President Bola Tinubu’s tax reform bills sparked intense debate in the House of Representatives, forcing lawmakers to make key amendments to address widespread concerns.
Northern stakeholders, in particular, opposed the proposed increase in VAT derivation from 20% to 60%, arguing it favoured southern states.
In response, the House adjusted the derivation to 30% while keeping the VAT rate steady at 7.5%.
Beyond VAT, legislators restructured the revenue-sharing formula.
They allocated 10% of net revenue to the federal government, 55% to states and the FCT, and 35% to local governments.
For VAT revenue, they based distribution on equality (50%), population (20%), and consumption (30%) to create a fairer system.
Stricter Rules For Free Trade Zones
Meanwhile, the House took decisive action on other controversial proposals.
Lawmakers scrapped the introduction of an inheritance tax, blocked the proposed defunding of key agencies like NASENI, TETFUND, and NITDA, and limited the President’s power to grant income tax exemptions, making National Assembly approval mandatory.
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The House also redefined tax incentives for businesses in free trade zones.
Companies must now ensure that at least 75% of their operations focus on exports to qualify for tax benefits.
Those exceeding a 25% domestic sales threshold will lose their exemptions.
Next Steps
Ultimately, the House aimed to balance competing regional interests while maintaining a sustainable tax structure.
The revised bills now await further legislative scrutiny.
