VAT Distribution Will Be A Win-Win, Oyedele Assures Northern Govs

The 19 northern governors have been assured by Taiwo Oyedele, the head of the Presidential Committee on Fiscal Policy and Tax Reforms, that the proposed Tax Reform Bill will benefit everyone in the governmental hierarchy.

Oyedele stated in a post on X (previously Twitter) that his committee shared the governors’ concerns about the “inequity inherent in the current model of derivation as a basis for distributing VAT revenue.”

On Monday, at a meeting with traditional rulers and other stakeholders, the Northern Governors’ Forum rejected the Tax Reform Bill that was forwarded to the National Assembly.

The proposed law, according to the 19 governors, violated the interests of the North and other sub-nationals, particularly the proposed change to the value-added tax (VAT) distribution system to use a derivation-based model.

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Responding, Oyedele said, “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.

By developing a different derivation that considers the place of supply or consumption for relevant goods and services, whether they are zero-rated, exempt, or taxable at the standard rate, our proposal aims to make a fairer system.

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

Source: Channels TV