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The League of Northern Democrats has rejected the derivation formula proposed in the ongoing tax reform discussions, warning that it could deepen regional inequalities if not properly defined.
The group commended the Nigeria Governors’ Forum for endorsing a revised Value Added Tax sharing formula of 50 per cent based on equality, 30 per cent on derivation, and 20 per cent on population.
However, it expressed strong reservations about the definition of “derivation” and its implications for fiscal equity.
LND made its position known in a statement by its spokesman, Ladan Salihu, on Saturday.
The group insisted that for tax reforms to be fair, equitable, and sustainable, derivation must be explicitly defined as the place of consumption, not the point of collection.
“Without this definition, the proposed increase of derivation to 30 per cent risks perpetuating regional inequalities, where certain areas benefit disproportionately at the expense of others, particularly the north,” the group said.
LND warned that failure to address the derivation issue could undermine the objectives of the tax reforms, calling for urgent amendments before it would fully endorse the process.
The group insisted that derivation must be based on the area of consumption, saying “tying derivation to the area of consumption will ensure that resources are distributed based on actual economic activity and contribution.
This approach, LND said, “not only aligns with the realities of modern taxation but also promotes accountability and incentivises regions to develop their economic capacities.
“Until this critical issue is resolved, LND will withhold its full support for the tax reform agenda. We urge the NGF and the Presidential Tax Reform Committee to incorporate this fundamental clarification, and all other amendments made by the LND, including the inheritance tax clause, into their framework to guarantee that the reforms deliver equitable and beneficial outcomes for all Nigerians,” the group maintained.
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