The Tax Reform Bills that were introduced to the National Assembly just two months ago are about to be withdrawn by the Bola Ahmed Tinubu government.
This decision is the result of intense criticism and disagreement, mostly from northern governors and traditional leaders who opposed parts of the planned law, especially those that affected the distribution scheme for the Value Added Tax (VAT).
The president has decided to withdraw the measures, according to information obtained by Daily Trust last night. However, sources stated that the proposed laws will be changed and resubmitted to the National Assembly at a later date.
Vice President Kashim Shettima headed the National Economic Council (NEC), which formally requested the legislation’s withdrawal on October 31.
The NEC’s suggestion is in line with a resolution adopted by the governors of Nigeria’s 19 northern states at a meeting in Kaduna.
The governors, who were accompanied by well-known traditional leaders, voiced worries that the new tax measures would have a detrimental effect on the economic situation of their states.
The planned changes to the VAT distribution mechanism, which the Northern leaders contend will harm the North, are the main source of their resistance.
The Northern Governors’ Forum chair, Governor Inuwa Yahaya of Gombe State, explained their position, saying that the existing VAT structure unjustly benefits governments with corporate headquarters rather than the areas where goods and services are used. They argue that this scenario shortchanges subnational areas and threatens the economic equilibrium.
The northern leaders, in a statement released after their meeting, urged equity in all national policies and stated that while they do not oppose reforms that benefit Nigeria as a whole, they feel that the proposed changes must be equitable and inclusive to prevent marginalising particular regions.
Oyo State Governor Seyi Makinde said during a media briefing that NEC’s suggestion shows an awareness of the general issues and a wish to permit more thorough consultations.
NEC recognises the need to develop consensus throughout Nigeria and unite all stakeholders on the tax changes, Makinde said, flanked by Governors Babagana Zulum (Borno) and Charles Soludo (Anambra).
Governor Zulum reaffirmed that the goal of NEC’s decision is to enable a more cohesive approach, emphasising the significance of providing stakeholders and citizens with clarity regarding the administration’s tax reform vision.
Meanwhile, the President’s Special Advisor on Information and Strategy, Bayo Onanuga, has already clarified the confusion around the tax bill.
He underlined that the goal of the proposed VAT derivation model is to establish a more equitable system, not to disadvantage the North.
By changing the VAT distribution mechanism to take consumption location into account, the law aims to fairly compensate the areas that produce items for usage across the country.
According to Onanuga, “The current model favours VAT remittance based on corporate headquarters, not where goods are consumed. The proposed reform would ensure that all regions, particularly those in the North supplying essential products, are fairly represented in VAT allocations.”