The Federal Inland Revenue Service (FIRS) has thrown its weight behind some members of the National Assembly who are against the sharing formula in the allocation of Value-Added Tax (VAT) in the country.
The Federal agency noted that about 34 States of the federation are at a disadvantage in favour of Lagos, Rivers and Abuja.
Dr. Zacch Adedeji, the chairman of FIRS, expressed displeasure that Lagos, Rivers and the Federal Capital Territory, Abuja will take 70 percent of the proceeds of VAT generated in their domains, describing it as unfair to the remaining 34 states.
He made this during an interactive session with members of the House of Representatives on the proposed tax reform bills.
Adedeji disclosed that he signed off 42% of October VAT proceeds to Lagos State last Friday.
He agree with northern lawmakers’ sentiment and fears that the sharing formula has potential risk for their states under the proposed tax reforms.
Adedeji therefore argued that the existing VAT distribution structure does not serve Nigeria’s best interests.
He noted that the current framework allows Lagos (42%), Rivers (16%), Oyo (5.2%), and the FCT (10%) to take over 70% of VAT proceeds, primarily because the head offices of many revenue-generating companies are located in these regions.
Puncturing the arrangement, he noted that 70 percent of Nigerians who consume the products and services provided by these companies are spread across the country.
Citing the example of a major mobile telecommunications network, MTN, which contributes the highest VAT to Lagos despite its services being consumed nationwide, Adedeji expressed worry about the disparity, noting that states like Borno and Bauchi collect only 0.32 percent and 0.4 percent of VAT proceeds, respectively, compared to Lagos’ 42 percent.
