Following the Federal High Court’s decision to rule VAT collection in favour of Rivers state government instead of FIRS, other states – particularly Lagos state – have begun taking the leap to appeal for VAT collection rights.
While the Chartered Institute of Taxation of Nigeria (CITN) has explained it is reviewing the situation, the Federal Inland Revenue Service is engaging the Lagos State Government on the need to maintain the status quo till the determination of the appeal instituted by the FIRS.
“It is about supporting the quest of Rivers State which has already filed a case at the Federal High Court, Port Harcourt which it won on why states should legitimately collect all VAT in their states and not the Federal Government that presently does and now redistribute, taking 15 per cent, giving states 55 per cent and the rest to LGs. Although FIRS has appealed the judgement, everyone and other states who are advocates of fiscal federalism must support the quest by River State. VAT is a form of sales tax and the Supreme Court ruled in 2015 or thereabouts that states are empowered to collect sales tax and not Federal Government which then redistributes. Lagos contributes over 60 per cent of the VAT collectibles but ends up getting a pittance after it is sent to Abuja,” said public affairs analyst Tayo Ogunbiyi.
The Federal Government however, maintains that handing over VAT collection rights to states will significantly deplete projected revenue generation for 2022.