Taiwo Oyedele, chairman of the Presidential Committee on Fiscal Policy, responded to Northern Governors' opposition to the proposed derivation model for VAT distribution. He argued for a fairer system that considers the location of consumption, emphasizing the need for equitable revenue sharing across Nigeria’s regions.
Taiwo Oyedele, who chairs the Presidential Committee on Fiscal Policy and Tax Reforms, has responded to the Northern Governors Forum's opposition to a proposed derivation-based model for distributing Value Added Tax (VAT) in the new finance bill. In a recent statement on X, Oyedele highlighted the shortcomings of the current VAT allocation system, which favors states based on where VAT is collected instead of where goods and services are consumed. He emphasized that this system is unjust, affecting not only Northern states but regions across the country.
Oyedele proposed that the reform committee seeks to establish a more equitable VAT distribution model that reflects the location of consumption rather than mere collection points. He pointed out that this would ensure that regions contributing to consumption receive a fairer share of the VAT revenue, regardless of whether the goods or services are subject to VAT exemptions or standard rates. For instance, he cited telecommunications, suggesting that VAT revenue should be allocated based on the subscriber’s location.
This call for VAT reform is met with resistance from Northern governors. Led by Gombe State Governor Muhammed Inuwa Yahaya, the forum argues that the derivation-based model undermines the interests of the North, urging members of the National Assembly to reject such legislation. Their communiqué stressed the need to safeguard regional welfare and maintain fair revenue sharing at the federal level.
Currently, the VAT distribution model allocates funds among the Federal Government, states, and local governments based on where VAT is remitted, while also considering population and equality factors. The ongoing discussions reveal the complexities involved in reaching a consensus as leaders navigate the path forward.
