The national government (Tinubu administration) introduced several tax reform bills in 2024, the Nigeria Tax Bill, the Tax Administration Bill, the Nigeria Revenue Service Establishment Bill, and the Joint Revenue Board Establishment Bill.
Part of the reforms include changes to how Value Added Tax (VAT) is collected and shared among federal, state, and local governments; greater centralisation of tax administration powers (for example, shifting more assessment/collection duties to a central revenue authority) .
Many states, legal experts, public commentators assert the reforms reduce fiscal autonomy of states and local governments.
A chief complaint that the Revenue-collection powers that used to rest with state or local government agencies are being reallocated to the National Revenue Service (or similar federal bodies). This is seen as a slide toward over-centralisation.
The proposed VAT changes are especially contentious: shifting VAT “contribution-based” shares (i.e. more to states that generate more VAT) and reducing population or equal-distribution bases. Critics argue this disproportionately disadvantages less economically vibrant or poorer states, many of which are in northern Nigeria.
Some argue that centralising collection or harmonising tax administration might improve efficiency, reduce duplication, avoid tax “leakages” and improve compliance.
Edwin Clark, a senior statesman, emphasises improving collection mechanisms and remittance rather than focusing solely on “fairness” of revenue sharing. The logic is that states can only share what is collected so boosting collection is key.
Fiscal Imbalance: If richer states (with more economic activities, industries, higher VAT generation) end up getting much more of the shared revenue, poorer states might struggle even more to provide basic services unless there is a strong equalisation/redistribution mechanism.
The Weakened Local Government areas (LGAs) may lose tax bases or collection powers, which might make them overly dependent on state/federal allocations. That can reduce accountability and responsiveness to local needs.
The Political Tension is regional distrust could grow states may feel the central government is encroaching on their constitutionally-guaranteed functions. There is already visible opposition, particularly from governors of states concerned with fiscal autonomy.
Potential Constitutional Challenges: Some critics say parts of the reform bills might violate constitutional provisions around the powers of states and LGAs concerning taxation, revenue generation, and distribution.
Federalism generally implies a division of powers and resources among the central and sub-national governments. Key features include:
The Autonomy means that the states should have some independent authority over taxation and expenditure.
Equity & Redistribution is ensuring all regions can function, even if they don’t generate large revenues.
Subsidiarity / Local Accountability is to make a decisions (including revenue raising) made as close as possible to the people affected.
Diminishes autonomy by giving more collecting/assessing power to the federal level.
Threatens equity if revenue sharing becomes heavily skewed towards wealthier states.
Undermines local responsibility and encourages dependence. States or LGAs may stop developing their own tax bases or innovations if centralised bodies take over too much.
Post a Comment
Leave a Reply