LET'S TALK ABOUT THE POLARIZED PRESIDENTIAL TAX REFORM BILL

The proposed reforms have been met with strong opposition, with Senator Ndume storming out of the legislative session, alongside some Northern senators. Senator Barau has also faced backlash for chairing the session and accused of manipulatively facilitating the reform's second reading passage in the Red Chamber.

Northern governors forum categorically opposed it and many other stakeholders. In the words of Jaafar Jaafar "Zulum ta cire soro ta saya da kafanta." This is evident in an interview Governor Zulum granted with BBC Hausa saying that many states not only in the North but Southeast and some southwest may not afford to pay salary upon passing of this tax reform.

The most problematic concept of the reform is about the VAT sharing formula. Since 1993 the VAT is shared thus:

15% Federal government 

50% States government (36+FCT)

35% Local government (774)

But the boiling point is how the VAT between and amongst states is being shared and here is the existing formula.

Present VAT sharing formula between and amongst states:

Based on derivation 20%

Based on equality 50%

Based on population 30%

That's to say, each state receives 50% as equal share, then 30% courtesy of state' population and 20% courtesy of where the VAT is derived/obtained.

So let's look at the proposed reform.

Proposed reform on VAT sharing formula between and amongst states:

Based on derivation 60%

Based on equality 20%

Based on population 20%

I believe we can now sense where the tension is coming from. 60% will now be courtesy of VAT you derived as a state instead of current 20%. This means, the states that generate more VAT will now be more prosperous and poor state with little commercial engagements will be left poorer.

But despite this, there are many beautiful things about this reform, especially the clarification of states where VAT is remitted and where the VAT is consumed. E.g MTN remits all its VAT to its head office in Lagos and despite all the calls made throughout Nigeria, it's only Lagos state that gets the VAT credit but this reform will change that. The companies will provide the consumption data and all states will receive their share of VAT based on their consumption.

Also the issue of multiple taxation will be addressed, reforms around removing other taxes that disallowed foreign investment from coming to Nigeria. Reduction of tax among small scale enterprises and proper documentation that will ensure close to accurate remittance, closing the loopholes that allow corruption to thrive in the tax sector.

I suggest that the Northern legislators should focus on retaining the existing sharing formula against all odd, while working to propose changes that protect and secure the interests of their constituents in the reform. Rather than rejecting the reforms outright, they should strive to find a balance that benefits everyone involved and close any exposure that would be to the detriment Nigerians. Especially the proposed VAT increment from 7.5% to 10% in 2026, to 12.5% through 2027 to 2029 and to 15% in 2030. This will further escalate the price of commodity and could possibly complicate the economy. These and similar sections from the reforms should be confronted with a view of creating a reflective easiness for the citizenry.