VAT tussle: Businesses in Nigeria face ‘confusion’, LCCI warns

The Lagos Chamber of Commerce and Industry has said it is concerned about the confusion businesses in Nigeria face as a result of the tussle by some states and the Federal Government over the collection of Value Added Tax.

A recent court judgment had restrained the Federal Inland Revenue Service from collecting VAT and empowered the Rivers State government to collect tax from within the state.

The LCCI noted in a statement that following this judgment, the Rivers and Lagos State Houses of Assembly passed respective bills into law in their states to start collection of VAT.

Last week, the Court of Appeal in Abuja ordered a stay of execution of the court judgement pending the determination of the appeal filed by the FIRS.

“The first concern of the Chamber is the confusion that businesses face as to who is in charge of VAT collection. This is not healthy for the business community and planning,” the Director-General, Dr Chinyere Almona, said.

The group, however, hailed what it described as the swift intervention of the Court of Appeal to reduce the uncertainties surrounding the controversies.

Almona said, “Businesses should not be subjected to unnecessary hurdles and made to pay the same tax twice from different agencies.

“The Federal Government should urgently establish an understanding with states on what is best for the nation and businesses.”

The chamber noted that VAT was introduced in 1993 to replace the sales tax in the states, adding that the original formula for the distribution was 50 percent to the Federal Government, 35 percent to states, and 15 percent to Local Government Areas.

But with effect from January 1999, the formula was adjusted to be 15 percent to FGN, 50 percent to states, and 35 percent to LGAs, it said.

According to the statement, the states and LGAs currently share their allocation using the factors of equality 50 percent, population 30 percent, and derivation 20 percent. 

Almona said, “We advise that the current sharing formula for the states and LGAs be adjusted using the factors of equality 20 percent, population 30 percent, and derivation 50 percent 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.”