In a bold move, 19 northern governors, under the umbrella of the Northern States Governors’ Forum (NSGF), have rejected President Bola Tinubu’s proposed tax hike, citing its potential harm to northern states and other less industrial regions. This decision was made public in a communique issued after a strategic meeting in Kaduna State, chaired by Governor Muhammad Yahaya of Gombe State.
The governors expressed concerns about the proposed shift to a derivation-based Model for Value Added Tax (VAT) distribution, which they believe would disadvantage northern states. Currently, VAT is remitted based on company headquarters rather than consumption location, and the governors argue this would negatively impact revenue distribution from the Federal Accounts Allocation Committee (FAAC) .
The proposed tax reform bill, submitted to the National Assembly for approval, has been met with opposition from the northern governors. They claim that the bill’s contents are against the interest of the North and other sub-nationals. The governors are demanding equity and fairness in national policy implementation, ensuring that no geopolitical zone is shortchanged or marginalized.
In their communique, the governors stated that they are not averse to policies or programs that promote national growth and development, but emphasized the need for fairness in implementation. They also appealed to citizens to remain calm, as states and federal governments work to implement measures to alleviate economic hardship.
The Tax Reform Bill controversy has sparked concerns about the potential impact on less industrialized regions. Many northern states, where Sharia law prohibits alcohol sales, still receive a share of VAT collected from alcohol sales. The proposed change would alter this arrangement.
Experts suggest that tax reforms should prioritize fairness and equity, considering the diverse economic realities of different regions. The World Bank’s Global Tax Program emphasizes the importance of domestic resource mobilization, while ensuring that tax policies promote economic growth and reduce poverty .
As the National Assembly considers the Tax Reform Bill, the northern governors’ rejection of the proposal is likely to influence the outcome. The fate of the bill remains uncertain, with many calling for a more inclusive and equitable approach to tax reform.
