The recent tax reform endorsed by the Nigeria Governors' Forum (NGF) is aimed at promoting equitable resource distribution among states. The revised Value Added Tax (VAT) sharing formula allocates funds based on three key criteria:
- *Equality (50%)*: Ensuring each state receives an equal share, regardless of its economic performance.
- *Derivation (30%)*: Allocating funds based on the state's contribution to the national economy.
- *Population (20%)*: Distributing funds according to each state's population size.
This new formula is designed to replace the existing one, which has been criticized for being unfair. The NGF has also agreed to maintain the current VAT rate and exempt essential goods from VAT to safeguard citizens' welfare and promote economic stability.
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