SHARING OF REVENUES FROM FEDERATION ACCOUNT: ISLAMIC APPROACHTO THE PROPOSED VALUE-ADDED TAX (VAT) REFORM 2024

Abstract

The federating system allocating resources to the federating units: Federal, States and Local
Governments for economic activities has been faced with fiscal imbalances for long. This study
examines the economic effects of the review of derivation model for VAT, collection and distribution
of the revenues accruing into the Federation Account to the federating units based on the derivation
principle, in the proposed Tax Reform 2024, on the economically fragile non-oil producing States
with unfunded resource endowments. This work adopted a comparative research method. Also,
relevant internet sources were used. Findings reveal that the derivation principle makes few States
with federally-funded resource endowments richer than the States with unfunded resource
endowments, starving them of the developmental funds and leading to disparity among the States of
the federation. It is recommended that the Federal Government should institutionalise optimal
funding of all other revenue endowments such as gold, iron-ore etc across the non-oil-producing
States so as to genuinely bring about just, fair and equal financial opportunities in the redistribution
of fiscal capacities to our federating units.