Nigeria’s House of Representatives has approved a revised Value Added Tax (VAT) sharing formula, allocating 55% to states and 35% to local government councils.
The decision followed the adoption of a report by the House Committee on Finance, which reviewed tax bills submitted by President Bola Tinubu in October 2024.
Committee Chairman, Abiodun Faleke, presented the report, detailing a public hearing and extensive review process.
The new VAT distribution structure, outlined in Section 77 of the report, will see states receive 50% of revenue equally, 20% based on population, and 30% based on consumption. Local governments will receive 35% of VAT revenue under a similar formula.
The revised formula emphasises the “actual place of consumption,” regardless of where tax returns are filed.
Other key recommendations include:
- Extending the timeline for issuing Taxpayer Identification Numbers (TINs) from two to five working days.
- Reducing the timeframe for companies ceasing operations to file tax returns from six to three months.
- Requiring presidential or gubernatorial tax remissions to be approved by the National Assembly or state Houses of Assembly.
- Mandating that presidential tax exemptions be approved by the National Assembly.
- Authorising the Accountant General’s office to deduct unremitted taxes from government agencies.
- Appointing six Executive Directors to the Federal Inland Revenue Service (FIRS) Board, representing each geopolitical zone.
- Funding the Tax Appeal Tribunal from the Consolidated Revenue Fund.
- Maintaining a 30% corporate income tax rate, with a 25% rate for priority sectors.
- Adjusting the distribution of the Development Levy to various funds.
The bills are expected to undergo a final reading before being passed into law next week.
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