Taking a cue from Rivers State, the Lagos VAT bill titled, ‘Bill for a Law to Impose and Charge Value Added Tax on Certain Goods and Services, Provide for the Administration of the Tax and for Related Matters,” was on Thursday passed into law
According to the bill, the tax which shall be charged and payable on the supply of all taxable goods and services other than goods and services listed in the schedule of the law shall be computed at the rate of 6 per cent on the value of goods and services as prescribed under sections 5 and 6 of the Law, except the goods and services listed under Part III of the Schedule which shall be taxed at zero rates.
Fiscal Policy Partner and Africa Tax Leader at the PriceWaterCoopers (PwC), Taiwo Oyedele, said at least 30 states, which account for less than 20% of VAT collection would suffer significant revenue decline.
Oyedele explained that the federal government might be better off given that FCT generates the second-highest VAT (after Lagos) in addition to import and non-import foreign VAT.
He further clarified that the judgment may also have implications for taxes collectible by local governments, which are currently administered by states as well as the amendment via Finance Act 2020, which introduced Electronic Money Transfer levy in place of stamp duties, among others.
Also commenting, Prof Uche Uwaleke, a former Commissioner for Finance in Imo State and financial expert, said, “The judgement is in line with true fiscal federalism as it returns taxing powers concerning VAT to the state governments.”
If implemented, Uwaleke said, “It will boost the IGR of many states since they will now be in a stronger position to collect VAT. As you know, VAT collection efficiency in Nigeria is low partly because it is centrally collected. So, I think it will reduce the incidence of non-remittance of VAT collections by companies.”
An economist, Dr Muda Yusuf, said that the controversy over the jurisdiction of VAT between the states and federal government was for the judiciary to settle; noting that it was a question of law and the interpretation of the law.
According to the former Director-General of Lagos Chamber of Commerce and Industry (LCCI), VAT is essentially domiciled with the sub-nationals in many jurisdictions around the world, adding that in some instances, it is imposed as a consumption tax.
He stated that there was a strong correlation between the volume and scale of economic activities VAT revenue generated and negative externalities to the host states.
He listed the externalities to include the impact on the environment, pressure on economic infrastructures such as roads, pressure on social infrastructure such as schools and hospitals, social problems such as heightened criminality, waste management as well as urbanisation challenges such as the proliferation of slums and traffic congestion among others.
These externalities, he said, put enormous pressures on the finances of the states that provide the bulk of the VAT revenue.
Source: Daily Trust