the Federal Inland Revenue Service (FIRS) Chairman, Zacch Adedeji, has stated that the current tax law in Nigeria benefits three states, Lagos, the Federal Capital Territory (FCT), and Rivers, which receive more than 70% of the Value Added Tax (VAT).

Adedeji disclosed this on during the public hearing on the tax reform bills held at the House of Representatives in Abuja.

Adedeji explained that the current VAT sharing arrangement primarily benefits these states, as 70% of consumption is not happening in those states.

The proposed reforms aim to address this imbalance by introducing a derivation principle model, ensuring a more equitable distribution of VAT revenues to all states, regardless of their economic status.

The proposed tax bills under consideration in the National Assembly propose adopting a derivation principle in the allocation of VAT revenues between the federal government and sub-national entities.

However, northern elites openly reject these proposals, arguing that the changes may not favor their region.

Under the current VAT Act, VAT revenue is allocated as follows: 15% to the Federal Government, 50% to the States and Federal Capital Territory (FCT), and 35% to Local Governments.