Taiwo Oyedele, the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, has firmly denied reports claiming that the committee has proposed reducing the federal government’s share of the Federation Account Allocation Committee (FAAC) to 10%.
In a statement released on Sunday, Oyedele addressed the confusion stemming from various media reports.
These reports suggested that the federal government would only receive 10% of FAAC allocations, while the remaining 90% would be distributed among state and local governments.
“We did not recommend a reduction in the federal government’s share from the federation account,” Oyedele stated.
He emphasized that the committee’s discussions focus primarily on the allocation of Value Added Tax (VAT) within the FAAC framework.
According to Oyedele, the goal of the proposed reforms is to increase the share of states and local governments from 85% to 90%.
He also urged states to discontinue their other forms of consumption taxes, which he described as multiple taxation on businesses and individuals.
Earlier reports circulated by various media outlets claimed a significant shift in the revenue allocation of the FAAC.
It was alleged that the new distribution formula would result in the federal government receiving only 10% of available funds.
Currently, the allocation formula distributes 52.68% of FAAC revenue to the federal government, 26.72% to the states, and 20.60% to local governments.
In practical terms, the reports suggested that if N100 is available for distribution, the federal government would take N10, all 36 states would share N36 equally, and N54 would be allocated based on derivation, favoring states that generate higher resources.
However, Oyedele refuted these claims, clarifying that the discussions were strictly about VAT revenue within the existing FAAC framework.
“The report does not reflect our position. Our recommendation is specifically related to VAT revenue allocation,” he explained.
The Federation Account Allocation Committee (FAAC) is responsible for the distribution of the country’s monthly revenue.
According to the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), the current distribution formula allocates 52.68% to the federal government, 26.72% to the states, and 20.60% to local governments.
Funds for local governments are deposited into a joint account managed by state governments, which often raises concerns about the effective allocation of resources to local government chairmen.
Many argue that this system undermines the independence of local governments and the direct benefits they should receive from FAAC allocations.
In recent years, the Supreme Court has ruled on the issue of fiscal autonomy for local governments.
This ruling means that FAAC payments meant for local governments should now be directly allocated to each local government area.
The discussions around FAAC allocations come at a time when Nigeria is grappling with economic challenges.
There is a growing demand for more transparent and equitable revenue distribution among different levels of government.
Many citizens and state governments feel that the current system disproportionately favors the federal government, leaving states and local governments with insufficient resources to address pressing issues like infrastructure, education, and healthcare.
As a result, there has been increasing pressure on the federal government to reform the revenue allocation system.
Many stakeholders believe that reforms could lead to better governance and improved services at the state and local levels.
Tax reform, particularly in the area of VAT, is seen as a crucial step in improving the fiscal health of both state and local governments.
The clarity provided by Oyedele is crucial in alleviating fears of a drastic reduction in federal funding.
He reiterated the importance of collaboration between different levels of government to ensure that resources are utilized effectively.
“Our goal is to create a more equitable distribution of resources that benefits all Nigerians,” Oyedele asserted.
