The League of Northern Democrats (LND), led by former Kano State Governor Senator Ibrahim Shekarau, has taken a stand against the proposed derivation formula in the ongoing tax reform discussions. This rejection comes with a warning that the formula, if not clearly defined, could exacerbate regional inequality.
Dr. Ladan Salihu, spokesperson for LND, made this announcement in a statement released on Sunday. The group expressed appreciation for the Nigeria Governors’ Forum (NGF) for backing a revised Value Added Tax (VAT) sharing formula. This new formula allocates 50% based on equality, 30% on derivation, and 20% on population.
### Heated Debates and Pushback
The tax reform bills have sparked intense debates nationwide, with a significant portion of opposition originating from the North. Many governors and leaders from the region have contested these bills, leading to confrontations in both chambers of the National Assembly. Their argument revolves around the belief that the reforms are skewed in favor of Lagos State and other specific interests while disadvantaging the North.
### The Essence of Clarity
In their statement, LND emphasized the necessity for a clear and unambiguous definition of ‘derivation’ to ensure fairness, equity, and sustainability in tax reforms. They stress that ‘derivation’ should be linked to the place of consumption to prevent regional inequalities from persisting. Without this clarity, the proposed increase in derivation to 30% could lead to certain areas benefiting excessively at the expense of others, particularly in the North.
### A Call for Resolution
LND firmly believes that tying derivation to consumption areas will promote fair distribution of resources based on economic activity and contribution. This approach aligns with modern taxation practices, encourages accountability, and motivates regions to enhance their economic capabilities. Until this critical issue is addressed, LND will withhold its full support for the tax reform agenda, urging the NGF and the Presidential Tax Reform Committee to incorporate their proposed amendments into the framework.
As the tax reform discussions continue, the need for clarity and inclusivity remains paramount to ensure that all Nigerians benefit equitably from the reforms.
