The Northern Governors’ Forum says they are unhappy with President Bola Tinubu’s proposed tax policy, which is based on a derivation principle.
According to this principle, states would receive tax revenue in proportion to what they contribute to the national tax purse.
While this policy has not yet become law, President Bola Tinubu has requested that the National Assembly amend existing tax laws to implement a derivation-based VAT distribution.
This change would benefit states that generate higher tax revenues while providing less to states that generate lower revenues.
At a meeting held on Monday at the Kaduna State Government House, the Northern Governors’ Forum, led by Gombe State Governor Mohammed Yahaya, rejected the proposal outright, describing it as a policy designed to “shortchange” the northern region.
The governors argued that several multinational companies, which pay significant portions of taxes, are not based in the southern part of the country.
In a communique read on behalf of his colleagues, Governor Yahaya expressed “dismay at the content of the recent Tax Reform Bill forwarded to the National Assembly, which, particularly in its proposed amendment for a derivation-based distribution of VAT, runs counter to the interests of the North and other sub-national entities.”
The Forum urged members of the National Assembly to unanimously reject the proposed Tax Amendments, warning that the changes “could jeopardize the well-being of our people.”
Governed by Sharia Law
Most northern states operate under Sharia law, which prohibits the sale and consumption of alcohol within their jurisdictions.
Their Sharia policy has led to the frequent destruction of alcoholic beverages in these states, costing business owners billions of naira in losses.
In February 2022, the Kano Hisbah Board destroyed nearly four million bottles of beer using bulldozers in a crackdown on alcohol in the northern Nigeria.
In 2021, Rivers State Governor Nyesom Wike said states that destroy alcoholic beverages didn’t have the moral right to continue to enjoy the dividends of Rivers state Value Added Tax (VAT).
Wike, now the FCT Minister, had gotten a legal victory over the Federal Inland Revenue Service (FIRS), to collect VAT from business in Rivers.
Calls have emerged from the Southern part suggesting that the North should not benefit from taxes collected from alcohol sales in other states where alcohol is not banned.
However, as Tinubu moves forward with his tax reform agenda, Northern governors are urging lawmakers—many of whom are from northern states—not to pass any legislation that could marginalize the North
