Tinubu’s tax reform bills: FIRS reveals three states receiving 70% VAT in Nigeria

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According to Zacch Adedeji, the chairman of the Federal Inland Revenue Service (FIRS), just three states benefit from the present tax regime, receiving over 70% of the Value Added Tax (VAT), while the remaining states only receive a margin percentage.

Adedeji made this revelation on Monday at the House of Representatives in Abuja during the public hearing on President Bola Ahmed Tinubu’s tax reform measures.

The dispute over the tax reform bills that were sent to the National Assembly in early October 2024 prompted the revenue chief to speak.

Remember that the National Economic Council and Northern Governors had rejected the bill due to the VAT derivative model, which concentrated on the location of production and consumption from the existing system based on the state where VAT is remitted.

But during the National Assembly’s interactive session, Adedeji clarified that the FCT, Lagos, and Rivers—the states with the majority of corporate headquarters—benefit most from the current VAT-sharing arrangement.

He added that by implementing a derivation principle model, the proposed reforms seek to rectify this imbalance and provide a more equitable allocation of VAT income to all states, irrespective of their economic standing.

He asserts that regardless of the health of Nigeria’s economy, all states will gain from the tax reform proposals currently before Congress.

“Today, I just reeled out of the data on this month of October sharing. I just signed it in on Friday. Today, Lagos will take 42 percent of the VAT. Rivers will take 16 percent. Oyo State will take 5.2 percent, and FCT will take 9 percent. If you take those 3 states, they are taking more than 70 percent of the tax.

“Why? Because those are the places where the head offices of those places are. And we know that 70 percent of consumption is not happening in those three states.

“So in whatever way you look at it, there is no way every other state apart from Lagos, Rivers, and FCT benefits from the proposed tax bill.

“If you look at it, MTN contributed the most, but because MTN headquarters are in Lagos, all the allocation from MTN is being accrued to Lagos. So, when this bill is passed, all states will benefit irrespective of the kind of economic situation that is happening in Nigeria,” Adedeji said.

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