By Industrial Digest
“We advise that the current VAT sharing formula for the States and LGAs be adjusted using the factors of equality 20%, population 30%, and derivation 50% going forward”
That’s the reaction of the Lagos Chamber of Commerce and Industry (LCCI) on the ongoing legal rivalry between the federal and some states government over the collection of Value Added Tax (VAT).
VAT was introduced in 1993 to replace the sales tax in the States. The original formula for the distribution was 50% to the Federal Government, 35% to States, and 15% to LGAs. But with effect from January 1999, the formula was adjusted to be 15% to FGN, 50% to States, and 35% to LGAs. Presently, the States and LGAs share their allocation using the factors of equality 50%, population 30%, and derivation 20%.
LCCI in a statement through Dr. Chinyere Almona, its Director-General, said the new sharing formula is recommended by the Chamber 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 said.
Recently, a court judgment restrained the Federal Inland Revenue Service (FIRS) from collecting Value Added Tax (VAT) and empowered the Rivers State government to collect tax from within the State.
Following this, the Rivers and Lagos State Houses of Assembly passed respective Bills into law in their States to start collection 0f VAT. Equally, the Court of Appeal in Abuja has ordered a stay of execution of the court judgment pending the determination of the appeal filed by the FIRS.
Image: Dr. Chinyere Almona, DG, LCCI