The League of Northern Democrats (LND), that has been controlled by former Governor of Kano State, Senator Ibrahim Shekarau, refused to accept the idea of derivation formula planned in the tax reform discussions.He conplained bitterly that the idea would cause regional inequality if not clearly defined.The spokesman of LND,Dr Ladan Salihu, stated this on Sunday.
Afterwards,the league, praised the Nigeria Governors’ Forum (NGF) for endorsing a revised Value Added Tax (VAT) sharing formula of 50 per cent based on equality, 30 per cent on derivation, and 20 per cent on population.
FCNN said that the tax reform bills have caused a lot of debate nationwide , with majority of the push backs coming from the North.
Many governors and some leaders from the region contested that the tax reform bills, which also led to open confrontations in both chambers of the National Assembly, was meant to favour Lagos State and other narrow interests, as well as to shortchange the North.
In it’s statement, the group said, “LND welcomes the forum’s (NGF) recognition of the need for comprehensive tax reforms to modernize Nigeria’s fiscal system, enhance stability and align with global best practices. However, there is one critical issue overlooked in the Governors Forum’s communique that requires urgent resolution before LND can fully endorse the reforms: the definition of ‘derivation’.
“For any tax reform to achieve equity, fairness and sustainability, ‘derivation’ must be clearly and unambiguously defined to mean the place of consumption. This was a cornerstone of LND’s recommendations and remains non-negotiable.
“Without this definition, the proposed increase of derivation to 30% risks perpetuating regional inequalities, where certain areas benefit disproportionately 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,” Salihu said.
He said the LND is convinced that tying derivation to the area of consumption will ensure that resources are distributed based on actual economic activity and contribution and that this approach not only aligns with the realities of modern taxation but also promotes accountability and incentivizes regions to develop their economic capacities.
He said, “Until this critical issue is resolved, LND will withhold its full support for the tax reform agenda. We urge the NGF and the Presidential Tax Reform Committee to incorporate this fundamental clarification, and all other amendments made by the LND, including the inheritance tax clause, into their framework to guarantee that the reforms deliver equitable and beneficial outcomes for all Nigerians.”
