Regarding the RMAFC’s position on the proposed VAT sharing formula, it is important to provide some context and highlight the issues which the reforms seek to address.

1. VAT was introduced via a decree in 1993 to replace the sales tax which was being administered by states at the time. While it is being centrally collected to ensure better efficiency and manage the intricacies of the multi-layered nature of VAT, there is a recognition that VAT remains a state tax.

2. Hence, 85% of the revenue is distributed to states with the federal government retaining only 15% which is a fraction of the VAT generated by the FCT and import VAT that ordinarily belong to the federal government. The sustained central collection and sharing formula therefore reflect this understanding among the tiers of government.

3. The tax predates the 1999 Constitution and despite having been in operation for over 5 years, the tax is not mentioned in the 1999 Constitution making it a residual matter within the purview of the states.

4. As a result of the above, VAT is paid into a special pool account and not treated along with the other revenues accruable to the federation for which the RMAFC is expected to play an advisory role regarding the sharing formula as contained in section 162 of the 1999 Constitution. A similar revenue item is stamp duties which also belong to states and it is meant to be shared among them based on 100% derivation without any requirement for the RMAFC to be involved in determining the sharing formula.

THE ROLE OF RMAFC
We note without conceding to the view expressed by the RMAFC regarding the proposed sharing formula. We believe that the focus should be on the ongoing engagements with key stakeholders to reach an acceptable position as a matter of priority.

From the Commission’s statements, it is clear that more understanding of the issue is required to enable more constructive contributions to the debate towards an effective resolution. Some of the concerns expressed which are either not applicable or only require some clarifications include:

1. That VAT consumption needs to be determined based on taxpayer residence. This is not the case with VAT or any consumption tax unlike income tax.

2. The illustration regarding the purchase of an asset in Lagos for use in Kano does not pose any difficulties as VAT has an inbuilt mechanism for input and output VAT where only the VAT related to incremental value added in a jurisdiction will be attributed to such location with production treated as intermediate consumption at each stage of the production process prior to the final consumption.

3. There is no need for any technology to track the location of consumption, every eligible business will simply be required to indicate the location of sales in its VAT returns as stipulated under section 22(12) of the Nigeria Tax Administration Bill. It is not necessary to tag VAT collections to end-user locations from sale to consumption, neither is it practical to do so. Afterall we may not be able to tag services or creative work that are digitally delivered as intangible goods.

4. The horizontal distribution of VAT revenue among states is not based on a formula of 50% derivation, 35% population and 15% equality as stated by the Commission but rather 20% derivation, 50% equality and 30% population.

We are aware of various efforts by the RMAFC over the past decade including the nationwide consultation exercise on the review of the federation revenue sharing formula 3 to 4 years ago. Not only was VAT excluded from this exercise despite the apparent inequity in the distribution formula, the outcome of the revenue sharing consultation is yet to be concluded many years after. VAT administration is already under dispute, therefore seeking a political solution to avoid the risk of the tax being adjudged as a tax to be administered by states requires urgent action.

THE WAY FORWARD

We look forward to the RMAFC joining the ongoing effort including consultation with key stakeholders to arrive at a generally acceptable outcome. This moment calls for a constructive and objective approach focusing on finding a workable solution, avoiding further controversies and working together in order to move our nation forward.

Taiwo Oyedele
Chairman, Presidential Fiscal Policy & Tax Reforms Committee

mrrandomguy:
Mohammed Bello Shebi... Arewa forum have pressed his button.

Northerners have inertia for everything.

I see how "educated" southerners who believe Nigeria can work sweating inside AC. They are trying to convince a people with glaucoma to see a big picture.

The earlier the southern regions breakaway from these parasites and snails the better for them.

helinues:
Toh

farouk2much:
Nigerians will never forget or forgive APC......

Antoeni:
So No Other Tribes Can Chair That Committee Other Than a Yoruba Man?

Sheuns:




Hehehehe.

The same south that some people believe others are dot in a circle?

The last thing anyone should be preaching now is Southern unity. It’ll be very hard to achieve. The two major tribes down south that ought to work together are always at each other’s throats.

Maybe not them but their political supporters

farouk2much:
Nigerians will never forget or forgive APC......

Shawarmagirl:


Mrs Toh, is that all you have to say?

LegendHero:
Lol, Mohammed Bello Shebi was probably drunk when he made that statement.

But he already retract it so Mr. Taiwo should just lock up.
Every weapon fashioned against the tax bill SHALL not prosper.

fineboynl:
..nigeria was not way structured and it was caused by obj.

When i was in india. Every state have their own sim network. It was well so organized. If you carry your Mumbai sim to New Delhi. Your phone will enter roaming. Meaning your phone bill will be higher until you return back to Mumbai otherwise you get a new sim there. And any card you purchase will be that from New Delhi. The recharge card doesn’t work for another state sim.


Similar thing with cable tv

Then other state can force any company to open branches in there state if they most allow theirs product. Manufacturing companies knows where their markets is and will comply if it worth it.