Akintunde Oyebode, the Ekiti State Commissioner for Finance and Chair of the Forum of State Commissioners for Finance in Nigeria, criticizes the Revenue Mobilization Allocation and Fiscal Commission (RMAFC) for not taking a leading role in the ongoing discussions on the controversial tax reform bills.
In an interview on Arise News, Oyebode stresses that the RMAFC, as the constitutional body responsible for overseeing revenue distribution, should be at the forefront of the conversation regarding these bills. He argues that the RMAFC should be more proactive in addressing revenue distribution, methodology, and indices, rather than leaving the issue to an ad hoc committee.
“The Revenue Mobilization Allocation and Fiscal Commission should be leading this conversation because constitutionally, they are the body that speaks to revenue distribution, the indices, the methodology, etc. They should take a more prominent position,” Oyebode says.
Regarding the tax reform bills, which have passed a second reading in the Senate, Oyebode acknowledges that Nigeria’s tax laws are outdated, as the country still operates with a system inherited from British colonial rule. He emphasizes that the conversation should focus on substantive issues, such as the shift from a sales tax to a true Value Added Tax (VAT), and should avoid ethnic or regional bias.
Oyebode explains that the current tax system in Nigeria functions more like a sales tax, where the full amount is charged at each level of the transaction. He advocates for a VAT system, which would reduce overall tax costs, even if the VAT rate increases, as long as it is managed properly. He highlights that exemptions in the proposed tax bills, such as those for food and healthcare, are important and will positively impact the quality of life.
“The goal is to reduce the number of taxable items, enhance transparency, and bring more people into the tax net. Many companies currently charge VAT but do not remit it, so improving compliance is a central focus of these reforms,” Oyebode adds.
Oyebode also supports the proposed reduction in the Companies Income Tax (CIT) from 30% to 25%. He believes this will make Nigeria more attractive to investors. “Nigeria is a large and competitive market, and by reducing CIT, we can offer a more attractive tax environment, making the country more appealing for investment,” he explains.
While Oyebode is generally supportive of the tax reforms, he acknowledges concerns about the trust surrounding the process. He suggests that the Presidential Committee on Fiscal Policy and Tax Reforms could have done more to involve key stakeholders, including the Governors’ Forum, the Commissioners’ Forum, and the Joint Tax Board, before presenting the bills to the National Assembly. He believes wider consultation could have helped address concerns and foster better understanding of the proposed changes.
The tax reform bills under review in the National Assembly propose a derivation principle for allocating VAT revenues between the federal government and sub-national entities, which has sparked controversy. Some northern elites have raised concerns that the new allocation model could disadvantage their region.
Currently, VAT revenue distribution under Section 40 of the VAT Act allocates 15% to the Federal Government, 50% to the States and Federal Capital Territory (FCT), and 35% to Local Governments, with a 20% derivation principle applied to states and local governments. The distribution is also influenced by equality and population factors, with 50% of the allocation based on equality and 30% based on population.
Additionally, the Federal Inland Revenue Service (FIRS) receives a 4% collection fee, while the Nigeria Customs Service (NCS) gets 2% of VAT revenue from imports.
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