League of Northern Democrats Commends Tax Reform Initiative, Calls for Clarity on “Derivation”

By Muhammad Sani Muazu

The League of Northern Democrats (LND) has expressed its support for the recent communique issued by the Nigeria Governors’ Forum (NGF) following their meeting with the Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr. Taiwo Oyedele, on January 16, 2025. The NGF’s endorsement of a revised Value Added Tax (VAT) sharing formula—50% based on equality, 30% on derivation, and 20% on population—was noted to align significantly with the recommendations of LND’s Technical Committee on Tax and Fiscal Reforms, presented in December 2024.

In a statement signed by its spokesperson, Dr. Ladan Salihu, the LND commended the forum’s recognition of the urgent need for comprehensive tax reforms aimed at modernizing Nigeria’s fiscal system, enhancing stability, and aligning with global best practices. However, the LND raised critical concerns about the lack of a clear definition of “derivation” in the NGF’s communique, stressing that this issue must be addressed to ensure the reforms achieve equity and fairness.

“For any tax reform to achieve equity, fairness, and sustainability, ‘derivation’ must be clearly and unambiguously defined to mean the place of consumption,” the statement read. The LND emphasized that without this clarification, the proposed 30% allocation based on derivation could exacerbate regional inequalities, disproportionately benefiting certain areas at the expense of others, particularly the North.

The LND argued that tying derivation to the place of consumption would ensure a fair distribution of resources based on actual economic activity and contributions. This approach, they noted, aligns with modern taxation practices, promotes accountability, and incentivizes regions to develop their economic capacities.

While withholding full support for the tax reform agenda until the issue is resolved, the LND urged the NGF and the Presidential Fiscal Policy and Tax Reforms Committee to incorporate this clarification into the framework, alongside other recommendations from the LND, including the proposed inheritance tax clause.

“As stakeholders committed to regional and national development, the League of Northern Democrats reiterates its readiness to work collaboratively with all parties to ensure these reforms foster fairness, growth, and prosperity for all Nigerians,” Dr. Salihu concluded.

The LND’s stance highlights the critical need for clarity and inclusivity in the ongoing fiscal reform process, ensuring that the outcomes are equitable and beneficial across all regions of the country.