The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Mr. Taiwo Oyedele, has reacted to the opposition of the Northern Governors Forum to the Value Added Tax (VAT) distribution model based on the derivation between the different levels of the federation in the country. new finance bill.

In a statement on his official page on or consumed.

According to him, the current VAT distribution model is unfair not only to the northern states, but also to states in all geopolitical zones.

He explained that the commission’s proposal is to create a fairer system that takes into account where goods are consumed or supplied, regardless of their VAT status.

In his words, “We share the sentiment expressed by Northern Governors regarding the inequity inherent in the current derivation model as the basis for distributing VAT revenue. This issue actually affects many states across geopolitical zones, as the current calculation is primarily determined based on where VAT is paid, rather than where the goods or services are supplied or consumed.

“Our proposal aims to create a fairer system by designing a different form of derivation that takes into account the place of supply or consumption of the relevant goods and services, whether they are zero-rated, exempt or taxable at the standard rate.”

He referred to telecommunications and said that the state in which the subscriber is located should be reflected in the distribution of VAT.

History

Nairametrics had earlier reported that the Northern Governors Forum, chaired by Gombe State Governor, Muhammed Inuwa Yahaya, had rejected the derivation based model for distribution of Value Added Tax (VAT) proposed in the new tax bill currently being deliberated in the National Assembly.

In a communiqué signed by Governor Yahaya following a meeting between Northern governors and elders, the forum criticized the proposal, saying it undermines the interests of the North and other sub-national regions.

The forum also urged members of the National Assembly to reject the bill and any similar legislation that could compromise the well-being of the people of the North.

Current VAT breakdown

• Currently, under Section 40 of the VAT Act, VAT revenue is distributed as follows: 15% to the Federal Government, 50% to the States and FCT, and 35% to local governments, with at least 20% of the distribution to states and local authorities based on a principle of derivation.
• Although not explicitly stated in the VAT law, other factors affecting distribution include 50% based on equality and 30% based on population.
• Additionally, a collection fee of 4% is remitted to the FIRS and 2% is allocated to the NCS for import VAT.

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