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NEWS UPDATE: Akinloye James: Understanding Nigeria’s VAT administration: A historical perspective

NEWS UPDATE: Akinloye James: Understanding Nigeria’s VAT administration: A historical perspective

An African proverb says that it takes someone who knows the history of a location to locate the boundary of the ground. This is the reason we all should be grateful that the teaching of history as a subject in secondary schools has been restored.

The knowledge of history comes in handy in the current conversation on the administration of VAT in Nigeria. It seems, notwithstanding, antithetical that the people who have the advatage of history on their side are the ones leading agitation that States in Nigeria should begin to gather Value Added Revenue enhancement (VAT) instead of the Federal Inland Revenue Service (FIRS), which by extant laws is responsible for collection. To pry farther may unearth a different matter altogether.

For the advatage of the dubiety, VAT was introduced in Nigeria in 1993 by the Federal Armed services Regime. Recall that the initial reason VAT was introduced was because of the dissatisfaction with the then-existing revenue enhancement structure i.e. the Sales revenue enhancement. Before the introduction, Sales revenue enhancement was under the jurisdiction of the States and generally, it was poorly administered with marginal contribution in terms of revenue. Hence, after extensive deliberation on the matter, VAT was introduced as a federal revenue enhancement by the VAT decree of 1993.

With the advent of the 4th republic in 1999, the National Assembly took the VAT decree and legislated on it thereby making it an Human activity of Parliament. The VAT Human activity has been in location since and then. VAT was imposed on selected goods and services at a uniform rate of 5%. In 2007, attempts were made to increment the rate to in relation to 10% through the enactment of Value Added Revenue enhancement Human activity No. 2 of 2007 but it failed because the Nigerian public resisted the increment. Nevertheless nonetheless, the VAT rate was increased to 7.5% via the Finance Human activity 2019 and it took effect from Jan 2020.

Subdivision 8 subsection 1 of the VAT Human activity compels businesses to register for VAT within the firstly 6 months of graduation of activities. The business entity that desires to conduct business with an agency of whatsoever tier of regime in Nigeria is required to exhibit evidence of VAT registration and past times VAT remittances. A registered entity is required to create VAT returns monthly and either pay to or have from the FIRS the difference betwixt the input VATs and the output VAT.

By the provisions of the Human activity, VAT is administered on behalf of the federation and not on behalf of the Federal Regime. This agency that VAT is administered on behalf of the 3 tiers of Regime – i.e. the 774 Local Governments, the 36 States & the FCT and the Federal Regime. The revenue accruing from VAT is shared amongst the 3 tiers of Regime based on extant provisions. Presently, 35% goes to the Local Governments, 50% goes to Province Governments and 15% goes to the Federal Regime. By this system, 85% of VAT collected goes to the States and Local Governments patch 15% goes to the Federal Regime.

It is instructive to annotation that the VAT revenue is not paid into the federation account at inception but into a VAT puddle account. It is only after it has been shared and allocated to the 3 tiers of Regime that the portion due to the Federal Regime goes into the relevant consolidated revenue account.

Whilst it is natural to agitate, those initiating such or are involved in it ought not to just ventilate their displeasure. It is to a greater extent honourable to seek ways to acquire the appropriate system of governance seem into the plight also. Sometimes it could require lobbying relevant authorities to acquire your dot across and elicit the essential activeness.

One of the criticisms levelled against the Sales revenue enhancement system before the introduction of VAT in 1993 centred on structure and administration. By hindsight, it was argued that the mechanism and procedures for implementing the revenue enhancement system were inadequate and hence accounted for the consistent low yields and intergroup inequality. As well, there was the challenge of bigotry, regionalism and other divisive sentiments that constituted drawbacks, thereby prompting the Federal Regime to present the Value Added Revenue enhancement in 1993 which came into effect on 1st Jan 1994.

To those agitating that states collect VAT arising within their jurisdiction, the query they should respond is whether there exists the essential structure and administration to properly embark on such a venture? Have the issues of ethnic bigotry, regionalism and other divisive sentiments been tackled, to extent that a reversal to the old system is guaranteed?

The National Assembly resumed on Tuesday, September 13, 2021, after their two-month annual holiday, to keep with the third yr of the 9th Assembly. Do citizens seem to the Parliamentarians for a solution to the revenue enhancement imbroglio? The state of affairs, whether left unresolved adds to the litany of challenges in the ground.

Akinloye James is the President and founder of the Initiative to Preserve Democracy. He can be reached via +2348122233309.


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