parliament such as the VAT Act could assume this responsibility as any such attempt would contravene the constitution since RMAFC remains the sole arbiter in producing allocation formula that is equitable, just and fair for the three tiers of government.”
Adeniran said: “Any deviation from a formula crafted by the RMAFC risks violating constitutional provisions and undermining the Commission’s role as the impartial arbiter of revenue allocation in Nigeria.”
According to him, the proposed bills will significantly bolster the commission’s efforts and the nation’s drive for domestic revenue mobilisation capable of integrating untapped revenue sources, including contributions from the informal sector into the tax net.
He said: “These reforms will enhance Nigeria’s revenue-to-GDP ratio, positioning the country more favourably among nations with high fiscal performance that could help address Nigeria’s fiscal challenges by elevating the country’s revenue generation and financing sustainable development.
“Since the existing VAT system prioritises revenue pooling and formula-based distribution over strict derivation principles, RMAFC as an impartial arbiter in the allocation of national resources should as a matter of urgency wade into the matter by aggregating the different views generated from the debate towards the formulation of a new acceptable VAT formula that would address the concerns of all stakeholders; reflect principles of equity, justice and fairness; and provide support for states with weaker economies to promote national cohesion and equitable benefits for all tiers of government without bias or favouritism.
“Any attempt to assign arbitrary percentages for VAT allocation, whether vertically among the tiers of government or horizontally among states and local governments, is both impractical and unconstitutional and ignoring the need to support less economically developed states and regions is capable of undermining national unity and equity in revenue-sharing.”
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