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Fiscal Policy: Oyedele clarifies no reduction in FAAC allocation to Federal Government

Mr. Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee

*Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, says the Committee ‘did not recommend a reduction in the Federal Government’s share from Federation Account’, contrary to a misleading news report in circulation

Isola Moses | ConsumerConnect

In view of the ongoing fiscal reforms in Nigeria, the Presidential Fiscal Policy and Tax Reforms Committee, has said it did not recommend any reduction in the Federal Government’s allocation from the Federation Account to 10 percent while state and local government councils get 85 percent to 90 percent of the allocation.

ConsumerConnect reports Mr. Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, made the clarification in a terse response to the misleading report on the recommendation of the Committee, released via his verified social media account Sunday, October 13, 2024.

Oyedele rather emphasised “we did not recommend a reduction in the Federal Government’s share from Federation Account.”

He also averred: “Our recommendation is in respect of VAT revenue, to increase the share of states and local governments from 85% to 90% and for states to discontinue any other forms of consumption taxes which constitute multiple taxation on businesses and individuals.”

Earlier, a report had claimed that Oyedele disclosed the Federal Government is set to take only 10 percent of the total FAAC allocations, while states and local governments would receive a combined 90 percent of the fund.

“The represents a drastic departure from the current sharing formula, which allocates 52.68 percent to the Federal Government, 26.72 percent to states, and 20.60 percent to local governments.

“Under the new proposal, Oyedele explained, the distribution formula for the states and local governments would include a clause stipulating that 60 percent of their share will be based on the principle of derivation.”

The report also noted that “in practice, this means if N100 is available for distribution from FAAC: The Federal Government will take N10, all 36 states will share N36 equally, and N54 will be distributed based on derivation, favouring states with higher resource generation.”

It further said the Chairman of the Committee stated: “This change in the sharing formula is part of broader reforms aimed at eliminating numerous ‘nuisance taxes’ and streamlining the tax collection process.

“The new approach not only simplifies tax collection but also lays the foundation for fiscal federalism, giving states and local governments more autonomy over their revenues.”

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