Based on the current VAT revenue sharing formula, Lagos State gets 42 per cent, meaning that the state alone takes home N2.401 trillion as its share during the period; Rivers State, which takes 16 per cent, got N914.88 billion during the same period, FCT with 10 per cent got N571.8 billion; while Oyo state that takes 5.2 per cent got N297.336 N285.9 billion.

The VAT sharing formula has become a contentious issue in recent times following the introduction of a new tax reform bill, which proposes radical changes to the current sharing formula.

According to the current formula, the Federal Government receives 15 per cent of VAT, states and the FCT take 50 per cent, while local governments take 35 per cent.

Of the 50 per cent meant for the states, each state retains 20 per cent of the VAT collected within its borders as derivation, 30 per cent is distributed based on the states’ population, while the remaining 50 per cent is shared equally among all the states.

According to the Presidential Committee on Fiscal Policy and Tax Reforms, this sharing formula does not take into account the fact that over 70 per cent of goods and services are consumed outside the head offices of the firms rendering those services or producing those goods but only recognises where VAT is remitted.

The new formula, which it proposes, gives Federal Government 10 per cent of VAT revenue, states and FCT, 55 per cent and local governments 35 per cent.

MEANWHILE, the Independent Media and Policy Initiatives (IMPI) has thrown its weight behind the tax reform bills currently awaiting approval by the National Assembly, hailing it as a bold move to revamp Nigeria’s economy.

Speaking during the organisation’s press conference in Abuja, yesterday, Chairman of IMPI, Omoniyi Akinsiju, emphasised the significance of the proposed legislation, stating that it was crucial for generating revenue, fostering enterprise growth, and enhancing citizens’ purchasing power.


He expressed dismay over what he called ‘unwarranted controversy’ about the reforms, particularly the VAT-sharing formula, calling it a distraction from the transformative benefits of the bills.