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VAT: LCCI Seeks Review Of Revenue Sharing Formula For States, LGs

Lagos Chamber of Commerce and Industry (LCCI) has canvassed the need for adjustment of the current revenue sharing formula at the sub-national levels to boost internally generated revenue (IGR) of the states and by so doing, facilitate broad-based grassroots development.

The organized private sector (OPS) group in a statement issued by its Director General, Dr. Chinyere Almona, gave the advice against the background of a recent court judgment which 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.

The LCCI boss pointed out that following the judgement, the Rivers and Lagos states’ houses of assembly passed respective Bills into law in their states to start collection 0f VAT after which he 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 director-general explained that the first concern of the Chamber on the matter was the confusion that businesses face as to who is in charge of VAT collection, describing the uncertainty as not healthy for the business community and planning.

While commending the swift intervention of the Court of Appeal to reduce the uncertainties surrounding these controversies, Almona cautioned that businesses should not be subjected to unnecessary hurdles and made to pay the same tax twice from different agencies.

The LCCI boss advised that the Federal Government should urgently establish an understanding with states on what is best for the nation and businesses.

Recalling that VAT was introduced in 1993 to replace the sales tax in the states, the director general stated that with effect from January 1999, the formula was adjusted to be 15 per cent to FGN, 50 per cent to states, and 35 per cent to LGAs with the states and LGAs currently sharing their allocations using the factors of equality 50 per cent, population 30 per cent, and derivation 20 per cent.

LCCI advised that the current sharing formula for the states and LGAs should be adjusted using the factors of equality 20 per cent, population 30 per cent and derivation 50 per cent going forward.

It maintained: “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”, the OPS group added.

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