The Lagos Chamber of Commerce and Industry(LCCI),has urged the Federal Government to consider adjustment of the sharing formula of Value Added Tax (VAT) with a view to laying to rest the ensuing crisis over the level of government that is entitled to collect the tax .
A court verdict last week restrained the Federal Inland Revenue Service (FIRS) from collecting Value Added Tax (VAT) and empowered the Rivers State government to collect tax from within the State.
Sequel to this development, the Rivers and Lagos State Houses of Assembly passed respective Bills into law in their States to start collection 0f VAT.
The Court of Appeal in Abuja has ordered a stay of execution of the court judgement pending the determination of the appeal filed by the FIRS.
The Director General of LCCI,Dr.Chinyere Almona,said the first concern of the Chamber is the confusion that businesses face as to who is in charge of VAT collection.
She said:”This is not healthy for the business community and planning. We, however, hail the swift intervention of the Court of Appeal to reduce the uncertainties surrounding these controversies.Businesses should not be subjected to unnecessary hurdles and made to pay the same tax twice from different agencies”
According to her,the Federal Government should urgently establish an understanding with states on what is best for the nation and businesses.
She said VAT was introduced in 1993 to replace the sales tax in the States. The original formula for the distribution was 50% to the Federal Government, 35% to States, and 15% to LGAs.
She also said with effect from January 1999, the formula was adjusted to be 15% to FGN, 50% to States, and 35% to LGAs. Presently, the States and LGAs share their allocation using the factors of equality 50%, population 30%, and derivation 20%.
She said:”We advise that the current sharing formula for the States and LGAs be adjusted using the factors of equality 20%, population 30%, and derivation 50% going forward. This arrangement should be agreeable by all concerned parties. This can drive innovation on revenue generation in all the states towards increasing their internally generated revenue. It will also make the states more sensitive to the needs of businesses in their respective States, knowing that an enabling business environment is likely to boost tax revenues”
