Governor Abdullahi Sule of Nasarawa State has praised the tax reforms introduced by President Bola Ahmed Tinubu. He acknowledged the efforts made by the President to enhance the economy through these reforms. However, Sule emphasized that Northern governors have specific concerns regarding the removal of Value Added Tax (VAT) from the federation allocation.
During a formal launch of innovative tax digital codes by the Nasarawa State Board of Internal Revenue Services (NSBIRS) at the Government House in Lafia, the governor reiterated the stance of his Northern counterparts. He made it clear that their objection is solely focused on the VAT issue and not on the broader tax reforms being proposed.
Sule articulated that while there are many positive aspects of the tax reforms, the removal of VAT from the FAAC is problematic. He explained that taking VAT out of the allocation would significantly affect revenue distribution among states. This concern highlights the complexities involved in the proposed tax changes.
He pointed out that removing VAT from the FAAC would mean that a substantial portion of revenue—60%—would be directed toward derivation. This shift, according to Sule, could create financial challenges for states that rely heavily on VAT revenue for their budgets.
The governor elaborated on the implications of the proposed changes by drawing from his extensive experience in the business sector. Having previously served as the managing director of major companies, he understands the intricacies of tax payments and consumption patterns.
Sule emphasized that if VAT is charged based on consumption, it could lead to misunderstandings about how taxes are applied. He mentioned that many people lack clarity on the concept of consumption tax, which could complicate matters further for businesses and consumers alike.
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To illustrate his point, Sule shared an example from his time as the managing director of African Petroleum. He recounted a scenario where a customer from Maiduguri would order a significant quantity of trucks, paying for all of them upfront. If VAT were applied based on consumption, it would inaccurately reflect the actual distribution and consumption of goods.
He argued that such a system could lead to confusion and unfair taxation practices, as the point of consumption does not always align with the point of sale. This discrepancy could disproportionately affect businesses and consumers in various regions.
In conclusion, while Governor Sule supports many aspects of the tax reforms proposed by President Tinubu, he strongly advocates for a reconsideration of the VAT removal from the federation allocation. He believes that a more nuanced approach is necessary to ensure that the tax system remains fair and equitable for all states.
