• Bills not aimed at undermining any region, says Oyedele
• Lawmakers voice concerns for vulnerable states 
• Abbas: House yet to take definite stand
• Lobbying frenzy in N’Assembly amid fierce opposition to bills 
A new dimension was introduced to the ongoing debate on the contentious tax reform bills yesterday as the Chairman of the Federal Inland Revenue Service (FIRS), Dr Zacch Adedeji, criticised the current allocation of Value Added Tax (VAT) proceeds, describing it as inequitable to the 35 states and the Federal Capital Territory (FCT) that receive substantially less than a few dominant states.
   
Speaking during an interactive session with members of the House of Representatives on the proposed tax reform bills, Adedeji revealed that he had just signed off on the VAT data for October. 
   
He highlighted that under the current structure, Lagos, Rivers, and Oyo states, along with the FCT, receive over 70 per cent of VAT proceeds. He attributed this to the fact that major companies generating substantial revenue have their headquarters in Lagos.
   
According to Adedeji, Lagos alone receives 42 per cent of VAT, followed by Rivers with 16 per cent and Oyo with 5.2 per cent. He argued that this distribution is unjust, considering that 70 per cent of Nigerians who consume the products and services provided by these companies are spread across the entire country.
   To illustrate his point, Adedeji cited the example of a telecommunications giant, MTN, which contributes the highest VAT to Lagos despite its services being utilised nationwide. He assured lawmakers that if the proposed tax reforms were passed into law, all states would receive their fair share of VAT proceeds based on actual consumption.
   
“Take Borno, for example,” Adedeji said, noting that the state currently collects a mere 0.32 per cent, which is less than half a per cent. “Meanwhile, Lagos is collecting 42 per cent. Whenever I sign it, I don’t feel like I am a Nigerian because this is not what we represent. We should be fair to ourselves as a nation. That is why, in the wisdom of the committee and the President, we must change this structure.”
   
Adedeji’s comments were applauded by the lawmakers, though the session also saw conflicting views. Babajimi Benson (APC, Lagos) and Adamu Yusuf Gagdi (APC, Plateau) expressed concerns about how the reforms might affect their respective states. Gagdi questioned how displaced citizens in northern states, affected by violent conflicts, would benefit from VAT based on consumption, especially regarding taxes related to imported goods.
   
Benson, visibly concerned about the potential impact on Lagos, where many companies are headquartered, asked whether the FIRS had conducted simulations in states like Cross River and Imo, which currently rank lowest in VAT collections.
   
This came as the Federal Government sought to allay the fears of governors and other stakeholders regarding the proposed tax reform bills, particularly the new derivation-based VAT distribution model.
   
The government assured that the reforms would benefit all states equitably and were not designed to favour any particular region.   Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, provided this clarification during an interactive session on the proposed bills organised by the House of Representatives.
   
Oyedele argued that the reforms would improve efficiency and boost revenue for states where goods and services are consumed. He noted that the existing VAT allocation system is skewed by the “headquarters effect,” which does not accurately reflect the true derivation in each state.
   
In September, President Bola Tinubu submitted four tax reform bills to the National Assembly for consideration based on recommendations from the Presidential Committee on Fiscal and Tax Reforms led by Oyedele. The bills include the Nigeria Tax Bill 2024, which aims to establish a fiscal framework for taxation, and the Tax Administration Bill, which seeks to streamline the legal framework for taxes and reduce disputes.
   
The main point of contention in the four tax reform bills is the Value Added Tax (VAT) sharing template in one of the bills (the Nigeria Tax Administration Bill), which seeks to change the VAT sharing formula, reducing the Federal Government’s share from 15 to 10 per cent.  
   
More contentious is a caveat in the bill that the allocation among states will consider the derivation principle. Hence, companies remit VAT based on the location of their headquarters and tax office rather than where the goods and services are consumed. Specifically, the provision titled “Distribution of Value Added Tax revenue” is contained within the Nigeria Tax Administration Bill.  
   
It reads: “Notwithstanding any formula that may be prescribed by any other law, the net revenue accruing by virtue of the operation of Chapter Six of the Nigeria Tax Act shall be distributed as follows: (a) 10 per cent to the Federal Government; (b) 55 per cent to the state governments and the Federal Capital Territory; and (c) 35 per cent to the Local Governments; provided that 60 per cent of the amount standing to the credit of states and local governments shall be distributed among them on the basis of derivation.”  
   
Another contentious issue is the proposed increase in VAT itself. The proposal is to progressively increase the VAT rate from 7.5 per cent to 10 per cent in 2025, then to 12.5 per cent from 2026 to 2029, and ultimately to 15 per cent by 2030, aligning it with VAT rates in other African countries. 
   
Oyedele stressed that the reforms are not designed to disadvantage any region. He explained that the existing VAT law already reflects a derivation principle of not less than 20 per cent in the distribution among states and local governments. Additionally, he assured that a provision in the new law guarantees that no state would receive less than what it would have under the repealed VAT Act of 2004.He concluded by stressing that allowing states to collect VAT independently could pose significant economic risks for Nigeria.
  
 Recalling previous efforts by some states that challenged the legality of the Federal Government’s collection of VAT, Taiwo Oyedele expressed concerns that allowing states to collect VAT independently could lead to a chaotic tax system, ultimately harming the economy.
   
The collection of VAT has been a contentious issue for years between the Federal Government and the states. Some states have previously contested the legality of the Federal Government’s authority to collect VAT. 
   
In 2021, the Federal High Court in Port Harcourt, Rivers State, issued an order restraining the Federal Inland Revenue Service (FIRS) from collecting VAT and personal income tax (PIT) within Rivers State.
   
Rivers State argued that the Federal Government’s tax powers were limited to stamp duties and the taxation of incomes, profits, and capital gains, asserting that the administration of VAT should be delegated to state agencies.
   
However, while clarifying the derivation-based VAT distribution model proposed in the new tax bill, Oyedele cautioned that states should not be under the illusion that they would generate more revenue if allowed to collect VAT themselves.
  
Oyedele explained that VAT was introduced in Nigeria in 1993 by the VAT Act No. 102 of 1993 as a replacement for the sales tax. He noted that even though state governments previously collected sales tax, it did not yield significant progress.He remarked: “Some states believe that if they can convert VAT into a state-level tax, they will generate significant revenue. We know that states like Rivers have gone to court over this issue, and Lagos has done the same multiple times. Both states have even enacted their VAT laws. When I reviewed those VAT laws, I was disheartened; they are worse than when VAT was first introduced in 1993.
   
“In 1986, the military government introduced a sales tax, which was collected by the states. Five years later, in 1991, there was no substantial progress. The military then set up a committee that concluded VAT was a more efficient consumption tax for Nigeria, but it needed to be collected centrally.
   
“So, if any state believes they will gain more by collecting VAT at the state level, they will end up losing more than half of what they currently receive. If states begin collecting VAT independently, it will create significant problems for all of us.”
   
Following Oyedele’s presentation, Representatives Ahmadu Jaha (APC, Borno) and Yusuf Adamu Gagdi (APC, Plateau) raised concerns about the proposed VAT distribution formula in the new tax bill. 
   
Jaha expressed that this was not the right time to introduce such legislation, noting that economically fragile states in crisis might be disadvantaged by the new formula. “There are states across the country that are not economically viable. Many communities are affected by crises, and currently, about 85 per cent of people in my community have been displaced, with some seeking refuge in Cameroon and other places. How can you accurately assess VAT based on consumption across the entire country under these conditions?” he questioned.  Gagdi emphasised the need to address vulnerability issues, stating, “We must ensure our laws are fair to all parts of the country.”
   
Similarly, Babajimi Benson, representing Ikorodu Federal Constituency, expressed concerns that the proposed legislation might disadvantage Lagos State. “Currently, Lagos generates 40 per cent of the country’s VAT. If we abandon this model, states that do not generate as much might end up receiving a larger share,” he noted.
   
In response, Oyedele reassured lawmakers that no state would lose out if the bills were passed. “This is not about one state losing and another gaining; it is about implementing the right policies. Every state will benefit. Even if your state is the least developed in Nigeria, implementing this proposal will bring uniformity in taxation,” he asserted.
   
Earlier, Speaker Abbas Tajudeen stated that the House had yet to take a definitive position on the proposed tax reform bills. He explained that the purpose of the interactive session was to provide lawmakers with a deeper understanding of the proposed bills, promote constructive dialogue on contentious or controversial areas, and build a consensus.    
   
 MEANWHILE, in response to significant opposition to the controversial tax reform bills, the leadership of the National Assembly has initiated vigorous lobbying efforts to secure support for the four proposed pieces of legislation.  
   
Ahead of the resumption of plenary today, the Rules and Business Committees in both chambers, under the direct supervision of the majority leaders, have been instructed to include the bills on the order papers to facilitate their swift introduction for first readings.  
   
The Guardian learnt that the Godswill Akpabio leadership is exerting pressure on various political and regional caucuses to mobilise support ahead of the debate on the bills.  
   
In parliamentary circles, lobbying involves direct or indirect communication with lawmakers to influence their decisions on a bill, motion, or other legislative activities, including the confirmation of nominees. It can be carried out directly with legislators or through their consultants or aides, to persuade decision-makers to take or refrain from specific actions.  
   
Lobbying is a legitimate and important part of a representative democracy. It enables parliamentarians and public officials to make better-informed decisions by considering various viewpoints on matters of public interest. Lobbyists are individuals hired by businesses or causes to persuade legislators to support those interests. They are compensated to gain favour from politicians. 
   
In this instance, the Senate leadership is lobbying lawmakers through their political and regional caucuses and is prepared to make concessions where necessary to secure the passage of the bills. While achieving consensus on controversial bills of this nature might be difficult, the lobbyists aim to secure a simple majority as required by House rules to pass the legislation.
   
The All Progressives Congress (APC) caucus in the Senate, which comprises 64 of the 109 senators, is leading efforts to expedite action on the President’s tax reform bills. Very little opposition is coming from the 34-member People’s Democratic Party (PDP) caucus led by Senator Abba Moro. 
  
 A lawmaker, who requested anonymity, told The Guardian that despite the controversy, the matter would be discussed extensively at various caucus levels to prevent the rejection of any bills.  
   
In the House of Representatives, an internal interactive session on the four Executive Tax Reform Bills has commenced to ensure robust engagement and informed legislative action on the reforms. Organised by the House leadership, the session aims to provide lawmakers with a platform to engage directly with the principal promoters of the reform bills from the executive, allowing members to seek clarifications, pose critical questions, and gain deeper insights into the proposed reforms.  
   
Findings, however, indicate that the 58-member Northern Senators Forum (NSF) is planning to propose critical amendments to the most contentious provisions of the tax bills. It was learnt that most lawmakers prefer that contentious areas, such as the proposed increase in the Value Added Tax (VAT) and the sharing of VAT revenue based on the derivation principle—considered detrimental to the people’s economic interests—be deferred or removed from the bill.