Going by the provisions of the proposed tax reform bills, the 36 states of the federation, and the Federal Capital Territory will receive an additional N976bn in funding from the federation account over the next three years, Saturday PUNCH findings have revealed.
Since its presentation to the National Assembly in October 2024 by President Bola Tinubu, the bills have sparked heated controversy involving state governors, public institutions, and other relevant stakeholders.
During a meeting on October 28, governors of the 19 northern states under the platform of the Northern Governors Forum had rejected the new derivation-based model for Value Added Tax distribution outlined in the tax reform bills.
They argued that the proposed changes could adversely affect their regions’ financial autonomy.
Three days later, the National Economic Council, which includes all 36 state governors called on the president to withdraw the bills from the National Assembly for comprehensive consultations.
However, in a tweet shared on Wednesday, a Senior Special Assistant on Media and Publicity to the President, Temitope Ajayi, argued that the tax reform bills would benefit the states by providing them with more funds from the Federation Account.
He explained that under the provisions of the bills, “the Federal Government will cede five percent of its current 15 percent share of the Value-Added Tax revenue to the states.”
Ajayi also added that the bill would “transfer income from the Electronic Money Transfer levy exclusively to the states as part of stamp duties.”
According to the National Medium-Term Expenditure Framework and Fiscal Strategy Paper for 2025-2027, about N6.95tn is projected to accrue to the VAT pool in 2025. Of this, the Federal Government’s VAT share is N1.04tn, while the states’ share is N3.4tn.
Based on Ajayi’s disclosure, the states are expected to receive an additional N52bn next year, which represents five per cent of the FG’s share of the VAT pool.
In 2026 and 2027, the FG’s VAT share is projected to be N1.206tn and N1.364tn, respectively, with five per cent of both amounts totalling N128.5bn.
Over the next three years, the EMTL of the federation is projected to be N228.85bn, N263.67bn, and N303.47bn, respectively, totaling N795.99bn.
This implies that the states will receive an additional N976bn from FAAC if the tax reform bills are fully implemented.