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VAT collection: LCCI seeks adjustment in allocation to states, LGAs

VAT collection: LCCI seeks adjustment in allocation to states, LGAs
September 13
19:03 2021

The Lagos Chamber of Commerce and Industry (LCCI) has called for a review of the current sharing arrangements of value-added tax (VAT) collection to states and local government councils. 

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This was announced in a statement by Chinyere Almona, LCCI director-general, on Sunday.

The statement follows the controversies surrounding VAT collection between Lagos, River states and the Federal Inland Revenue Service (FIRS).

Last week, the court of appeal in Abuja directed Rivers and Lagos states to maintain status quo pending the determination of an appeal filed by the Federal Inland Revenue Service (FIRS).

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“VAT was introduced in 1993 to replace the sales tax in the states,” Almona said.

“The original formula for the distribution was 50 percent to the federal government, 35 percent to states, and 15 percent to LGAs. But with effect from January 1999, the formula was adjusted to be 15 percent to FGN, 50 percent to states, and 35 percent to LGAs.

“Presently, the States and LGAs share their allocation using the factors of equality 50 percent, population 30 percent, and derivation 20 percent.

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“We advise that the current sharing formula for the States and LGAs be adjusted using the factors of equality 20%, population 30%, and derivation 50% going forward.

“This arrangement should be agreeable by all concerned parties. This can drive innovation on revenue generation in all the States towards increasing their internally generated revenue.

“It will also make the States more sensitive to the needs of businesses in their respective States, knowing that an enabling business environment is likely to boost tax revenues.”

She further expressed dissatisfaction with confusion generated by the issue on the payment of VAT charges to FIRS or the state government.

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“This is not healthy for the business community and planning. We, however, hail the swift intervention of the Court of Appeal to reduce the uncertainties surrounding these controversies.

“Businesses should not be subjected to unnecessary hurdles and made to pay the same tax twice from different agencies.

“The Federal Government should urgently establish an understanding with states on what is best for the nation and businesses.”

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