By Emma Ujah, Abuja Bureau Chief

The Revenue Mobilization Allocation and Fiscal Commission (RMAFC) has expressed its opposition to the proposed changes to the Value Added Tax (VAT) sharing formula contained in the Tax Reform Bills before the National Assembly.

In a memorandum submitted to the lawmakers, the RMAFC maintained that it is the sole body constitutionally mandated to determine revenue-sharing formulas, including VAT.

The commission stated: “Only the RMAFC has the mandate to produce formulae for sharing revenues, including VAT. Any deviation from this constitutionally backed process is both inappropriate and potentially unconstitutional.

“Such deviations risk violating constitutional provisions and undermining the Commission’s role as the impartial arbiter of revenue allocation in Nigeria.”

The bills propose altering the current VAT revenue-sharing formula, reducing the federal government’s share from 15% to 10% while allocating the remaining 90% to states and local governments.

Currently, VAT revenue is distributed as follows:

50% to States

35% to Local Governments

15% to the Federal Government

RMAFC’s Concerns

The RMAFC highlighted the constitutional implications of bypassing its authority, emphasizing the need for fairness and equity in revenue allocation:

“Section 162 (2) of the 1999 Constitution empowers the RMAFC to determine the formula for equitable revenue sharing among the three tiers of government.”

The commission argued that arbitrary percentages could create perceptions of favoritism, particularly toward states with higher corporate activities or VAT collections, neglecting less developed regions and threatening national unity.

The memorandum noted: “Lagos, as the point of collection, could argue for derivation rights, while Kano, as the consumer’s residence and point of use, could also claim rights since VAT is ultimately borne by the final consumer.”

Commendation for Revenue Reforms

Despite opposing the VAT formula changes, the RMAFC commended President Bola Ahmed Tinubu’s innovative revenue mobilization efforts.

The commission stated: “The proposed bills reflect the President’s visionary leadership in enhancing Nigeria’s fiscal stability. They will significantly bolster domestic revenue mobilization, integrate untapped sources, and improve Nigeria’s revenue-to-GDP ratio, enhancing fiscal performance.”

The RMAFC emphasized its readiness to collaborate on reforms while preserving its constitutional role as the arbiter of revenue-sharing formulas.