President Bola Ahmed Tinubu tax reform will spark healthy economic competition among states, Minister for Information and National Orientation Mohammed Idris said yesterday.
He told The Nation that the proposed Tax Reform Bills have been designed to reposition the country on a sustainable path to economic prosperity.
Dismissing as unfounded fears that the regime would be unfavourable to certain regions, the minister said: “Contrary to the belief in some quarters, the new tax regime is designed to put Nigeria back on the path of sustainable economic prosperity, eliminating corruption, end multiple taxation, and making tax administration more efficient. It is not designed to hurt any part of the country”.
His view corroborates those of Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, who, while defending the Bills, said the plan is intended to significantly increase revenue for government at all level.
President Tinubu last year proposed for passage by the National Assembly four Bills which will comprehensively revitalize the tax system in the country.
The Bills cause uproar among a section of Nigerians, who took up arms against them.
Governors during a meeting of the National Economic Council (NEC) requested the withdrawal of the Bills from the National Assembly.
But the President refused the advice, and asked all those with misgivings to channel them to lawmakers during the public hearing.
The Federal Government thereafter intensified explanations on the need for the Bill. As at last month, the Senate where the Bills are in the third reading, waiting for passage, and the House of Representatives, where it has not been listed at all, have come to agreement on the need to pass the Bills.
Federal lawmakers have signaled that the Bills might be passed next month after the passage of the Appropriation Bill 2025.
The proposed Value Added Tax (VAT) model seeks to shift revenue distribution to reflect actual economic activities across all states, rather than concentrating it in a few locations where major companies are headquartered.
Under the current system, the VAT revenue is distributed with 20 per cent allocated based on derivation; 50 per cent based on equality and 30 per cent based on population.
But the proposed reforms will introduce a more balanced approach that prioritizes economic activity.
Under the proposed model, Oyedele explained that the VAT revenue will be allocated based on where goods and services are consumed rather than where they are produced.
Oyedele said: “Rather than saying that because the company producing beverages is headquartered in Lagos, that’s where we derive all the VAT revenue from in Nigeria, we’ll say, where did you send them to?
“The one you sent to Ekiti, to Zamfara, to Kebbi, to Abia—let them take credit for their economic activities. Everyone should be excited about that apart from Lagos State. We believe it’s a fairer approach.”
To address concerns of fairness and regional equity, Oyedele’s committee has proposed a new VAT revenue-sharing formula. Under this model, 60 per cent of VAT revenue will be allocated based on derivation (where goods and services are consumed), 20 per cent based on population, and 20 per cent based on equality.
This shift is expected to reward states that actively promote economic activities, ensuring they directly benefit from their contributions to the national economy.
To further incentivize state governments, Oyedele proposed that the Federal Government reduce its share of VAT revenue from 15 per cent to 10 per cent. The additional five per cent would be used as a fiscal equalization buffer for states, guaranteeing that no state receives less revenue than it would have under the old formula.
Oyedele said: “This guarantees every state that as a result of our reform, they will not collect less than they would have, under the old formula.
“The upside is significant – your VAT revenue could double in less than two years if this reform is implemented.”
