Friday, November 15, 2024 -Abdullahi Sule, governor of Nasarawa state, has clarified that northern governors are not opposing the federal government’s tax reforms in entirety but are specifically against the removal of value-added tax (VAT) from the Federation Account Allocation Committee (FAAC). Sule addressed the matter on Thursday during the launch of innovative tax digital codes by the Nasarawa State Board of Internal Revenue Services (NSBIRS) in Lafia, the state capital.
The governor praised President Bola Tinubu’s administration for its
commitment to tax reform but highlighted the potential challenges the northern
region could face if VAT is excluded from FAAC allocations. “Let me make it
categorically clear, we are not against the tax reforms. There are so many good
things about the tax reforms that Mr. President is putting forward,” Sule said,
as quoted by Daily Trust. “We just selected an item out of the tax
reforms. It is the VAT that we are talking about, which would be taken out of
the FAAC. That is why we are calling for a review of that position.”
Sule raised concerns over the proposed derivation-based VAT
distribution model, noting that such a system would divert a significant
portion of VAT revenue to regions where goods are consumed rather than where
they are produced. “The moment you take VAT out of FAAC, you are taking 60
percent of that to go to derivation,” he explained. Drawing on his experience
as a former managing director of major companies, he emphasized that VAT at the
point of consumption could create complexities and inefficiencies in tax
collection. “For people like me, who was once a managing director of some of
the biggest companies, I was the one paying VAT. I was the one paying taxes;
and I knew how it was paid. I know where some of these goods are consumed,” he
stated.
To illustrate, Sule cited his experience as managing director of
African Petroleum, recounting a scenario involving a customer from Maiduguri
who ordered 200 trucks but requested only 10 to be delivered to Maiduguri, with
the remaining trucks distributed from Ilorin to Sokoto. “If you say you are
going to go by consumption, you are going to charge the VAT of the 200 trucks
to Maiduguri. But in reality, at the point of distribution, he would now tell
me to bring only 10 trucks to Maiduguri,” he explained, highlighting how the
derivation model could lead to inaccuracies. “If you say it is at the point of
derivation, then all the corporate headquarters that collected for the 200
trucks are in Lagos. Which means I pay in Lagos. Whichever way you pick, you
are going into default.”
On October 13, President Tinubu submitted four tax reform bills to
the National Assembly: the Nigeria Tax Bill, Tax Administration Bill, and Joint
Revenue Board Establishment Bill. However, the Northern States Governors Forum
(NSGF), representing 19 northern states, opposed the proposed shift to a
derivation-based model for VAT. In a communiqué released after a meeting, the
governors collectively rejected this distribution model, arguing it would
disproportionately impact northern states. Sule reiterated this stance on
October 29, calling the proposed derivation-based VAT sharing formula “unfair”
to the northern region.
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