Taiwo Oyedele, chairman of the presidential tax reform committee, says businesses will suffer and the economy would retrogress if state governments are allowed to collect value-added tax (VAT).
Oyedele spoke on Friday during an interview on Channels Television’s Hard Copy programme.
According to the tax committee chairman, a similar approach was attempted in the 1980s with sale tax, but the sub-national governments failed to generate significant revenue through it.
“By 1999, we were writing the constitution because we now have the 4th republic. But what we did was to just replicate the 1979 constitution,” Oyedele said.
“In 1979, there was no VAT. So there was no VAT in the 1979 constitution.
“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.
“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.
“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, the economy would 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 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.”
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