Presidential Committee Reacts As 19 Northern Governors Reject Tinubu’s Tax Reform Bill
Northern governors had rejected the proposed shift to a derivation-based VAT model by President Bola Tinubu’s administration.
Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has reacted to concerns raised by Northern States Governors’ Forum (NSGF) over the current model for distributing Value Added Tax (VAT) revenue, which relies on derivation.
In a statement on Tuesday, Oyedele said, “We share the sentiment expressed by the Northern Governors regarding the inequity inherent in the current model of derivation as a basis for distributing VAT revenue.”
SaharaReporters on earlier Tuesday reported that the Northern governors had rejected the proposed shift to a derivation-based VAT model by President Bola Tinubu’s administration, citing concerns over its potential disadvantage to northern and less industrial regions.
They criticised the approach of determining VAT revenue based on company headquarters rather than where goods and services are actually consumed.
Governor Muhammad Yahaya of Gombe, NSGF chairman, voiced these sentiments in a communiqué following a strategic meeting in Kaduna, which included traditional rulers and key national stakeholders.
“The forum notes with dismay the content of the recent Tax Reform Bill that was forwarded to the National Assembly,” he stated. “The contents of the reforms are against the interest of the North and other sub-nationals.”
Oyedele, meanwhile, suggested a model focusing on the supply or consumption points of VAT-relevant goods and services, which he believes would be more equitable.
“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,” he explained.
Oyedele further highlighted that states producing VAT-exempt goods like food should not lose out in VAT revenue simply because their products are consumed in other states.
The Northern governors insisted on the need for fairness in implementing national policies, stressing that “no geopolitical zone should be short-changed or marginalised.”
Reacting to the concerns, Oyedele said the presidential committee “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.”
The proposed model would also ensure that VAT from telecommunications services reflects where subscribers are based, aligning with the principle that states contributing to VAT should receive recognition in revenue distribution.
This development is part of broader debates over resource control and VAT distribution among states, particularly as northern states often prohibit alcohol sales but still receive shares of VAT from these products.
The statement reads, “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.”
