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Friday, December 2, 2022

VAT collection: ‘Many States in trouble’

By Adekola Afolabi
& Samuel Edu


Ondo State Commissioner for Economic Planning and Budget, Pastor Emmanuel Igbasan has said that  Ondo State and many other states in the country would  have lesser revenue from the federation account as a result of decision tø allow states  collèct Value Added Tax, VAT.

Igbasan noted that putting VAT collection at the domain of states would create technical hitches for many states.

His words: “To say states should manage it will create some technical hitches for them. They might not even be able to collect as much as the federal government has the capacity and capability to collect.

“Also, it would mean that most states would have lesser allocations from the federal government because the fair distribution of VAT has helped to soar up the revenue profiles of many states that were not buoyant enough.

“When you import from abroad, you suffer import tax at the point of entry. When you want to make your annual return to the Federal Island Revenue Service,  you  deduct import tax and then pay the Value Added Tax.

“Now states do not control the maritime sector, they do not control Customs.

“So, for me, what I will suggest is simply that they give back to source, may be the originating states will have 50% of VAT for equity and fairness.”

The Commissioner also said state like Lagos which controls about 60% of the companies operating in Nigeria will definitely have more revenue.

“I take that position because some states suffer socio-economic costs of the activities of those companies that pay the VAT. So, states that bear the immediate consequence of economic activities should be given more consideration in sharing whatever comes in from VAT,” he added.

However, some economists have described the move to be in the right direction as they opined that it will greatly be in the interest of states.

Professor Simon-Oke Olayemi of the Department of Economics, Federal University of Technology Akure, FUITA lauded the National Assembly on this move.

The don said “it is a political somersault for the Federal Government to collect VAT for states, there are some states that do not contribute a dime in terms of revenue generation and yet these states will still be given equal allocation by the Federal Government.

“I feel this new move for states to collect VAT  is a good one as it will help each state to stand on their own and work harder.

Another economist  and a senior lecturer in the Department of Economics, Adekunle Ajasin University, Akungba Akoko, Dr. Bakare Adewale said he was only concerned about the implementation of the new policy.

In the opinion of Dr Fasoranti Mary, the policy will encourage states to invest more on industries establishment.

She said, “personally, I believe this is a good development as it will serve as encouragement for states to invest more in industry with the understanding that their revenue will be largely dependent on whatever they generate.

“Unlike when states that generate little or nothing to the purse of the Federal Government will have the same share with states with more contributions, this new policy will help correct this anomaly.”

Recalled that last year, a Federal High Court ruled that states had the power to collect VAT.

However, the Federal Government opposed the ruling and continued to collect VAT, projecting that it will collect N2.2tn in 2022 through the Federal Inland Revenue Service.

This decision of the Federal Government met deadlock on Tuesday March 1, 2022, as the National Assembly rejected a proposal seeking to move the collection of VAT from the concurrent to the exclusive list.

Out of the 85 senators who voted as against the 95 senators who registered to vote, 41 voted in favour of VAT being collected exclusively by the Federal Government while 44 voted against this move.


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