RMAFC Rejects Proposed Changes to VAT Sharing Formula in Tax Reform Bills

RMAFC Rejects Proposed Changes to VAT Sharing Formula in Tax Reform Bills

By Fly Cable News

The Revenue Mobilization Allocation and Fiscal Commission (RMAFC) has opposed the proposed amendments to the Value Added Tax (VAT) sharing formula outlined in the Tax Reform Bills currently before the National Assembly. In a memorandum to lawmakers, the RMAFC emphasized that it is the only constitutionally authorized body to determine revenue-sharing formulas, including VAT distribution, and warned that altering this process could be unconstitutional and inappropriate.

One of the proposed bills seeks to reduce the federal government’s VAT share from 15% to 10%, leaving 90% for states and local governments, a shift from the current distribution: 50% to states, 35% to local governments, and 15% to the federal government. The RMAFC cautioned that such changes could undermine national unity and fairness.

Referencing Section 162(2) of the 1999 Constitution, the commission argued that bypassing its authority in determining VAT allocation would directly contradict the Constitution. The RMAFC also raised concerns over the complexities of VAT as a consumption tax, noting the need for a balanced approach, given the contrasting claims of states like Lagos (as a collection point) and Kano (as a consumer hub).

Despite its opposition to the VAT proposal, the RMAFC praised President Bola Ahmed Tinubu’s tax reform initiatives, expressing confidence that the reforms would boost Nigeria’s revenue base and improve fiscal stability by tapping into underutilized sources and enhancing the revenue-to-GDP ratio. The commission reiterated its commitment to working on policies that strengthen the country’s fiscal framework while upholding constitutional principles.