Reps amend knotty revenue sharing formula in Tinubu’s tax reform bills

…retains 7.5% VAT, limits president’s powers

The House of Representatives have amended some contentious clauses in President Bola Tinubu’s tax reform Bills, to align with concerns of stakeholders.

The bills include: A Bill for an Act to Provide for the Assessment, Collection of, and Accounting for Revenue Accruing to the Federation, Federal, States and Local Governments; Prescribe the Powers and Functions of Tax Authorities, and for Related Matters (HB.1756) ” (Referred: 12/2/2025).

A Bill for an Act to Repeal the Federal Inland Revenue Service (Establishment) Act, No.13, 2007 and Enact the Nigeria Revenue Service (Establishment) Bill to Establish Nigeria Revenue Service, charged with Powers of Assessment, Collection of, and Accounting for Revenue Accruable to the Government of the Federation and for Related Matters (HB.1757)” (Referred: 12/2/2025).

Bill for an Act to Establish Joint Revenue Board, the Tax Appeal Tribunal and the Office of the Tax Ombud, for the Harmonisation, Coordination and Settlement of Disputes arising from Revenue Administration in Nigeria and for Related Matters (HB.1758) and a “Bill for an Act to Repeal Certain Acts on Taxation and Consolidate the Legal Frameworks Relating to Taxation and Enact the Nigeria Tax Act to Provide For Taxation of Income, Transactions and Instruments, and for Related Matters (HB.1759).

Some of the ammendments affected controversial areas including the revenue sharing formula, proposed increase in Value Added Tax, inheritance tax, taxation of free trade zones, the proposed defending of TETFUND, NITDA and NASENI.

Read also: Reps amend Tinubu’s tax bill, retains 7.5% VAT, removes inheritance tax, others

On the revenue sharing formula, the house amended proposed 60% derivation to 30% consumption. The House recommended that notwithstanding any formula that may be prescribed by any other law, the net revenue accruing by virtue of the operation of chapter six of the Nigeria Tax Act shall be distributed as follows — (a) 10% to the Federal Government; (b) 55% to the State Governments and the Federal Capital Territory; and (c) 35% to the Local Governments.
(2The amount of the VAT revenue standing to the credit of states and local governments shall be distributed among them on the following basis: (a) Equally – 50%; (b) Population – 20% (c) Consumption – 30%.

For the purpose of this section, consumption is determined by the place of consumption, irrespective of where the return is filed. The bill proposed the place of consumption should be point of derivation.

Currently, VAT revenue is shared as follows: 15% to the federal government, 50% to states, and 35% to LGAs. States presently use a 50:30:20 formula—50% for equality, 30% for population, and 20% for derivation.

The tax administration bill had proposed increase in VAT derivation, from 20% to 60% which sparked sharp criticism, particularly from northern stakeholders, who argue that the new formula disproportionately favours southern states, especially Lagos.

James Faleke, chairman of the committe while presenting key ammendments during consideration of the Bill on Thursday said the stakeholders recommended a reduction of the tax rate to 5% but the committee proposed to retain the current VAT of 7.5 which the House adopted.

The Committee deleted the clause on proposed introduction of inheritance tax as well as the proposed defending of NASENI, TETFUND and NITDA.

On taxation of free trade zones, the committee recommended that operators of free trade zone must be limited to 75% for export and 25% outside the free zones before they would enjoy the tax benefits.

The House also limited the powers of presidnet to exempt form income tax, and subjected it to approval by the National Assembly