The Federal Inland Revenue Service (FIRS) has disclosed that the Value Added Tax (VAT) revenue generated by southern states in Nigeria far exceeded the amount they were allocated from the VAT pool in August 2024.

According to recent data released by the FIRS, the nationwide VAT revenue for August stood at N444.19 billion, with southern states contributing an impressive N387.06 billion.

However, despite this significant contribution, the southern states received only N149.09 billion in VAT allocation.

This contrasts sharply with the situation in ten northern states, which contributed a combined N13.69 billion but received a substantial N59.17 billion in allocations.

For instance, Zamfara State, a northern state, contributed only N432.80 million but received N5.65 billion, while Lagos State, which contributed a staggering N249.77 billion, received just N40.22 billion in return.

Nigeria’s proposed tax reform bill, introduced by the Presidential Committee on Fiscal and Tax Reform chaired by Taiwo Oyedele, has sparked widespread debate recently.

The reform bill seeks to streamline the tax system by harmonising multiple levies, unifying revenue collection processes, and integrating technology to enhance efficiency. A key proposal is the adoption of the derivation principle for distributing VAT revenues.

Under this principle, VAT revenue would be distributed based on where goods and services are consumed rather than pooled centrally and redistributed.

The Chairman of the Federal Inland Revenue Service (FIRS), Zacch Adedeji, clarified the rationale for this shift, emphasising that VAT is fundamentally a consumption tax.

While the proposed reforms aim to ensure fairer revenue distribution, they have faced strong opposition from some northern stakeholders, who argue that the bill undermines the interests of the North and other sub-national entities.

Tribune