While tax experts see the current happening as a good development which will wake up sleeping states to the task of generating revenue internally, the initial challenges that the court judgement will pose to taxpayers and to states that do not have existing structures for collection of VAT are hurdles they have to scale.
According to the MAN chief executive, manufacturers, like many other business operators in Nigeria, are deeply concerned about what becomes of their fate come September 20 when businesses are expected to file VAT claims, and beyond. “Also, we should not be put in a situation where we have to pay both governments the same tax. This will amount to an overkill for the struggling manufacturing sector, and I, dare say, a recovering economy. This is potentially dangerous, not only to the profitability of the manufacturing sector, it is ruinous to the disposable income of the average Nigerian consumer,” Ajayi-Kadir said.
“Some states will have almost nothing to collect and the federal government will actually be better off. At the moment it takes about 15 per cent of the VAT but if this judgement is implemented and every state collects VAT, it means that the FG will collect on international trade and the Federal Capital Territory . As of last year, VAT collection was N2.2 trillion, out of that about N550 billion was on import tax, which is already like 25 per cent.
The official argued that whilst the implementation will cause a huge disruption to the existing tax collection process, thereby putting taxpayers in confusion, a middle ground can be reached by adjusting the present sharing formula. In his reaction, Mr. Abiodun Ajayi, a chartered accountant and tax expert with over 20 years of experience, said going by the ruling of the court, state governments should take steps to create the enabling environment that will attract huge investments to build strong tax generation structures.
Ajayi dismissed the argument that state governments lack the capacity to collect VAT in their various states, saying that lack of capacity is not a key factor in this regard. An economist and former director-general of the Lagos Chamber of Commerce and Industry , Dr Muda Yusuf said, “The controversy over the jurisdiction of VAT between the states and federal government is for the judiciary to settle. It is a question of law and the interpretation of the law, but there are legal as well as equity issues in the VAT question.
“The reason is that there is a strong correlation between the volume and scale of economic activities, VAT revenue generated and negative externalities to the host states. Such economic activities generate proportionate negative externalities which the host states have to take responsibility for. “Once it is passed into the law, some states will feel it at the beginning, but it is a way to have true federalism because some states who are sleeping right now will then wake up and start looking inwards on how to develop their states.
Speaking in the same vein, the founder of Blockchain Mobile Technologies, Mr Stanley Okwu, told our correspondent that if states finally get the nod to start collecting TAX, it will bring about speedy development of each state in Nigeria. In specific terms, Justice Tsanami granted status quo ante below in favour of the FIRS, and against the respondents.FIRS, in an appeal marked CA/PH/282/2021, is praying the court to set aside the judgment of a Rivers State High Court which granted power to the state to collect Value Added Tax.
The judgement had declared that the Rivers State Government had the right to collect Value-Added Tax and Personal Income Tax in the state, and not the Federal Inland Revenue Service. The Lagos State government, in line with the judgment, also passed a VAT bill and asked the FIRS to stop collecting VAT from businesses in the state.
I support state government collecting VAT, because that will change attitudes of some people to tax payers, which be viewed as assert to defend and protect, other than using religion to distroy people businesses, yet be assisted with taxes same business in other states generated.
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