Tax reform: Open letter to Northern governors

Your Excellencies, Governors of Northern Nigeria states, I write to you with a vision we all share: building a prosperous, fair, and united Nigeria. It’s understandable to have concerns about the recent Tax Reform Bill, especially regarding the proposed shift to a derivation-based model for VAT distribution and how it might impact Northern states.

However, looking more closely at this reform reveals opportunities to benefit not only Northern states but also the entire nation. I believe that with your leadership and support, this reform could unlock opportunities that advance the North’s growth and empower its communities. I wish to share some perspectives on the vision and benefits of this reform.

The purpose of this reform, according to Dr. Zacch Adedeji, Executive Chairman, Federal Inland Revenue Service, backed by the Federal Government, is not to create new taxes or burden the everyday citizen. He states, and I quote, “This reform is about taxing prosperity, not poverty.” In clearer terms, the reform is designed to ensure that those with greater means and profits contribute fairly while also reducing redundant taxes that impact small businesses and local communities. This streamlined approach offers simplicity, making tax compliance easier and more efficient for businesses, farmers, and traders alike, thereby allowing our local enterprises to grow without unnecessary hindrances.

What does this mean for Northern Nigeria?

In practical terms, a derivation-based VAT model would redirect funds from goods and services generated locally back into the communities that produce them. It also means resources collected in the North would be reinvested directly into Northern infrastructure like roads, schools, hospitals, and other development projects. Such reinvestment has the power to create a real impact: stimulating local businesses, attracting new industries, and generating more wealth within the region over time.

This model is an opportunity for sustained growth that benefits both communities and the local economy in a meaningful way.

In the past, VAT revenue has been centralized, but this reform offers a new direction, allowing each state to gain more from its own economic activities.

A localized VAT model values the strengths and contributions each region brings to the country and ensures that these efforts benefit local communities directly. It’s a way to support each state’s growth and allow funds collected within a state to have a greater impact on its residents. I understand your concern but the new bill will help in developing the region into a prosperous North if you look inward in line with the following: One, it will strengthen North the more to focus on some of the things they have comparative advantage of and make them stronger.  Two, it will make the North to be more creative in developing what they have, instead of relying on other section of the country for progress and development. Third, it will also make the North look inwards into their ability and capability to develop themselves.

Additionally, the reform seeks to establish transparency and accountability in tax administration, addressing past inefficiencies that have created distrust in the system. A more transparent framework assures that taxpayers can see tangible improvements from their contributions. Dr. Zacch, again, has said, and I quote, “This is about a fairer, simpler tax system that not only empowers businesses but also respects and values taxpayers’ contributions.”

Let’s not forget, the Renewed Hope Agenda of President Bola Tinubu seeks to bring transformation that empowers every region. The proposed tax reforms align with this vision by creating a tax system that is efficient, transparent, and geared toward prosperity.

So, as trusted leaders, I encourage you to consider these reforms not only for the present but for the potential they unlock for a prosperous Northern Nigeria. Together, with your guidance and influence, we can pave the way for a Nigeria where all regions feel seen, valued, and fairly treated. This bill offers a foundation on which to build a stronger North and a unified Nigeria.

• Aderonke is the Technical Assistant, Broadcast Media, to the Executive Chairman of the Federal Inland Revenue Service (FIRS).

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