The Chairman of the Presidential Tax Reform Committee, Taiwo Oyedele, has stated that businesses will suffer and the economy will regress if state governments are allowed to collect value-added tax (VAT).
Speaking in an appearance on Channels Television’s Hard Copy on Friday, Oyedele explained that a similar approach was tried in the 1980s with sales tax, but sub-national governments were unable to generate significant revenue from it.
Oyedele further noted that the omission of VAT collection as a federal responsibility in the 1999 Constitution was an oversight, given that it was one of the country’s highest revenue sources at the time.
His words: “By 1999, we were writing the constitution because we now have the 4th republic. But what we did was just replicate the 1979 constitution.
“Because it’s a residual matter means it belongs to the subnational. That’s why Rivers State and Lagos have been to court and won. In 1979, there was no VAT. So there was no VAT in the 1979 constitution,” he said on the programme.
“However, by 1999, we had implemented VAT for about five years. And it was becoming our top revenue tax. How on earth did we forget to put it in the 1999 constitution? Because it wasn’t stated in the 1999 constitution, lawyers will state to you that it’s a residual matter.
“If we get a judgment from the Supreme Court today, it will tell you that VAT should be collected and administered by states. That will be chaotic.
“States will collect less, businesses will suffer, and the economy will retrogress.
“On balance, the new reform is meant to treat everybody equitably. Try to get us out of the impression that when you start doing VAT at the state level, you make so much money, which is not the case.
“In fact, today, the VAT on imports and international services is actually more than the VAT we collect in Nigeria, within our jurisdiction.
“And that amount that is collected from international services and import VAT is not attributed to any state. It goes into the pool and is shared.
“So, today we shared VAT between and among states based on derivation, 20 percent; based on equality, 50 percent; and based on population, 30 percent we are proposing that correct derivation and share, 60 percent based on derivation, 20 percent based on population and 20 percent based on equality.”