Tax Reform: Oyedele Expresses Frustration as Beneficiaries Turn Against the Proposal
Taiwo Oyedele, the Chairman of the Presidential Tax Reform Committee, expressed his disappointment over the rejection of the tax reform bills by northern governors.
Speaking with newsmen on Wednesday, Oyedele acknowledged that the Federal Government had not anticipated such opposition from the northern states, expecting the resistance to come primarily from Lagos and Rivers states instead as he noted that the issue of VAT derivation, in particular, has become a point of contention, as it differs from oil and gas derivation, which is production-based.
Oyedele highlighted that the VAT derivation issue is sensitive for many states because it involves consumption rather than production. He explained that, unlike crude oil, which is derived from specific production areas, VAT is a consumption tax that applies universally across the country.
Therefore, if VAT is shared based on derivation, every state, regardless of its production capacity, would benefit from it, which creates disparities in the distribution model that some states find problematic.
Furthermore, Oyedele clarified that the government’s proposal regarding tax distribution aligns with the country’s Constitution. He pointed out that Section 163 of the Constitution specifically addresses the issue of stamp duty and its distribution based on derivation. Oyedele emphasized that the government’s proposal is not foreign to the Constitution, asserting that recognizing where taxes are generated is essential to ensuring fairness in the system and preventing potential legal challenges, such as one from a state seeking a Supreme Court ruling.
In conclusion, Oyedele expressed frustration with the unexpected opposition from northern states, which he said contradicted the original intent of the reform. He stressed the importance of aligning tax reform efforts with the Constitution and called for a more unified approach to resolving these issues, especially as they pertain to the fair distribution of tax revenue among the states.
