Payment of New Minimum Wage will be difficult if tax reforms bills are passed

Payment of New Minimum Wage will be difficult if tax reforms bills are passed

Zamfara State Governor Dauda Lawal has expressed concerns that some states may struggle to survive financially if the proposed tax reform bills are passed into law.

Speaking on Channels Television’s Politics Today program on Tuesday, Lawal emphasized the potential challenges that could arise for many states under the new tax structure.

Introduced by President Bola Tinubu in early October, the four tax reform bills have sparked widespread debate across the country, with particularly strong opposition from stakeholders in the northern regions.

Critics argue that the proposed changes to the value-added tax (VAT) distribution system could severely impact their states, especially with the shift toward a derivation-based model.

This model would allocate VAT revenue based on where it is generated, a change that northern states fear may undermine their financial stability.

One of the central points of contention is the proposed shift to a VAT distribution system that factors in derivation, a move that opponents argue could disadvantage northern states with less revenue-generating capacity compared to their southern counterparts.

Some critics also argue that such a change might be unconstitutional, as the current VAT distribution model is based on principles of equity and population distribution.

Governor Lawal raised alarm over the broader economic implications of these reforms, suggesting that many states could face significant difficulties in meeting basic financial obligations, such as paying the minimum wage, if the new tax laws are enacted.

“Well, the tax issue has a lot of components – there is the good aspect and there is the bad aspect. So, we are studying the situation so as also to advise our people on the way forward. It’s an ongoing process and we will continue with the engagement.

“Reform in a system is inevitable and we should always expect reforms. However, in trying to do that, we also need to be careful not to be in a hurry to do something that will later hurt us.

“So, I believe we should carefully study the situation, and have a clear understanding and take a common stand.

“There is a component of it that talks about derivation and definitely, if we are to go by it, it is going to affect some of the states in terms of what kind of inflows they have and invariably it may make it difficult for some states to be able to pay their salaries.

“Honestly, if we were to go by it, it would be difficult for some states to pay salaries especially with the issue of minimum wage.
“Some states may not be able to survive so it is something that must be carefully studied so that we don’t hurt ourselves in the long run.”