The recently proposed Tax Reform Bill has reignited a critical debate over the devolution of powers in Nigeria, as experts argue that the bill goes beyond revenue distribution and strikes at the core of Nigeria's federal structure.
Dr Olisa Agbakoba, SAN, a legal expert and advocate for constitutional reform, emphasized that the bill’s implications are far-reaching, particularly in the political and economic spheres.
“The resistance to the bill is not just about revenue sharing. It raises sensitive and political questions about the nature of federalism in Nigeria,” Dr Agbakoba noted.
Central to his concerns is the Federal Government's dominance over revenue collection, particularly the Value Added Tax (VAT).
According to Agbakoba, VAT is a consumption and sales tax, which, in most federal systems, falls under the purview of local and state governments.
“The Federal Government should not act as a mere collecting agency to distribute revenue to the states,” he argued, stressing that over-centralization hinders sustainable revenue growth and state-level innovation.
He further highlighted that Nigeria’s current tax system suppresses the economic potential of its states.
“Each state has unique resources. For example, Plateau State, with its expansive savannah lands, could leverage mechanized agriculture to feed Africa,” Agbakoba said.
He cited Spain’s success as the world’s largest producer of olive oil as an example of how localized resource management can drive economic prosperity.
Agbakoba recommended that VAT be abolished at the federal level and transferred to state and local governments to foster revenue generation at the grassroots.
“The potential to generate tax at the base is underestimated. A decentralized system would encourage creativity and unlock vast revenue sources across the country,” he added.
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