Northern governors not opposed to tax reforms — just VAT distribution, says Abdullahi Sule

Abdullahi Sule, governor of Nasarawa state, says northern governors are only against the removal of value-added tax (VAT) from the federation account allocation committee (FAAC).

Sule spoke on Thursday during the launch of innovative tax digital codes initiated by the Nasarawa state board of internal revenue services (NSBIRS) in Lafia, the state capital.

The governor, who commended President Bola Tinubu’s administration, noted the need to scrutinise a key aspect of the tax reforms to prevent potential economic hardship in the northern region.

“Let me make it categorically clear, we are not against the tax reforms. There are so many good things about the tax reforms that Mr. President is putting forward,” Daily Trust quoted Sule as saying.

“We just selected an item out of the tax reforms. It is the VAT that we are talking about, which would be taken out of the FAAC. That is why we are calling for a review of that position.

“The moment you take VAT out of FAAC, you are taking 60 percent of that to go to derivation.

“Other people are introducing consumption. For people like me, who was once a managing director of some of the biggest companies, I was the one paying VAT. I was the one paying taxes; and I knew how it was paid. I know where some of these goods are consumed.

“If you now turn around and say, it’s now at the point of consumption, then I can even educate somebody for a whole day about consumption. Because people don’t even understand the issue of consumption.

“A typical example I can give you from two industries that I have worked as CEO. As MD of African Petroleum, I had a customer from Maiduguri who would order 200 trucks, and he would pay me for 200 trucks.

“If you say you are going to go by consumption, you are going to charge the VAT of the 200 trucks to Maiduguri. But in reality, at the point of distribution, he would now tell me to bring only 10 trucks to Maiduguri.

“The rest of that, he is going to start distributing them from Ilorin all the way to Sokoto. This will make it difficult for you to understand consumption.

“If you say it is at the point of derivation, then all the corporate headquarters that collected for the 200 trucks are in Lagos. Which means I pay in Lagos. Whichever way you pick, you are going into default.”

Recall that on October 13, Tinubu asked the national assembly to consider and pass four tax reform bills.

The proposed legislations are the Nigeria tax bill, tax administration bill, and joint revenue board establishment bill.

Subsequently, the Northern States Governors Forum (NSGF), representing 19 northern states, collectively opposed the tax amendment bills.

In a communiqué released after a meeting, the northern governors rejected the proposed shift to a derivation-based model for the distribution of VAT.

On October 29, Sule said that the proposed legislations on the sharing formula of VAT based on the derivation model is “unfair” to the northern region.