The League of Northern Democrats (LND) has expressed reservations about the recently proposed tax reforms endorsed by the Nigeria Governors? Forum (NGF), citing concerns over the definition of ?derivation? in the revised Value Added Tax (VAT) sharing formula.

In a press release issued by its spokesperson, Dr. Ladan Salihu, on Saturday, the LND acknowledged the NGF?s endorsement of a new VAT sharing formula ? 50% based on equality, 30% based on derivation, and 20% based on population.

While commending the Governors? Forum and the Presidential Fiscal Policy and Tax Reforms Committee for their efforts to modernize Nigeria?s tax system, the LND stated that it cannot fully support the reforms unless the term ?derivation? is clearly defined as the ?place of consumption.?

The LND argued that defining derivation as the place of consumption is essential to ensure equity, fairness, and sustainability in the proposed tax system.

According to the group, failure to adopt this definition risks perpetuating regional inequalities, as certain areas would disproportionately benefit at the expense of others, particularly the North.

?The absence of clarity on this matter undermines the principles of equity that the reform is said to seek to achieve in the first place,? the statement read.

The LND stressed that tying derivation to consumption aligns with modern taxation practices, promotes accountability, and incentivizes regions to boost their economic activities.

The LND also highlighted that the NGF?s proposal aligns substantially with its Technical Committee on Tax and Fiscal Reforms? recommendations, presented in December 2024.

However, the group emphasized that this alignment cannot be considered complete without resolving the derivation issue and incorporating its additional recommendations, including a clause on inheritance tax.

The League reiterated its willingness to collaborate with stakeholders to ensure the success of the reforms but maintained that its support hinges on resolving these critical issues.

?Until this critical issue is resolved, LND will withhold its full support for the tax reform agenda,? the statement concluded. (Nigerian Tribune)

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