The Nigeria Governors’ Forum (NGF) has firmly rejected the proposed increase in Value Added Tax (VAT), deeming it an untimely move.
This decision came after a meeting held in Abuja on Thursday, where the governors reaffirmed their support for the ongoing legislative process to reform the country’s tax system.
Last year, Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, announced plans to increase VAT from the current 7.5% to 10%, addressing the nation’s ongoing revenue challenges. He emphasized the urgency of revenue transformation to tackle Nigeria’s fiscal crisis, noting that even with the proposed tax increases, the country’s revenue would still be insufficient to meet its infrastructure needs.
Finance Minister Wale Edun further outlined at the IMF/World Bank Annual Meetings that the VAT increase would be gradual, focusing primarily on luxury items, while essential goods for the poor would remain VAT-exempt or be taxed at a zero rate.
In response, the NGF issued a communique on Thursday, rejecting the VAT increase and emphasizing the importance of economic stability. The forum proposed an equitable VAT sharing formula based on equality (50%), derivation (30%), and population (20%). They also advocated for the continued exemption of essential goods and agricultural products from VAT to protect citizens’ welfare and promote agricultural growth.
Additionally, the NGF supported the ongoing legislative process for comprehensive tax reform, urging that no changes be made to Corporate Income Tax (CIT) rates or the terminal clauses for specific development funds at this time.
The forum’s stance underscores a cautious approach to fiscal policy, prioritizing economic stability and equitable resource distribution as Nigeria moves forward with tax system reforms.
