The Chairman of the presidential committee on fiscal policy and tax reforms, Taiwo Ayedele has reacted to Northern States Governors rejection of President Bola Ahmed Tinubu’s tax reform bill before the National Assembly.

The new regime billed to come into effect from January 1 plans to impose 15 per cent tax on luxury items, an increase from the current 7.5 per cent.

Whereas the Northern governors in a statement rejected the bill because the sharing formula was not in their favour, Oyedele in statement via official X handle on Tuesday contented that the proposed amendment will create a fair system.

He however assured that there will be collaboration with all stakeholders to address various concerns with a view to achieving a win-win outcome for all.

He said: “We share the sentiment expressed by the Northern Governors regarding the inequity inherent in the current model of derivation as a basis for distributing VAT revenue.

“This issue, in fact, affects many states across all geopolitical zones because the current derivation is mainly determined based on where VAT is remitted, rather than where goods or services are supplied or consumed.

“Our proposal aims to create a fairer system by devising a different form of derivation which takes into account the place of supply or consumption for relevant goods and services whether they are zero rated, exempt or taxable at the standard rate.

“For example, a state that produces food shouldn’t lose out just because its products are VAT-exempt or consumed in other states.

“The state where the supply originates should be recognised for its contributions. The same principle should apply to services like telecommunications—VAT distribution should reflect where subscribers are located.

“We will collaborate with all stakeholders to address this concern with a view to finding a balanced solution that achieves a win-win outcome for all.”