States, LGs to get 90% VAT revenue – Tinubu panel

The Presidential Committee on Fiscal Policy and Tax Reforms has proposed reviewing states’ and local governments’ share of the Value Added Tax revenue to 90 per cent and reducing the Federal Government’s share from 15 to 10 per cent.

The panel also recommended an upward review of the current 7.5 per cent rates charged to customers.

The Chairman of the committee, Taiwo Oyedele, disclosed this at a stakeholder’s exposure and impact assessment session organised to discuss some of the major proposals in the National Tax Policy in Abuja.

The proposals were part of the reforms being introduced to boost the nation’s tax revenue.

“We are proposing that the Federal Government’s portion should be reduced from 15 per cent to 10 per cent. States’ portion will be increased but they would share 90 per cent with local governments,” Oyedele confirmed in a meeting with business owners, industry players and other stakeholders on Monday.

The strategic meeting is a vital aspect of engaging stakeholders, ensuring the successful implementation of tax reform policies devised by the current administration to attain a minimum tax-to-GDP ratio of 18 per cent.

President Bola Tinubu inaugurated the fiscal policy and tax reforms committee last August to improve the nation’s revenue profile and business environment by eliminating multiple taxes.

VAT is a 7.5 per cent consumption tax administered by the Federal Inland Revenue Service when goods are purchased and services rendered. The final consumer bears the tax burden.

Revenue generated from VAT is usually disbursed to the three tiers of government through the Federation Accounts Allocation Committee at a current formula of 15 per cent for the central government, 50 per cent for states and 35 per cent for local governments.

Checks by our correspondents showed that the government raked in N10.1tn from the collection of Value Added Tax under former President Muhammadu Buhari.

Despite the huge amount, the government has clamoured for an increase in the rates. The former Minister of Finance, Zainab Ahmed, had advised the current government to increase VAT from the current 7.5 per cent to 10 per cent.

According to the 2024-2026 Medium Term Economic Framework, the government plans to hire more tax agents in five sectors including telecommunications, banks and other financial institutions and companies in the construction, and aviation industry to maximise coverage and collection.

But speaking at the event, Oyedele said the nation could potentially double its VAT revenue within two years if the reforms were approved.

He also emphasised that the committee had collaborated closely with business owners to ensure that measures were in place to prevent any escalation in the cost of their products.