Five northern states, two southwestern states, two south-south states and one southeastern state collected a total of 373.84 billion naira on the value-added tax allowance of 836.51 billion naira available to states in 14 months.
This is according to the latest FAAC allocation data available from the National Bureau of Statistics for the months of January 2020 to February 2021.
During the period under review, the thirty-six states of the federation and the federal government shared 1.09 billion naira as VAT revenues of the Federation Accounts Allocation Committee.
The top 10 states were: Lagos (N 153.94 billion), Kano (N 32.48 billion), Oyo (N 29.85 billion), Rivers (N 28.43 billion), Kaduna (N 24, N75 billion), Katsina (N22.72 billion), Delta (N20.91 billion), Bauchi (N20.49 billion), Anambra (N20.14 billion) and Jigawa (N20.13 billion) .
Lagos obtained the largest share of VAT revenue during the period under review (153.94 billion naira), while Nasarawa obtained the smallest allocation of 15.36 billion naira.
Based on regions, the South West region received the highest VAT allocation (N 256.21 billion), followed by the North West (N 154.41 billion), South-South (N 119, 88 billion N), North-East (107.43 billion), Center-North (106.58 billion N). The Southeast received the least amount of VAT allocations (91.99 billion naira).
The last 10 states were Nasarawa (N 15.36 billion), Bayelsa (N 15.79 billion), Taraba (N 16.23 billion), Gombe (N 16.33 billion), Kwara (N 16.35 billion N), Ekiti (16.46 billion N), Yobe (N16 0.90 billion), Abia (17.03 billion N), Ebonyi (17.04 billion N) and Cross River (17.17 billion N ).
According to Investopedia, VAT is a consumption tax that is levied on a product multiple times at each point of sale to which value has been added. In Nigeria, VAT is collected by the Federal Inland Revenue Service and shared by the federal government.
According to BNS data, VAT has local non-imported VAT, non-imported foreign VAT, and Nigerian customs service import VAT.
In 2020, N1.53tn was generated as VAT in the country. Unimported local VAT was N 763 billion, non-imported foreign VAT was N 420.43 billion, and NCS import VAT was N 347.72.
Local taxes account for about 50 percent of total VAT, while imported goods and non-imported foreign goods or services make up the other half. Local VAT is imposed on goods and services consumed in each state of the federation.
Based on the country’s revenue sharing formula, the federal government receives 15 percent of the VAT, while states share 50 percent and local governments 35 percent based on the share formula. During the period under review, the federal government obtained 251.55 billion naira from VAT.
In an Aug. 10 decision, the Federal High Court sitting in Port Harcourt, Rivers State, ruled that it was the Rivers State government, not the federal tax services, that should collect the tax. VAT and income tax in the state.
In 2020, the total revenue generated internally by the 36 states of Nigeria was 1.21 billion naira.
A former finance minister, Ms Kemi Adeosun, had said that 55% of the total local VAT was generated in Lagos.
Based on this indication, in 2020 Lagos may have contributed to N419.65 billion. in the same year, however, he received 130.97 billion naira.
Rivers State Governor Nyesom Wike said recently that Rivers State generated VAT revenues of N15 billion in June this year, but obtained only N4.7 billion. . He added that Kano generated 2.8 billion naira in the same month and collected the same 2.8 billion naira.
Wike also said that Lagos generated 46.4 billion naira but received 9.3 billion naira.
Lagos Chamber of Commerce and Industry director general Dr Chinyere Almona said on Sunday that the current sharing formula for states and LGAs should be adjusted using the 20%, population 30 equal factors. % and bypass 50%.
This goes against the current system of 50 percent equality, 30 percent population, and 20 percent derivation.
According to her, this arrangement should be agreeable to the parties involved and can lead to innovation on income generation in all states in order to increase their internally generated income.
She added that it would also make states more responsive to the needs of businesses in their respective jurisdictions.
Almona said: “The first concern of the chamber is the confusion that businesses face over who is in charge of collecting VAT. It is not healthy for business and planning.
“However, we welcome the rapid intervention of the Court of Appeal to reduce the uncertainties surrounding these controversies.
“Businesses should not be subjected to unnecessary barriers and forced to pay the same tax twice to different agencies.
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“The federal government should urgently reach agreement with the states on what is best for the nation and for business. “
According to the head of the Department of Economics at Pan-Atlantic University of Lagos, Dr Lekan Aworinde, if state governments start collecting VAT, there will be both positive and negative results.
He said: “On the positive side, states can increase their internally generated revenue, which means states that make huge sums of money from VAT will be able to generate more revenue for themselves. .
“However, on the other hand, we don’t know if states will have the structure to be able to collect this tax. What I mean is that tax collection involves many structures such as policy and tax planning; therefore, these states have the manpower to collect these taxes. If they don’t, the process might not be as smooth and efficient.
“Apart from all this, if the administration of VAT is the responsibility of the state, how sure are we that they will be able to remit what is owed to local communities.
“In many cases, even with the old systems when the federation account allocations come into play, state governments do not pay out the local governments share as expected. “
He added that there was the possibility of multiple charges, especially on imports.
Aworinde added: “There is also the possibility of multiple taxation which can be caused when the federal government and the state government charge VAT for certain items like imports. Multiple taxation will have a ripple effect on the economy.
“It will hamper the ease of doing business in the country, erode investor confidence in the country, and further reduce foreign investment, largely because investors don’t want to enter a country with too many taxes.
“With declining investment, unemployment will rise, which will also push more people below the poverty line.
“As incomes remain constant while the cost of goods and services continues to rise, increased poverty or a rapid increase in the poverty rate in the country is inevitable.”
Meanwhile, Taiwo Oyedele, fiscal policy partner and Africa tax officer, PwC, said challenging any ambiguity or treatment that states consider constitutionally incompatible with the courts is a healthy development for the system.
Oyedele said this in an interview with one of our correspondents, in response to the prayer of state attorneys general at the Supreme Court to determine whether or not states have exclusive authority to administer and collect stamp duty. on all transactions involving individuals and persons. within their respective states.
PUNCH reported that the Attorney General of the 36 states of the federation dragged the Attorney General of the federation, Abubakar Malami, to the Supreme Court for the federal government’s failure to remit funds generated by stamp duties in the states’ accounts.
Oyedele said: “There is generally no ambiguity regarding the collection of stamp duty. States have the right to levy stamp duties on any taxable instrument between individuals. When a legal person is involved, the federal government is empowered to collect stamp duty.
“While each state can keep the stamp duty collected by it, any stamp duty collected by the federal government must be shared among the states at a 100% lower collection cost based on the diversion. “
In another development, an economist and private sector advocate, Dr Muda Yusuf, advised the National Assembly and the Federal Ministry of Finance to suspend proposed excise taxes on a segment of the manufacturing sector.
Yusuf said in a statement on Sunday in response to the announcement made by the Nigerian customs service during the assessment of the 2022-2024 medium-term expenditure framework in the National Assembly to reintroduce excise taxes on the production of non-alcoholic beverages in the country.
Yusuf described the move as untimely, inappropriate and detrimental to the growth of the manufacturing sector, saying it nullifies the federal government’s economic recovery and job creation goals.
He said: “Many small businesses coming into the beverage business would be hit hard by this proposal. The millions of micro-enterprises in the soft drink distribution chain will be affected by the imposition of the excise tax. “
He added that the reality was that Nigerian manufacturing companies were currently going through enormous stress, affecting sales, turnover, profitability, shareholder value and the sustainability of investments in the sector.