Why Governors Endorsed Tax Reform Bills

Indications emerged on Sunday why the 36 state governors reconsidered their initial rejection of the tax reform bills pending before the National Assembly.

The governors, through the National Economic Council (NEC), had, late last year, called on President Bola Tinubu to withdraw the bills to allow for broader consultations.

However, the governors on Thursday unanimously endorsed a revised version of the bills, specifically the derivation principle in the sharing of value-added tax (VAT).

An investigation by THE WHISTLER revealed that the initial rejection of the bills by the governors strained the relationship between President Tinubu and Vice President Kashim Shettima.

Sources close to the presidency said Tinubu was piqued by the open involvement of the Borno State Governor, Babagana Zulum, in a media campaign to shoot down the bills.

Zulum had warned that the bill could have devastating consequences for the Northern region and other parts of the country as well.

The governor also criticised the speed with which the bill was progressing through the legislative process, compared to the Petroleum Industry Bill, which took about 20 years to pass.

“Why the rush? The Petroleum Industry Bill took almost 20 years before it was finally passed. But this tax reform bill is being transmitted and receiving legislative attention within a week. It should be treated carefully and with caution so that even after our exit, our children will reap its benefits,” Zulum had stated.

Going specifically, the Borno governor had declared that if passed into law by the legislature as proposed by the President, only Lagos State would be the beneficiary.

But members of Tinubu’s kitchen cabinet were said to have considered Zulum’s action an affront to the president by a protege of the vice president. Having succeeded Shettima as Borno governor in 2019, Zulum was seen as fighting a proxy war for his mentor and political godfather.

Even though the president and his close allies did not openly react directly to Zulum’s criticisms, sources at the presidential villa said the governor’s action strained the relationship between the president and his deputy.

“Nigerians know the relationship between the Borno State governor and vice president just as they know the relationship between the Lagos State governor and the president. The voice of the governor of Lagos State might be taken for that of the president, who is his political godfather.

“It’s in the same way Zulum’s action could be seen as signifying Shettima’s position on any issue, rightly or wrongly. So people may not be too wrong if they say it’s a case of Esau’s hand, Jacob’s voice,” a presidential source told THE WHISTLER on Sunday.

The source further confirmed that the NEC, chaired by the vice president, had to intervene to thaw the icy relationship between Tinubu and Shettima.

“That was why the governors, on the platform of the Nigeria Governors Forum, had to review their initial position on the bills and endorse an amended version of the documents,” the source added.

The governor’s position was conveyed through a communiqué released on Thursday after a meeting with the Presidential Fiscal Policy and Tax Reform Committee in Abuja.

The communiqué, signed by the chairman of the NGF, Governor AbdulRahman Abdulrazak of Kwara State, called on the two chambers of the National Assembly to resume legislative work on the bills.

In the reviewed version that the governors endorsed, the sharing of VAT based on derivation was slashed from 60 per cent as proposed in the original bill to 30 per cent. Sharing by derivation in the extant law is 20 per cent, that is, the state where the VAT revenue is generated retains only 20 per cent.

The governors’ initial objection to the original version of the bill stemmed from the perception that raising the derivation percentage for Lagos State, which generates more than half of the entire national VAT revenue, from 20 to 60 per cent would give the state so much money compared to the other states.

Tax experts have argued that the reason for the initial rejection of the tax bills by the governors and other stakeholders was mainly because of the 60 per cent that the original bill proposed for derivation.

Why Governors Endorsed Tax Reform Bills is first published on The Whistler Newspaper