The Chairman of the Federal Inland Revenue Service (FIRS), Dr. Zacch Adedeji, has described the allocation of 70% of value-added tax (VAT) proceeds to Lagos, Rivers, and the Federal Capital Territory (FCT) as unfair to the remaining 34 states.

Speaking during an interactive session with members of the House of Representatives on the proposed tax reform bills on Monday, Adedeji revealed that he signed off 42% of October VAT proceeds to Lagos State last Friday.

Addressing the concerns of northern lawmakers about potential disadvantages for their states under the proposed tax reforms, Adedeji 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.

Adedeji criticised the arrangement, pointing out that 70% of Nigerians who consume the products and services provided by these companies are spread across the country.

To illustrate, he cited the example of a major mobile telecommunications network, MTN, which contributes the highest VAT to Lagos despite its services being consumed nationwide.

“What the bill seeks to correct is that the existing structure does not represent the interest of either the President or the nation,” Adedeji said.

“Today, I just signed the data on VAT for October. Lagos will take 42% of the VAT, Rivers will take 16%, Oyo State will take 5.2%, and the FCT will take 10%. Go and check; these three states are taking more than 70%. Why? Because those are the places where the head offices of those companies are.

“As we know, 70% of consumption is not accruing to those three states. So, whatever way you look at it, apart from Lagos, Rivers, and FCT, every northern state would benefit. That is the Bill being presented.

“If you look at it, MTN contributed the highest, but because MTN’s head office is in Lagos, all derivation from MTN is accruing to Lagos. With this Bill, irrespective of the economic situation of any state in Nigeria, all states would benefit.”

Adedeji expressed concern over the disparity, noting that states like Borno and Bauchi collect only 0.32% and 0.4% of VAT proceeds, respectively, compared to Lagos’ 42%.

“Any day I sign it, I don’t feel like I am a Nigerian because this is not what we represent in our prayer as a nation. That is why, in the wisdom of Mr. President, we need to change this structure,” he stated.

The FIRS boss assured lawmakers that the proposed tax reform bills would ensure a fair distribution of VAT proceeds based on consumption.

His remarks were met with applause from lawmakers, although conflicting opinions emerged during the session. Babajimi Benson (APC, Lagos) and Adamu Yusuf Gagdi (APC, Plateau) expressed concerns about the impact of the reforms on their respective states.

Gagdi questioned how conflict-displaced citizens in the North could benefit from VAT proceeds tied to consumption and other import-related taxes. Adedeji reiterated the necessity of the reforms, calling for fairness in the distribution of resources across the federation.

Source: https://guardian.ng/business-services/its-unfair-for-lagos-rivers-fct-to-have-70-vat-proceeds-firs-boss/

Is Kano consuming alcohol when they take VAT from alcohol? That formula is fair enough if we must grow. The north wants VAT shared by consumption but get VAT from what they do not consume presently. How does lagos get rewarded for absorbing the pollution that goes with value-addition(manufacturing)?

“As we know, 70% of consumption is not accruing to those three states. So, whatever way you look at it, apart from Lagos, Rivers, and FCT, every northern state would benefit. That is the Bill being presented.

Every state on his own, the era of free money is coming to an end, if you want the lion share, improve the IGR of your state. The issue here is that most states governor are lazy and they have nothing to offer, all they are interested in is to go to Abuja and collect federal Allocation.

What is other states contribution to the tax?

But states banning and destroying beers can have VAT

Even the ones collected, we can't see how it's been utilized.

But they are the one generating that same VAT now

Why should South South state also be getting more Oyel money than other states most especially Bayelsa state with 3 m+ population yet nothing to show for the huge money they have been receiving monthly

Hmmm, I know that the firs guy will sweet talk our rubber stamp reps into agreement. The tax reform will be good for Nigeria if properly implemented

If this is truly the essence of bringing this bill to light, then it's a welcome development

There's no modification made to the tax bills that won't see Lagos, Abuja and Port Harcourt getting the most vat because they are the core consumers in Nigeria.

Even Ogun State, which has many industries, cannot stand a chance because most goods produced in Ogun State are consumed in Lagos and across Nigeria.

Just as the middle class is quickly varnishing, there's no conscious effort to distribute the wealth of Nigeria. We are still living with the "grab as much as you can" disease.

helinues:
But they are the one generating that same vat now

Today will be wasted?

Matters arising

I think the FIRS boss stands on the principle of fairness and justice.

Leave VAT to states

Okay

Ok

As much as this is fine, northern states shouldn't benefit that much from VAT raised through alcohol beverages and similar substances.

Tinubu high headedness and mis governance will soon be his undoing.

Let me help these people 30% to the headquarters, 30% to the location and states of the consumers another 30% to the location of the factories. The remaining 10% to the Federal government . This should apply to oil, gas , hydro electric, coal etc

Noted

A welcome development.
It will evenly distribute resources to the state irrespective of where the revenue comes from.

helinues:


No, you are the one wasting your life away trolling others

Productive you need to create on average of 5 monikers daily just to tell me to look for job

Why did you stop to be sounding normal?

Meanwhile, we have started brightly as usual while you are wasting your life away.

We must help you to locate the missing senses

Rabbish

Okay so gbam we rule on wastage today !

“As we know, 70% of consumption is not accruing to those three states. So, whatever way you look at it, apart from Lagos, Rivers, and FCT, every northern state would benefit. That is the Bill being presented.

“If you look at it, MTN contributed the highest, but because MTN’s head office is in Lagos, all derivation from MTN is accruing to Lagos. With this Bill, irrespective of the economic situation of any state in Nigeria, all states would benefit.”

So why are northern governor’s against the bill?

BAT na master, abeg! Someone listening to Adedeji would think that he was siding North. The bill is to move funds to where consumptions are and not where the head offices of the production companies are located.
If 1m people consumes alcohol in Anambra, the VAT there to should go to Anambra. If 10 people consumes alcohol in Kano, they get vat only on the 10 people that consumes the products.

If 10m people in Lagos accesses network services from MTN, the VAT there goes to Lagos. If only 50k people accesses or uses MTN services in Kebbi state, the VAT that goes should only be on the 50k people that uses the services.

I think this is fair and Mr. President should be supported and commended for initiating this fiscal reform. VAT as a consumption tax is also a "destination" tax and the locations where consumers of goods and services lives, should enjoy higher percentage allocation.