Tax Reform Bills: RMAFC Opposes VAT Sharing Formula -By Muhammad Konto

As the debate over the Value Added Tax (VAT) sharing formula continues to gain momentum, the Revenue Mobilization Allocation and Fiscal Commission (RMAFC) has once again reiterated its opposition to the current framework.

In a recent statement, the RMAFC chairman, Elias Mbam, emphasized that the commission’s stance is predicated on the need to address the inherent constitutional breaches in the existing VAT sharing formula.

According to Mbam, the RMAFC’s position is informed by the provisions of Section 163(b) of the 1999 Constitution, which mandates the commission to review the revenue allocation formula and principles in operation to ensure conformity with changing economic realities.

The RMAFC chairman noted that the current VAT sharing formula, which allocates 15% to the federal government, 50% to the states, and 35% to local governments, is inconsistent with the constitutional provision.

Mbam argued that the VAT sharing formula should be reviewed to reflect the current economic realities, adding that the RMAFC has already initiated the process of reviewing the revenue allocation formula.

The RMAFC chairman’s statement has once again brought to the fore the need for a comprehensive review of the VAT sharing formula. The current formula, which has been in operation since 1999, has been criticized for being unfair and inequitable.

One of the major criticisms of the current VAT sharing formula is that it favors the federal government at the expense of the states and local governments. The formula allocates a disproportionate share of VAT revenue to the federal government, leaving the states and local governments with a paltry sum.

This has resulted in a situation where the states and local governments are unable to meet their financial obligations, including the payment of salaries and provision of basic infrastructure.

The RMAFC’s opposition to the current VAT sharing formula is therefore a welcome development. The commission’s stance is a clear indication that it is committed to ensuring that the revenue allocation formula is fair, equitable, and just.

As the RMAFC continues to push for a review of the VAT sharing formula, it is imperative that the federal government, states, and local governments work together to ensure that the formula is reviewed in a fair and transparent manner.

The review of the VAT sharing formula presents an opportunity for the country to rethink its revenue allocation framework and ensure that it is aligned with the current economic realities.

It is also an opportunity for the country to address the issue of fiscal federalism, which has been a major source of contention between the federal government, states, and local governments.

As the debate over the VAT sharing formula continues, it is essential that all stakeholders approach the issue with an open mind and a willingness to compromise.

The RMAFC’s stance on the VAT sharing formula is a step in the right direction, and it is hoped that it will lead to a comprehensive review of the revenue allocation formula.

In conclusion, the RMAFC’s opposition to the current VAT sharing formula is a welcome development that has the potential to address the issue of fiscal federalism and ensure that the revenue allocation formula is fair, equitable, and just.

We commend the RMAFC for its stance and urge the federal government, states, and local governments to work together to ensure that the VAT sharing formula is reviewed in a fair and transparent manner.

Muhammad Konto

Mass Communication Department, Borno State University, Maiduguri.