19 northern govs oppose Tinubu’s planned tax hike

The governors of the 19 Northern states have expressed their strong objections to the recent Tax Reform Bill submitted by the Federal Government to the National Assembly for approval. They specifically oppose the proposed transition to a Derivation-based Model for distributing Value Added Tax (VAT), arguing that it would disadvantage Northern states and other less industrialized regions.

Representing the Northern States Governors’ Forum, the governors articulated their concerns in a communiqué released following a strategic meeting in Kaduna, which was led by the Forum’s Chairman, Muhammad Yahaya, who is also the Governor of Gombe State. The meeting included traditional rulers from the North, Chief of Defence Staff General Christopher Musa, and various key stakeholders.

This development arises amidst ongoing discussions about resource control and the allocation of VAT revenue among states. Notably, many Northern states that enforce Sharia law do not permit the sale of alcoholic beverages, yet they still receive a portion of the VAT generated from alcohol sales.

In the proposed tax reform, a panel led by Taiwo Oyedele suggested changing the VAT distribution formula to a Derivation-based Model. The governors rejected this idea, stating that VAT currently depends on the location of a company’s headquarters rather than where goods and services are actually consumed. They indicated that this change would adversely impact revenue distributions from the Federal Accounts Allocation Committee.

The communiqué stated, “The forum expresses its disappointment with the recent Tax Reform Bill sent to the National Assembly. The proposed reforms do not align with the interests of the North and other sub-national entities, particularly the shift towards a Derivation-based Model for VAT distribution. This is due to the fact that companies remit VAT based on their headquarters and tax offices, rather than consumption locations. Therefore, the Forum collectively rejects the proposed Tax Amendments and urges National Assembly members to oppose any legislation that could harm our communities.”

The governors further insisted on the need for equity and fairness in national policy execution, emphasizing that no geopolitical zone should be disadvantaged.

“To clarify, the Northern Governors’ Forum supports policies that promote the country’s growth and development. However, we call for fairness in the application of all national policies to ensure no region is marginalized. In light of the current economic challenges facing the nation, the Forum encourages citizens to remain patient as both state and federal governments strive to implement measures to alleviate these hardships,” the communiqué concluded.