- Proposed VAT changes could shift the balance between federal and state governments.
- What the reforms mean for businesses and the everyday Nigerian.
In recent weeks, the Nigerian Senate has been deliberating President Bola Tinubu’s tax reform bills, which could significantly reshape the country’s financial landscape. The reforms aim to simplify tax collection, ensure fairer resource distribution, and promote state self-reliance.
What the Tax Reform Proposes
The proposed reforms address how the federal government collects and shares revenue, such as VAT (Value Added Tax). Key highlights include:
- Increasing states’ share of VAT revenue from 15% to 55%.
- Removing redundant taxes to ease the burden on businesses.
- Exempting people earning below the minimum wage from taxation.
The goal is to create a simpler, more equitable system that benefits citizens and businesses alike.
Full Resource Control: A Hypothetical Future
Some argue for a system where states control 100% of their resources, often referred to as “resource control.” This approach would allow states to keep and manage revenues generated within their boundaries.
- Benefits:
- States could benefit from their unique resources, like oil (Rivers, Delta), agriculture (Kebbi, Plateau), or industries (Lagos).
- Encourages competition and better economic management.
- Promotes local accountability by reducing dependence on federal allocations.
- Challenges:
- States without major resources, like Borno or Yobe, may struggle with limited funding.
- Risk of uneven development and potential for mismanagement at the state level.
- Possibility of increased local taxes to cover funding gaps.
What Does This Mean for Nigerians?
For citizens, the reforms could translate into better infrastructure and services in resource-rich states, provided funds are managed responsibly. However, states with fewer resources might face higher taxes or reduced services. Overall, the changes place greater responsibility on state governments to ensure development and economic growth.
While the reforms don’t yet grant states full control, they represent a significant step toward fiscal autonomy. Ultimately, holding leaders accountable—both at the federal and state levels—will be essential to realizing the benefits of these reforms.
