Governors’ Forum rejects VAT hike, proposes alternative tax reforms

The Nigeria Governors’ Forum (NGF) has firmly opposed proposed plans to increase the Value Added Tax (VAT) rate in the country, citing concerns over economic hardship and potential negative impacts on citizens.

Representing all 36 states, the forum articulated its position during a meeting with the Presidential Tax Reform Committee on Thursday, January 16, 2025. The discussion centered on critical fiscal policies and tax reform initiatives aimed at improving Nigeria’s revenue system.

In a statement signed by NGF Chairman and Governor of Kwara State, AbdulRahman AbdulRazaq, the governors expressed their commitment to comprehensive tax reform while advocating against measures that could worsen economic challenges for Nigerians.

The governors highlighted several resolutions reached during the meeting, including their opposition to VAT increase, maintaining that the current economic climate does not support such an adjustment.

The forum also opposed any reductions in CIT, stressing the need to maintain fiscal balance. The NGF recommended retaining VAT exemptions for essential goods and agricultural produce to safeguard citizens’ welfare and encourage agricultural productivity.

A proposal was made to ensure fairer resource distribution, with 50% of VAT revenues shared equally among states, 30% based on derivation, and 20% determined by population.

The governors called for removing terminal clauses for agencies like the Tertiary Education Trust Fund (TETFUND), National Agency for Science and Engineering Infrastructure (NASENI), and National Information Technology Development Agency (NITDA) in tax reform allocation.

READ ALSO: Northern leaders criticize Tinubu’s stance on controversial tax reforms

The current Tax Reform Bills under review by the National Assembly propose a progressive VAT rate increase, rising from 10% in 2025 to 12.5% between 2026 and 2029, and 15% by 2030.

These bills stem from recommendations by the Presidential Committee on Tax Reform, chaired by fiscal policy expert Mr. Taiwo Oyedele. The reform package includes four major bills aimed at overhauling Nigeria’s tax administration framework.

Economic experts have weighed in on the NGF’s stance, applauding the governors for prioritizing citizen welfare amidst fiscal challenges.

Dr. Mabel Okonkwo, a tax policy analyst, remarked: “The governors’ resistance to VAT increases reflects the need to balance revenue generation with the economic realities faced by ordinary Nigerians. Any tax policy that disproportionately burdens the poor risks undermining public trust in governance.”

Similarly, Professor Ademola Ogundele, a development economist, praised the NGF’s advocacy for a revised VAT-sharing formula, noting: “Redistributing VAT revenues to align more closely with state contributions and population dynamics could enhance equity and encourage states to boost internal revenue generation.”

Governor AbdulRazaq’s Perspective: The NGF chairman emphasized the importance of fairness in fiscal reforms.

“Our tax reform efforts must reflect fairness, equity, and the need to protect our citizens, particularly during these economically challenging times,” he stated.

The NGF’s opposition to the VAT hike and its proposals for alternative reforms are expected to spark further debates as the National Assembly deliberates on the tax reform bills. Observers note that the governors’ unified stance could significantly influence the legislative outcome, shaping the trajectory of Nigeria’s fiscal policies in the coming years.