UncategorizedVAT Inclusion: A Pro or Con to The Nigerian Economy.

Abayomi OgunniyiJune 25, 202232010 min

Few weeks ago, the Federal Inland Revenue Service proposed a bill suggesting to the National Assembly that the Value Added Tax should be included in the Exclusive Legislative list of the amended 1999 Constitution of the Federal Republic of Nigeria.

The intention took an interesting approach when the Lagos and River State Government posed a challenge on FIRS.  According to a report by Vanguard Newspaper on  September, 7, 2021, The Federal Inland Revenue Service had filed an application to the Federal High Court, Rivers State requesting that the Federal High Court stop the state government from commencing the collection of value added tax in the state Vanguard; it was on the same day the Lagos State Government passed the Value Added Tax bill for the first and second reading at the Lagos State House of Assembly,  lamenting on the low monthly allocation received from the Federal Government despite generating an excess of 500 Billion Naira in Value Added Tax annually as disclosed by the speaker, Honorable  Mudashiru Obasa at the Lagos State House of Assembly, Complex, Alausa, Ikeja, Lagos State according to Vanguard.

 The Federal Inland Revenue Service application was dismissed by the Federal High Court in Port Harcourt; it was dismissed on the basis that it contradicts the principle of equity, noting its grievous implication to the state economy if it is upheld. Following the Judgment, Rivers State Governor Nyesom Wike had directed the River State Revenue Service to commence the collection of value added tax from corporate bodies and business in River State. In his statement as reported by the Vanguard Newspaper published on September 7, 2021 Vanguard, he stated that it was the constitutional right and authority of the state to impose, collect and utilize value added taxes and He directed River State Revenue Service to commence the collection of Value Added Tax ensuring that the state is able to regulate an effective administration of Value Added Tax in the state.

Wike’s emphasis on states with low economic activities and restrictive policies being negatively affected by the judgment of the Federal High Court raised a debate among states governors, economist and Public Affairs analyst on how economic activities are managed by states across the country.  It raised the call for fiscal federalism where states on its own devise a means of sustaining itself economically using the resources available to generate revenue for its state without depending on the Federal Government for monthly allocation. It is this call that prompts the Lagos State Government alongside states in the southwest region to sign the Value Added Tax Bill into Law; a decision that was not received by the Federal Government, Federal Inland Revenue Service and the Northern Governors.

The situation poses a lot of questions by Nigerians who are asking why their region remits so much money in tax and yet generates less in revenue; Experts ask why the FIRS wants to embark on double tax collection from the state and the federal government knowing the struggle certain states encounter to remit their tax despite the low monthly allocation they get from the Federal government while states which remit less get higher monthly allocation from the Federal Government.

There are economic crises across the country which includes a high rate of unemployment, inflation in the prices of commodities, low investment turnout because of insecurity and a constant drop in the exchange rate. How will a state that generates 500 billion as tax still struggle economically despite remitting so much money to coffers of the Federal Government; the question lingering in Nigerians’ minds is what the inclusion of the value added tax will solve economically.

The inclusion of the Value Added Tax is an exposition to the poor run of the economy by the Federal Government that concentrates majorly on the oil sector, neglecting other aspects of the economy such as Agriculture and Mining, e-commerce, Manufacturing and Financial Technology in anticipation to generate more revenue.  The Federal Government’s failure to look elsewhere other than oil creates a problem of generating the desired revenue for infrastructural development, a situation that prompts states like Riverstate to stand on its own.

Many experts call for economic diversification within the system despite the FIRS seeking for an appeal to stop the state government from collecting value added tax. There were calls for economic partnership among states in Nigeria to ease the remittance of value added tax. Despite several suggestions, many Nigeria inquire if it will solve the economic problem across the country; will it improve their business and investment after remitting so much money in tax.

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Abayomi Ogunniyi

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