₦airaland Forum

The Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC) has opposed President Bola Ahmed Tinubu’s controversial tax reform bills currently before the National Assembly for consideration.

RMAFC, in a comprehensive nine-page memorandum signed by its chairman, Mohammed Bello Shebi, rejected the principle of derivation over the exisitng system of VAT pooling among other legal, constitutional, and technical objections to the proposed legislation.

According to the document obtained by the Economic Confidential, RMAFC emphasized that it was empowered by Section 162(2) of the 1999 Constitution (as amended) to determine the formula for equitable revenue sharing among the three tiers of government. This mandate also includes ensuring that the formula reflects principles of fairness and justice.

“The Constitution designates RMAFC as the final authority on matters of revenue allocation,” the memorandum stated.

The Commission noted that “As such, no Act of Parliament, including the VAT Act, can infringe upon this constitutional responsibility. Any such attempt would constitute a violation of the Constitution.”

It further maintained that its role as the exclusive arbiter in developing fair revenue allocation formulas must be respected, arguing that any deviation from its constitutional duties could undermine the integrity of the Commission and compromise the principles of justice in revenue sharing.

The Commission, however, called for an approach to Value Added Tax (VAT) allocation that accounts for the unique nature of VAT as a consumption tax.

Reacting to the issue of derivation, the commission noted that VAT revenue is shared among the three tiers of government with 15% for the Federal Government, 50% for the States, and 35% for Local Governments.

It added that VAT is consumption-based, unlike oil revenue, where 13 percent is returned to the producing states.

“Derivation in fiscal federalism refers to the principle where revenue generated from a specific resource or activity is allocated to the jurisdiction (state or region) where it originated. In Nigeria, this principle is constitutionally recognized, notably in the allocation of oil revenues where 13% of revenue derived from oil is returned to oil-producing states, though different from the VAT derivation. It aims to ensure fairness and economic equity by compensating resource-originating regions for their contributions to the national purse,” the memorandum added.

Continuing, the RMAFC painted a scenario where goods purchased in Lagos (as a point of VAT collection) are consumed in Kano, adding that VAT laws in Nigeria do not provide a clear mechanism to track goods post-sale to the end-use location. “Without robust systems for monitoring consumption patterns, the allocation of VAT based on derivation becomes contentious.”


While highlighting systemic issues in VAT administration, the Commission also argued that the existing VAT system prioritizes revenue pooling and formula-based distribution over strict derivation principles.

It maintained that VAT as a critical source of revenue for the three tiers of government, is a centralized tax collected for redistribution across the Federation, making it crucial to allocate revenues equitably.

Proposing a formula developed by the commission, the RMAFC said this would ensure equitable distribution among federal, state, and local governments.

“Given the dynamics, arbitrary apportioning of percentages for VAT allocation, whether vertically among the tiers of government or horizontally among states and local governments, is both impractical and unconstitutional. There might be Public perception of skewing the law to favour states with higher production or corporate presence, regardless of where consumption occurs. Ignoring the need to support less economically developed states and regions and undermining national unity and equity in revenue-sharing.”

Among several recommendations in its memorandum, the RMAFC called on the federal government to empower the Commission to finalize a VAT allocation formula in line with its constitutional mandate.

Also, it noted that this will reinforce Constitutional Mandates by ensuring that VAT allocation strictly follows RMAFC’s framework, not arbitrary provisions in the VAT Act or the proposed reform bill, while also urging dialogue among federal, state, and local governments to secure consensus on the RMAFC’s formula, thereby reducing tensions and ensuring acceptance.

The memo also cautioned legislative or executive measures that undermine RMAFC’s authority and advocates implementing systems like electronic invoicing to tag VAT collections to end-user locations, enhancing transparency and accuracy.

According to RMAFC, the proposed tax reform bills threaten national unity and constitutional harmony.

Frigga13:
They will soon sack him and replace with Yoruba man… while Igbos keep shouting southern unity

“The Constitution designates RMAFC as the final authority on matters of revenue allocation,” the memorandum stated.

The memo also cautioned legislative or executive measures that undermine RMAFC’s authority and advocates implementing systems like electronic invoicing to tag VAT collections to end-user locations, enhancing transparency and accuracy.

MadamExcellency:
Who wrote this rubbish calling an unelected bureaucrat the final arbiter?

“The Constitution designates RMAFC as the final authority on matters of revenue allocation,” the memorandum stated.

The Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC) principal officers should be suspended by the president with immediate effect.

Imagine unelected appointees taking over policy directives and the mandate of elected executive government.

CodeTemplar:
They think with their intestine and not their brains in that north. Consumption tax does mean it can't be collected from the point of production in addition to the error you pointed out. Most of those appointees are not fit to lead the association of rat poison sellers in a village market.

Frigga13:
They will soon sack him and replace with Yoruba man… while Igbos keep shouting southern unity

MadamExcellency:
An Agency of the government (unelected bureaucrats) is issuing a warning to the Executive and Legislative arms of the government against changing policies they were elected to do.

What I understand from the audacity of this writeup is that Mallam wants to force this tax legislation to a constitutional review to enable the Northeast and Northwest to defeat the proposal with their 13 States thereby denying the proposal the required 2/3rd requirements for changes in the constitution.

Bobloco:
https://tribuneonlineng.com/tax-reform-bills-rmafc-opposes-proposed-vat-sharing-formula/amp/

MadamExcellency:
Who wrote this rubbish calling an unelected bureaucrat under the Executive Government the final arbiter in a democracy?



The Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC) principal officers should be suspended by the president with immediate effect.

Imagine unelected appointees taking over policy directives and the mandate of elected executive government.

CodeTemplar:
The RMAFC man is obviously an ignoramus or tribal legend at best, parading as in intellectual. That it is called a consumption tax doesn't mean it is meant to serve the consumer or go to the consumer directly in anyway. It can still be collected at value addition location and reshared in Abuja, which is what Tinubu has done here. Let the ignoramus tell us who collects the VAT for good consumed outside Nigeria but within ECOWAS if the tax is for the consumer as they assume here.

It is a tax that should compensate whoever shoulders the burden of production or value-addition. It will be harsh to allow Lagos poach investors, create enabling environment, lost their land, culture, values to foreigners, suffer environmental degradation, provide supporting infrastructure like road, power, security and more, then you treat them equal with where the good are consumed because the textbook says VAT is a consumption (based) tax. It is collected from the consumer for consuming the value added unto the raw input but never meant for the consumer or her location.

It is like saying tolls collected in Kano for a road should go to Lagos or Rivers because the final destination of some of the passengers include Lagos and Rivers. The road is a service and is provided by Kano so why reward the destination of the passenger? What about passengers who end up in Ghana or Cameroon?

If we use this logic of the foolish and greedy RMAFC boss, states may be forced to collect it forcefully like that of a tolled road that serves interstate traffic and there will be chaos and rip offs because they will charge far higher than the flat rate FG is enforcing.

VAT is best managed centrally and redistributed to whoever is absorbing the impact of the value-addition within the value-addition chain accordingly. If nigeria must grow to become a hub where thing are manufactured and sold all over west Africa, this bill is good for rewarding value-adding states.

CodeTemplar:
The RMAFC man is obviously an ignoramus or tribal legend at best, parading as in intellectual. That it is called a consumption tax doesn't mean it is meant to serve the consumer or go to the consumer directly in anyway. It can still be collected at value addition location and reshared in Abuja, which is what Tinubu has done here. Let the ignoramus tell us who collects the VAT for good consumed outside Nigeria but within ECOWAS if the tax is for the consumer as they assume here.

It is a tax that should compensate whoever shoulders the burden of production or value-addition. It will be harsh to allow Lagos poach investors, create enabling environment, lost their land, culture, values to foreigners, suffer environmental degradation, provide supporting infrastructure like road, power, security and more, then you treat them equal with where the good are consumed because the textbook says VAT is a consumption (based) tax. It is collected from the consumer for consuming the value added unto the raw input but never meant for the consumer or her location.

It is like saying tolls collected in Kano for a road should go to Lagos or Rivers because the final destination of some of the passengers include Lagos and Rivers. The road is a service and is provided by Kano so why reward the destination of the passenger? What about passengers who end up in Ghana or Cameroon?

If we use this logic of the foolish and greedy RMAFC boss, states may be forced to collect it forcefully like that of a tolled road that serves interstate traffic and there will be chaos and rip offs because they will charge far higher than the flat rate FG is enforcing.

VAT is best managed centrally and redistributed to whoever is absorbing the impact of the value-addition within the value-addition chain accordingly. If nigeria must grow to become a hub where thing are manufactured and sold all over west Africa, this bill is good for rewarding value-adding states.

CodeTemplar:
The RMAFC man is obviously an ignoramus or tribal legend at best, parading as in intellectual. That it is called a consumption tax doesn't mean it is meant to serve the consumer or go to the consumer directly in anyway. It can still be collected at value addition location and reshared in Abuja, which is what Tinubu has done here. Let the ignoramus tell us who collects the VAT for good consumed outside Nigeria but within ECOWAS if the tax is for the consumer as they assume here.

It is a tax that should compensate whoever shoulders the burden of production or value-addition. It will be harsh to allow Lagos poach investors, create enabling environment, lost their land, culture, values to foreigners, suffer environmental degradation, provide supporting infrastructure like road, power, security and more, then you treat them equal with where the good are consumed because the textbook says VAT is a consumption (based) tax. It is collected from the consumer for consuming the value added unto the raw input but never meant for the consumer or her location.

It is like saying tolls collected in Kano for a road should go to Lagos or Rivers because the final destination of some of the passengers include Lagos and Rivers. The road is a service and is provided by Kano so why reward the destination of the passenger? What about passengers who end up in Ghana or Cameroon?

If we use this logic of the foolish and greedy RMAFC boss, states may be forced to collect it forcefully like that of a tolled road that serves interstate traffic and there will be chaos and rip offs because they will charge far higher than the flat rate FG is enforcing.

VAT is best managed centrally and redistributed to whoever is absorbing the impact of the value-addition within the value-addition chain accordingly. If nigeria must grow to become a hub where thing are manufactured and sold all over west Africa, this bill is good for rewarding value-adding states.

Sheuns:
This bill won’t fly. Modifications must be made. Nigeria is too big to be run by one man.

Where’s the regional government bill they were screaming some months ago?

You must carry everyone along else your work no go show.

aviara:
I keep imagining what south west would have been pushing for if the oil in the Niger delta was all domiciled in any of the south west states.

13% derivation given to oil producing states is so little yet Niger delta is not clamouring for more greedy south west politicians only thinking about how they can corner everything to themselves.

CodeTemplar:
The RMAFC man is obviously an ignoramus or tribal legend at best, parading as in intellectual. That it is called a consumption tax doesn't mean it is meant to serve the consumer or go to the consumer directly in anyway. It can still be collected at value addition location and reshared in Abuja, which is what Tinubu has done here. Let the ignoramus tell us who collects the VAT for good consumed outside Nigeria but within ECOWAS if the tax is for the consumer as they assume here.

It is a tax that should compensate whoever shoulders the burden of production or value-addition. It will be harsh to allow Lagos poach investors, create enabling environment, lost their land, culture, values to foreigners, suffer environmental degradation, provide supporting infrastructure like road, power, security and more, then you treat them equal with where the good are consumed because the textbook says VAT is a consumption (based) tax. It is collected from the consumer for consuming the value added unto the raw input but never meant for the consumer or her location.

It is like saying tolls collected in Kano for a road should go to Lagos or Rivers because the final destination of some of the passengers include Lagos and Rivers. The road is a service and is provided by Kano so why reward the destination of the passenger? What about passengers who end up in Ghana or Cameroon?

If we use this logic of the foolish and greedy RMAFC boss, states may be forced to collect it forcefully like that of a tolled road that serves interstate traffic and there will be chaos and rip offs because they will charge far higher than the flat rate FG is enforcing.

VAT is best managed centrally and redistributed to whoever is absorbing the impact of the value-addition within the value-addition chain accordingly. If nigeria must grow to become a hub where thing are manufactured and sold all over west Africa, this bill is good for rewarding value-adding states.

MadamExcellency:
Who wrote this rubbish calling an unelected bureaucrat under the Executive Government the final arbiter in a democracy?



The Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC) principal officers should be suspended by the president with immediate effect.

Imagine unelected appointees taking over policy directives and the mandate of elected executive government.

CodeTemplar:
The RMAFC man is obviously an ignoramus or tribal legend at best, parading as in intellectual. That it is called a consumption tax doesn't mean it is meant to serve the consumer or go to the consumer directly in anyway. It can still be collected at value addition location and reshared in Abuja, which is what Tinubu has done here. Let the ignoramus tell us who collects the VAT for good consumed outside Nigeria but within ECOWAS if the tax is for the consumer as they assume here.

It is a tax that should compensate whoever shoulders the burden of production or value-addition. It will be harsh to allow Lagos poach investors, create enabling environment, lost their land, culture, values to foreigners, suffer environmental degradation, provide supporting infrastructure like road, power, security and more, then you treat them equal with where the good are consumed because the textbook says VAT is a consumption (based) tax. It is collected from the consumer for consuming the value added unto the raw input but never meant for the consumer or her location.

It is like saying tolls collected in Kano for a road should go to Lagos or Rivers because the final destination of some of the passengers include Lagos and Rivers. The road is a service and is provided by Kano so why reward the destination of the passenger? What about passengers who end up in Ghana or Cameroon?

If we use this logic of the foolish and greedy RMAFC boss, states may be forced to collect it forcefully like that of a tolled road that serves interstate traffic and there will be chaos and rip offs because they will charge far higher than the flat rate FG is enforcing.

VAT is best managed centrally and redistributed to whoever is absorbing the impact of the value-addition within the value-addition chain accordingly. If nigeria must grow to become a hub where thing are manufactured and sold all over west Africa, this bill is good for rewarding value-adding states.