Whose VAT? | Dailytrust

Whose VAT?

Permit me to contribute to the raging debate on the appropriate tier of government to collect and spend in a winner takes all manner instead of the present 15:50:35 sharing formula for federal, state and local governments.

It is pertinent to trace the genesis of the VAT regime in Nigeria in order to appreciate the position of the altercating parties.

The Value Added Tax (VAT) Act No. 102 of 1993 was an offshoot of the repealed Decree 7 of 1986 nurtured Sales Tax. The inherent loopholes and inefficiencies in the states’ administered Sales Tax birthed the noble harmonisation idea by the Babangida regime in 1991 when the then Minister of Finance Alhaji Abubakar Alhaji head-hunted Emmanuel Ijewere to lead a committee including Prof. Sam Aluko in creating a robust consumption Tax system.

The committee made a recommendation to the Federal Military Government that a VAT Commission should be established for the purpose of administration and a deduction of five per cent is to be withheld by the VAT Commission as running cost, while the 95 per cent is shared amongst states on the ‘basis of collection’.

This was further altered to ratio 80/20 in favour of the states and 20 per cent as cost of administration that metamorphosed into ratio 50:25:25 in favour of the federal, state and local governments preceding the current 15:50:35.

Lest we forget, the Sales Tax belonged to the states and federal government merely stepped in as the tax reformer for the purpose of enhancing efficiency and not as beneficiary of generated revenue.

On the return to civil rule, the neglect of the basis of collection principle which in local parlance translates to ‘No Contribution, No Chop’ (NCNC) as Sales Tax or VAT is a consumption tax forced the Lagos State Government to challenge the provisions of the Act as to the appropriate tier of government required to administer VAT/Sales Tax which culminated in the re-introduction of the abrogated Sales Tax in the state.

The mantle has fallen on Governor Wike who challenged the unitary approach to government.

My advice is that we should not forget the reasons why the inefficient and ill-administered Sales Tax was abrogated in the first instance, if reasons why the Sales Tax failed are ignored something within me tells me, loud and clear that we have embarked on a fruitless search and at the end of the day, when we imagine that the new order is here, we would be terribly disappointed!

The hunting expedition of the lion and tiger in a team is expected to yield more spoils than each animal hunting alone, hence the lion can still carry the hunting bag of the tiger instead of the parties hunting alone.


Opeyemi Ajala FCA, is a former presenter Eagle Sports Hour on Eagle Cable Television

Dear Reader,
Every day, we work hard to provide readers such as you with the most accurate, up-to-date, and comprehensive information. Quality journalism costs money. Today, we're asking that you support us to do more. Your support means that Daily Trust can keep offering journalism to everyone in the world. Sign up for as little as N1,000 to become a member. Learn more about our membership here

Bank transfers can be made to:
Zenith Bank
Media Trust Ltd

Please send details of your bank transfer to the email or Whatsapp number below so that we can contact you.

If you have any questions, please let us know.

Email: membership@dailytrust.com
Whatsapp: +234 806 990 3410