By Emma Ujah, Abuja Bureau Chief

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

In a memorandum submitted to the legislature, RMAFC emphasized that it is the only body constitutionally mandated to determine revenue-sharing formulas, including VAT. It described any deviation from its role as both inappropriate and potentially unconstitutional.

One of the bills under consideration reduces the federal government’s VAT share from 15% to 10%, leaving the remaining 90% for states and local governments. Currently, VAT revenue is distributed as follows:

50% to states

35% to local governments

15% to the federal government

RMAFC warned that arbitrary changes to these percentages without its input undermine its constitutional authority and could disrupt national unity and equity.

The commission cited Section 162(2) of the 1999 Constitution (as amended), which empowers RMAFC to design revenue-sharing formulas based on fairness and justice.

“Any attempt to bypass this constitutional process by enacting a new VAT Act that assumes this responsibility would be a direct contravention of the Constitution,” the memorandum stated.

RMAFC also highlighted the complexities of VAT as a consumption tax. It noted that while Lagos, as a collection point, might argue for derivation rights, Kano, as a consumer hub, could make a similar claim, reflecting the need for a balanced approach.

Despite its opposition to the VAT formula change, RMAFC commended President Bola Ahmed Tinubu’s innovative revenue-raising initiatives.

“The Commission appreciates the submission of the four proposed bills, which reflect the President’s visionary leadership in enhancing fiscal stability,” the statement read.

RMAFC expressed confidence that the reforms would expand Nigeria’s revenue base by integrating untapped sources, including contributions from the informal sector, and improving the revenue-to-GDP ratio to align with global fiscal standards.

The commission concluded by reiterating its readiness to collaborate on policies that strengthen Nigeria’s fiscal framework while respecting constitutional provisions.