The Nigerian Governors’ Forum has thrown its weight behind the ongoing tax reform efforts in the National Assembly but with a crucial caveat: no increase in Value Added Tax (VAT).
This stance, articulated in a communique issued following their recent meeting in Abuja, directly contradicts the federal government’s proposal to raise the VAT rate from 7.5% to 10%.
“We cannot, in good conscience, support any measure that could further burden our citizens during these challenging economic times,” Governor AbdulRahman AbdulRazaq of Kwara State, Chairman of the Forum, declared. “An increase in VAT would undoubtedly impact the cost of living for ordinary Nigerians and hinder economic growth.”
The governors emphasized the need for economic stability and expressed concerns about the potential inflationary pressures of a VAT increase. They strongly advocated for the continued exemption of essential goods and agricultural produce from VAT, recognizing the critical role these sectors play in the lives of Nigerians.
“We must prioritize the welfare of our people,” Governor AbdulRazaq stressed. “Exempting essential goods and agricultural produce from VAT is not merely a matter of social justice; it is crucial for ensuring food security and supporting our agricultural sector.”
Furthermore, the governors proposed a revised VAT-sharing formula that they believe would ensure a more equitable distribution of resources across the country. This formula, they suggest, should allocate 50% of VAT revenue based on equality, 30% based on derivation, and 20% based on population.
“The current VAT sharing formula is inherently unfair and does not adequately reflect the diverse needs of our states,” Governor AbdulRazaq argued. “Our proposed formula will ensure that all states, regardless of their size or economic output, receive a fair share of this critical revenue stream.”
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Beyond the VAT increase issue, the governors also expressed their support for the continued funding of key institutions such as the Tertiary Education Trust Fund (TETFUND), the National Agency for Science and Engineering Infrastructure (NASENI), and the National Information Technology Development Agency (NITDA). They urged the National Assembly to ensure that these institutions continue to receive their share of development levies.
The governor’s position now sets the stage for a potential showdown with the federal government over the direction of tax reform. While the federal government seeks to increase revenue through higher taxes, the governors prioritize economic stability and social welfare, arguing that a VAT increase %would be detrimental to both.
This issue will undoubtedly be a key point of contention in the ongoing dialogue between the federal and state governments as they work to navigate the complex challenges of economic growth and fiscal sustainability.
The outcome of these discussions will have significant implications for the Nigerian economy and the lives of millions of citizens.
