Northern governors oppose bill to share VAT based on derivation

Northern governors have rejected the Tax Reform Bill and are lobbying legislators to oppose the bill on the grounds that northern states could be “short changed” asserting that multinationals who pay high chunks of taxes are not headquartered in the North.

Gombe State Governor Mohammed Yahaya who also chairs the Northern Governors’ Forum on Monday read out a strongly-worded communiqué conveying the North’s disapproval of the tax bill that would have VAT shared according to the states in which it’s derived.

The proposed amendment sought to adopt the derivation-based VAT distribution in that the states which generate high taxes will benefit more than states which generate less.

Mr Inuwa contended that the North would receive the short end of the stick because the majority of big companies do not have their headquarters in northern states.

“Forum notes with dismay the content of the recent Tax Reform Bill that was forwarded to the National Assembly,” Mr Yahaya read at the joint meeting which was held at the Kaduna State Government House on Monday.

“The contents of the bill are against the interests of the North and other sub-nationals, especially the proposed amendment to the distribution of value-added tax to a derivative-based model.”

The Forum said that “companies remit VAT using the location of their headquarters and tax office and not where the services and goods are consumed.”

“In view of the foregoing, the Forum unanimously rejects the proposed Tax Amendments and calls on members of the National Assembly to oppose any bill that can jeopardise the well-being of our people,” the communiqué said.

States in the North are governed by the Islamic Sharia law which forbids the sale and consumption of alcohol. Thousands of crates of alcoholic drinks have continually been destroyed in the North, leaving businessmen and women to suffer tremendous losses.

Southern states have grumbled that the North which outlawed alcohol has no right to lay claim to the dividends of alcohol beverages sold in other states.

Then Rivers Governor Nyesom Wike in 2021 said “states with ethically restrictive social policies” would be adversely affected by his decision not to share the Rivers VAT.

Critics on social media have also noted that the northern governors lack the moral standing to benefit from products banned in their own states particularly with regular updates announcing the seizure and destruction of alcoholic beverages worth hundreds of millions of dollars.

Mr Inuwa pleaded with the lawmakers to be fair in implementing national policies “to ensure that no geopolitical zone is short-changed or marginalised.”

Mr Inuwa’s Gombe State, governed by Sharia law, was among the seven states with the least Internally Generated Revenue raking in N13.6 billion, records from the National Bureau of Statistics stated in 2022.