Tag: RMAFC

The Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) has insisted that it is its remit to produce formulae for sharing revenues, including the Value Added Tax (VAT).

In a memorandum submitted by the Commission to the National Assembly on the ongoing debates on the Tax Reform Bills, RMAFC cautioned against amending the VAT sharing formula without its constitutional input.

The National Assembly is deliberating on four proposed bills under the Tax Reform and Fiscal Policy Bill.

Insisting on its exclusive constitutional authority to determine revenue-sharing formula, RMAFC said: “Only the RMAFC has the mandate to produce formulae for sharing revenues, including VAT. Any deviation from this constitutionally backed process is both inappropriate and potentially unconstitutional.”

One of the proposed bills seeks to allocate 10 per cent of VAT revenue to the federal government, while states and local governments would share the remaining 90 per cent.

Reacting to the bill, RMAFC warned against arbitrary changes to the VAT formula, noting that such actions could violate constitutional provisions and undermine its role as the impartial arbiter of revenue allocation.

“Arbitrary apportioning of percentages for VAT allocation, whether vertically among the tiers of government or horizontally among states and local governments, is both impractical and unconstitutional,” the Commission stated.

The RMAFC also pointed out the risk of public perception issues, particularly claims of bias toward states with higher production or corporate presence, which could undermine national unity and equity.

Read Also: RMAFC calls for increased domestic revenue mobilisation

It maintained its authority under Section 162(2) of the 1999 Constitution (as amended), which empowers it to develop formulas for equitable revenue sharing among the federal, state, and local governments. It warned that attempts to bypass this mandate would contravene the Constitution.

“The Constitution, being supreme, does not envisage that any other Act of Parliament, such as the VAT Act, could assume this responsibility,” the Commission argued.

To address the contentious VAT sharing debate, the RMAFC proposed the following:

•VAT allocation and derivation should be based on a formula developed by the RMAFC, reflecting VAT’s unique nature as a consumption tax and ensuring equitable distribution.

•The formula should account for consumption patterns and provide support to states with weaker economies, promoting national cohesion.

•Implement tools like electronic invoicing and transaction monitoring to link VAT collections to end-user locations.

• Amend legislation to clarify derivation rules for interstate transactions and foster collaboration among the federal, state, and local governments to secure consensus on the RMAFC’s proposed formula.

Currently, VAT revenue is shared in the ratio of 50 per cent to states, 35 per cent to local governments and 15 per cent to the federal government.

However, disputes could arise, with states like Lagos and Kano arguing for derivation rights based on collection and consumption patterns, respectively, the RMAFC argued.

The commission commended President Bola Ahmed Tinubu for his innovative leadership in enhancing Nigeria’s revenue base and expressed support for the four proposed bills, noting their potential to significantly boost domestic revenue mobilization.

“The proposed bills will help integrate untapped revenue sources, including contributions from the informal sector, into the tax net, enhancing Nigeria’s revenue-to-GDP ratio,” the commission stated.

It added that the reforms would strengthen Nigeria’s fiscal stability and facilitate sustainable development, reaffirming its readiness to support the federal government’s efforts to reposition the country’s economy.

The Revenue Mobilization Allocation and Fiscal Commission (RMAFC) has cautioned the federal government, the National Assembly, and the Taiwo Oyedele-led Presidential Fiscal Policy and Tax Reform Committee against amending the Value Added Tax (VAT) sharing formula without its constitutional involvement.

In a memorandum submitted to the National Assembly during deliberations on four proposed bills under the Tax Reform and Fiscal Policy Bill, RMAFC emphasized its exclusive authority to determine revenue-sharing formulas.

“Only the RMAFC has the mandate to produce formulae for sharing revenues, including VAT. Any deviation from this constitutionally backed process is both inappropriate and potentially unconstitutional,” the Commission stated.

One of the proposed bills recommends allocating 10 percent of VAT revenue to the federal government, with the remaining 90 percent shared between states and local governments.

The RMAFC, however, warned that such changes to the VAT formula without its input could breach constitutional provisions and undermine its role as the impartial arbiter of revenue allocation in Nigeria.

“Arbitrary apportioning of percentages for VAT allocation, whether vertically among the tiers of government or horizontally among states and local governments, is both impractical and unconstitutional,” the Commission stated.

The RMAFC also pointed out the risk of public perception issues, particularly claims of bias toward states with higher production or corporate presence, which could undermine national unity and equity.

The RMAFC maintained its authority under Section 162(2) of the 1999 Constitution (as amended), which empowers it to develop formulas for equitable revenue sharing among the federal, state, and local governments. It warned that attempts to bypass this mandate would contravene the Constitution.

“The Constitution, being supreme, does not envisage that any other Act of Parliament, such as the VAT Act, could assume this responsibility,” the Commission argued.

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To address the contentious VAT sharing debate, the RMAFC proposed the following: VAT allocation and derivation should be based on a formula developed by the RMAFC, reflecting VAT’s unique nature as a consumption tax and ensuring equitable distribution. The formula should account for consumption patterns and provide support to states with weaker economies, promoting national cohesion. Implement tools like electronic invoicing and transaction monitoring to link VAT collections to end-user locations. Amend legislation to clarify derivation rules for interstate transactions and foster collaboration among the federal, state, and local governments to secure consensus on the RMAFC’s proposed formula.

Currently, VAT revenue is shared in the ratio of 50 percent to states, 35 percent to local governments, and 15 percent to the federal government. However, disputes could arise, with states like Lagos and Kano arguing for derivation rights based on collection and consumption patterns, respectively, the RMAFC argued.

The Commission commended President Bola Ahmed Tinubu for his innovative leadership in enhancing Nigeria’s revenue base and expressed support for the four proposed bills, noting their potential to significantly boost domestic revenue mobilization.

“The proposed bills will help integrate untapped revenue sources, including contributions from the informal sector, into the tax net, enhancing Nigeria’s revenue-to-GDP ratio,” the Commission stated.

The RMAFC stated that these reforms would strengthen Nigeria’s fiscal stability and facilitate sustainable development, reaffirming its readiness to support the federal government’s efforts to reposition the country’s economy.

The Revenue Mobilization Allocation and Fiscal Commission (RMAFC) has called on all tiers of government to intensify efforts in mobilising domestic revenues as a strategy to advance national development.

RMAFC Chairman, Dr. Mohammed Bello Shehu, made the call during his presentation at the 2024 National Council on Finance and Economic Development (NACOFED) in Bauchi State. He argued that effective domestic revenue mobilisation (DRM) is critical to achieving fiscal independence and reducing Nigeria’s reliance on external borrowing.

Dr. Shehu acknowledged DRM as a pathway that involves using taxes, fees, levies, natural resources, state-owned enterprises, and other productive sectors to create a stable foundation for planning and implementing development programmes.

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In his remarks, Dr. Shehu noted that the global economic environment, marked by fluctuating oil prices, rising debt burdens, and increasing demands for social services, has made boosting domestic revenue an urgent priority for Nigeria.

“This revenue serves as the backbone for public investment in essential sectors such as infrastructure, healthcare, education, and social welfare, directly contributing to socio-economic growth and poverty reduction,” he said.

He warned that Nigeria’s dependence on oil exports exposes the country to global price volatility, making the diversification of domestic revenue sources important for fiscal resilience and economic stability.

The Revenue Mobilization Allocation and Fiscal Commission (RMAFC) has called on all tiers of government to intensify efforts in mobilizing domestic revenues as a strategy to advance national development.

This call was made by RMAFC Chairman, Dr. Mohammed Bello Shehu, during his presentation at the 2024 National Council on Finance and Economic Development (NACOFED) in Bauchi state.

He argued that effective domestic revenue mobilization (DRM) is critical to achieving fiscal independence and reducing Nigeria’s reliance on external borrowing.

Shehu acknowledged DRM as a pathway that involves using taxes, fees, levies, natural resources, state-owned enterprises, and other productive sectors to create a stable foundation for planning and implementing development programmes.

To strengthen DRM, the Commission called on governments to prioritize diversification by promoting high-growth sectors such as agriculture, technology, solid minerals, tourism, and the creative industries. Shehu noted that these sectors hold significant potential for job creation and economic growth while mitigating the impact of oil price fluctuations.

In his remarks, Shehu noted that the global economic environment, marked by fluctuating oil prices, rising debt burdens, and increasing demands for social services, has made boosting domestic revenue an urgent priority for Nigeria.

“This revenue serves as the backbone for public investment in essential sectors such as infrastructure, healthcare, education, and social welfare, directly contributing to socio-economic growth and poverty reduction,” he said.

He warned that Nigeria’s dependence on oil exports exposes the country to global price volatility, making the diversification of domestic revenue sources important for fiscal resilience and economic stability.

Dr. Shehu identified several benefits of enhanced DRM, reduced reliance on external debt, preservation of fiscal sovereignty, and the ability to allocate more resources to domestic development rather than debt servicing.

He said: “Effective domestic revenue mobilization necessitates improvements in governance, transparency, and accountability. As citizens contribute more through taxes, they demand better governance, leading to a virtuous cycle of transparency, efficiency, and improved public trust,” he added.

Read Also: RMAFC backs cost-cutting measures

The RMAFC chairman outlined a comprehensive strategy for enhancing DRM, stressing the need for Support for Innovation and Research to unlock economic potential; Development and Improvement of Infrastructure to attract investments; Enhanced Governance and Transparency to build public trust; promotion of financial inclusion to expand the tax base; Regional Economic Integration to foster trade and economic collaboration and Strengthening the Social Contract and Community Engagement to ensure accountability and participation.

Shehu stated that financing national development through DRM is not only a financial necessity but also a critical step toward achieving Nigeria’s long-term stability and economic independence.

“Financing national development through domestic revenue mobilization is imperative to foster an economically self-reliant Nigeria, capable of driving its national development agenda with stability, resilience, and independence,” he said.

The Senate on Thursday passed a bill that seeks to empower the Revenue Mobilisation, Allocation, and Fiscal Commission (RMAFC) to monitor accruals to, and disbursements from, the Federation Account.

The Senate passed the bill following its consideration and adoption of the report by its Committees on National Planning and Economic Affairs, Finance, and Appropriations during plenary.

The proposed legislation, according to the chairman of Senate Joint Committees on National Planning and Economic Affairs, Finance and Appropriations, Senator Yahaya Abdullahi, seeks to repeal the RMAFC Act, 2004, and replace it with the Revenue Mobilisation, Allocation, and Fiscal Commission Bill, 2024.

The proposed law, he said, revised the composition and operational framework of the Commission to ensure that federal, state, and local governments receive the constitutionally mandated resources necessary to address governance and development challenges.

To enhance the Commission’s efficiency, he said the bill proposed additional funding, allowing RMAFC to effectively discharge its constitutional responsibilities.

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Abdullahi emphasised the importance of the amendment of the Bill amid dwindling national revenues and Nigeria’s rapidly growing population.

He stated that the Act, last updated over two decades ago, no longer reflects the nation’s evolving economic realities.

According to him, the primary objective of the bill is to reinforce the mandate and powers of the RMAFC as the constitutionally recognised body responsible for monitoring revenue generation and ensuring its equitable disbursement among the three tiers of government.

He noted that the Bill prescribes a revamped structure and operational method for the Commission, ensuring that federal, state, and local governments are adequately resourced to meet governance and developmental challenges.

“In the conduct of this onerous task the Commission requires adequate funding from the Federation Account, the lack of which has hitherto hampered the effective performance of its Constitutional responsibilities,” he said.

Senators approved the amendments to the Bill when the Deputy Senate President, Barau Jibrin, put the recommendations in the report to voice vote.

The Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) has applauded President Bola Tinubu’s recent directive to reduce convoy sizes of Ministers and top officials, aiming to lower governance costs across the country. 

In a statement by RMAFC’s Head of Information and Public Relations, Maryam Umar Yusuf, the Commission encouraged State Governments to implement similar cost-saving measures.

RMAFC Chairman Dr. Mohammed Bello Shehu, noted that the high cost of governance has impeded infrastructure and social services, leading to reduced investment, high unemployment, and rising insecurity. 

Shehu noted that Nigeria’s expensive bureaucratic structures, overlapping ministries and agencies, and persistent corruption contribute significantly to governance costs.

Read Also: Senate okays 21 federal commissioners for RMAFC

“The high expenses related to public service delivery, security costs, and infrastructure failures, combined with multiple salaries, severance allowances, and domestic and foreign debt burdens, exacerbate the challenge,” he added.

The RMAFC has long advocated for governance reforms, urging reductions in unnecessary expenditure to ensure resources benefit Nigerian citizens. 

The Commission suggested the immediate implementation of the Orosanye report, which recommends streamlining government structures and reducing political appointees.

By reducing governance costs, the RMAFC believes Nigeria can better address infrastructural, healthcare, and educational needs, ultimately fostering a more sustainable economic environment.