The Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) has raised serious concerns over the constitutional validity of the Value Added Tax (VAT) sharing formula proposed in the newly introduced tax reform bills. The Commission, which is constitutionally mandated to determine the revenue-sharing formula among the federal, state, and local governments, has warned that the proposed changes could violate the provisions of the 1999 Constitution (as amended).
At the heart of the RMAFC's objection is Section 162(2) of the Constitution, which grants the Commission the exclusive authority to propose how federal, state, and local governments share revenue. The Commission argues that any attempt to amend the VAT sharing formula without its involvement constitutes a breach of this constitutional responsibility and may disrupt the carefully structured system of revenue distribution established under the law.
The proposed tax reform bills, currently being discussed in the National Assembly, suggest that the federal government will receive 10% of the VAT collected, with the remaining 90% divided between the states and local governments. This formula has sparked controversy, as critics argue that such a significant allocation to the federal government could undermine the financial autonomy of the states and increase tensions in the already strained federal structure.
The RMAFC has cautioned that the proposed formula lacks the input of the Commission, thereby raising concerns about its fairness and constitutional compliance. The Commission believes that these proposals could lead to conflicts between states, as well as between states and local governments, over what constitutes an equitable share of VAT revenue. According to the RMAFC, any modifications to the VAT allocation system should be in alignment with its established role and the constitutional framework that governs fiscal matters in Nigeria.
The Commission has recommended that the federal government and the National Assembly consult with it before finalizing any changes to the VAT sharing formula. It also urged that a formula developed by the RMAFC, which takes into account the nature of VAT as a consumption tax, be adopted. The RMAFC's proposed formula is designed to ensure a fair and equitable distribution of VAT revenue, reflecting the consumption patterns of the various states and local governments.
Additionally, the RMAFC has emphasized the importance of transparency and accuracy in the collection of VAT, calling for the implementation of electronic invoicing and transaction monitoring systems. These measures, the Commission suggests, would help link VAT collections to the actual consumption activities in different regions, ensuring that each state and local government receives its fair share based on where the tax is actually generated.
In its submission, the RMAFC stressed the need for a balanced approach to tax reforms, one that ensures fairness, transparency, and respect for constitutional provisions. The Commission's stance has reignited the debate over Nigeria's fiscal federalism, with many observers calling for a more inclusive and consultative approach to tax reforms that involve all stakeholders in the decision-making process.
As the National Assembly moves forward with deliberations on the tax reform bills, the RMAFC's objections highlight the complex legal and constitutional considerations that must be taken into account when altering the nation's revenue-sharing structure. The Commission's warning serves as a reminder of the need to adhere to the principles of fairness and justice in Nigeria's fiscal policies, ensuring that the rights of states and local governments are not undermined in the pursuit of broader economic reforms.
The outcome of this ongoing debate will have significant implications for the future of Nigeria's revenue distribution system, potentially reshaping the financial landscape for years to come. With the 2025 general elections approaching, the government's ability to navigate this issue could play a crucial role in maintaining harmony among the various levels of government and preserving the integrity of the country's constitutional framework.
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