Tinubu’s ‘Tax Reform Bill’ aims to support consumption-based VAT model

• The federal government’s proposed tax reform bill aims to change the formula for calculating value added tax (VAT) in Nigeria.
• The proposed reform aims to change the paradigm of income distribution by prioritizing consumption over production.
• Experts say states such as Lagos and Rivers are currently benefiting from higher VAT revenues.

Pascal Oparada of Legit.ng has been writing about technology, energy, stocks, investing and economics for over a decade.

The federal government’s proposed tax reform bill, which aims to change the formula for calculating value added tax (VAT) in Nigeria, has sparked widespread debate over its potential to redefine regional equity in income distribution.

Proponents argue that reform could resolve long-standing disparities in resource distribution, with far-reaching consequences for Nigeria’s economic growth and national unity.

FIRS chief explains benefits of new tax bill

During the House of Representatives meeting, Zach Adedeji, the Executive Chairman of the Federal Inland Revenue Service (FIRS), articulated the need for a consumption-based VAT system.

“VAT is a consumption tax and its revenue should reflect where goods and services are consumed and not where transactions are recorded,” Adedeji said.

Under the current VAT system, revenue distribution disproportionately favors states where corporate headquarters or manufacturing centers are located.

Lagos, for example, accounts for 42% of VAT collections, followed by Rivers and the Federal Capital Territory (FCT) with 16% and 9% respectively. Conversely, states such as Borno and Bauchi receive less than half a percent each.

The proposed reform aims to change the paradigm of income distribution by prioritizing consumption over production.

Supporters stress that the legislation could level the playing field for states with large populations but little industrial activity. “This change could give low-income regions the opportunity to invest in education, health and infrastructure,” said Arabinrin Aderonke Atoebi, Adedeji’s media aide.

New tax bill to spread wealth evenly

However, concerns remain. States such as Lagos and Rivers, which currently benefit from higher VAT revenues, may require additional budgetary constraints under the new formula.

Critics fear it could delay infrastructure projects and public services. Supporters, however, argue that the long-term benefits – overcoming regional inequalities and promoting unity – far outweigh the short-term problems.

Adedeji’s reform efforts are in line with President Bola Ahmed Tinubu’s Renewed Hope agenda. The government is committed to promoting sustainable growth and reducing regional disparities by ensuring equitable distribution of resources.

“This reform is aimed at creating a Nigeria where every region can succeed,” Adedeji stressed.

The proposed VAT redistribution model aroused significant public interest. This provides a vision of a future in which Nigeria’s wealth is more equitably distributed among its various regions.

An expert explains what Tinubu’s ‘Tax Reform Bill’ aims to achieve

Legit.ng earlier reported that President Bola Tinubu’s tax reform bill has become important to his administration’s economic vision.

The focus is on creating a unified and efficient tax system that promises to stimulate national growth.

Among all these components of the tax reform bill legit.ng reported that the northern bloc expressed skepticism about these reforms.

Proofreading by James Ojo Adakole, journalist and editor of Legit.ng.

Source: Legit.ng