CurrentReport Blog Former Executive Chairman of the Federal Inland Revenue Service (FIRS), Muhammad Nami, has shed light on the advantages of President Bola Ahmed Tinubu’s tax reform bills, asserting that they promote fairness and equitable wealth distribution across Nigerian states.
In a statement shared on his official Facebook account on Monday, Nami defended the proposed bills, which include the Nigeria Tax Bill 2024, Tax Administration Bill, Nigeria Revenue Service Establishment Bill, and Joint Revenue Board Establishment Bill. The bills, introduced to the National Assembly on October 3, 2024, have sparked significant debate, particularly over the proposed value-added tax (VAT) derivation model.
Nami emphasized that the Tax Administration Bill addresses longstanding disparities in VAT allocation, proposing a shift to a consumption-based VAT reporting system. He highlighted that under the current system, 20% of VAT returns are allocated to states where companies’ head offices are located, disproportionately favoring Lagos, Rivers, and the Federal Capital Territory (FCT).
Key Provisions of the Tax Administration Bill
- Place of Consumption VAT Reporting:
Companies would file VAT returns based on the location of consumption, ensuring that states where goods and services are consumed benefit directly. - Redistribution of VAT Returns:
States will receive 60% of VAT generated within their jurisdiction, while the remaining 40% will go into a central VAT pool for shared distribution.
Nami’s Clarification on Benefits
Nami argued that the reforms will correct current imbalances, allowing states like Niger, Kano, and Adamawa to gain a larger share of VAT revenue, reducing the dominance of Lagos, Rivers, and FCT.
“For instance, if consumption occurs in Niger State, it will receive 60% of the VAT generated from its jurisdiction,” Nami explained. “This will result in a more favorable outcome for most states compared to the current regime.”
Stakeholder Reactions
The tax reform bills have faced resistance from the Northern Governors Forum (NGF), the National Economic Council (NEC), and other stakeholders. Critics argue that the proposed VAT sharing formula could disrupt the current revenue flow to high-performing states.
However, Nigerian economists have supported the reforms, citing their potential to expand the country’s tax base and boost revenue generation.
Nami appealed to NEC, NGF, and other stakeholders to embrace the bills, describing them as a step toward equitable wealth redistribution in Nigeria.
As the National Assembly deliberates on these bills, their potential impact on Nigeria’s fiscal landscape remains a focal point of public discourse.
