VAT sharing proposal will create fair system for all — Oyedele

Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has stated that the proposed amendment to value-added tax (VAT) distribution will create a fair system.

Mr. Oyedele explained that all stakeholders will collaborate to address various concerns to find a balanced solution that achieves a win-win outcome for all.

Reacting to the concerns raised by the Northern States Governors Forum (NSGF) on the Value Added Tax (VAT) sharing proposal in President Bola Ahmed Tinubu’s Tax Reform Bill, Oyedele said the issue affects many states across all geopolitical zones.

Mr. Oyedele who reacted through his X handle (formerly Twitter) said, “We share the sentiment expressed by the Northern Governors regarding the inequity inherent in the current model of derivation as a basis for distributing VAT revenue.

“This issue, in fact, affects many states across all geopolitical zones because the current derivation is mainly determined based on where VAT is remitted, rather than where goods or services are supplied or consumed”.

Delving into the new proposal on VAT distribution, Oyedele explained, “Our proposal aims to create a fairer system by devising a different form of derivation which takes into account the place of supply or consumption for relevant goods and services whether they are zero-rated, exempt or taxable at the standard rate.

“For example, a state that produces food shouldn’t lose out just because its products are VAT-exempt or consumed in other states. The state where the supply originates should be recognised for its contributions. The same principle should apply to services like telecommunications —VAT distribution should reflect where subscribers are located.

“We will collaborate with all stakeholders to address this concern with a view to finding a balanced solution that achieves a win-win outcome for all”.

The Northern Governors Forum, chaired by Gombe State Governor Muhammed Inuwa Yahaya had rejected the derivation-based model for Value Added Tax (VAT) distribution proposed in the new tax bill before the National Assembly.

In a communiqué the Northern governors and elders’ forum criticized the proposal, stating that it undermines the interests of the North and other sub-nationals.

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