Lagos Chamber of Commerce and Industry (LCCI) has called for adjustment in the current revenue sharing formula for states and local government areas.
The Chamber in a statement issued to LEADERSHIP, said that “A court judgment 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.
“Following this, the Rivers and Lagos states’ houses of assembly passed respective Bills into law in their states to start collection 0f VAT. The Court of Appeal in Abuja has ordered a stay of execution of the court judgement pending the determination of the appeal filed by the FIRS.”
The director-general of LCCI, Dr. Chinyere Almona, said that “The first concern of the Chamber is the confusion that businesses face as to who is in charge of VAT collection. This is not healthy for the business community and planning.
“We, however, hail the swift intervention of the Court of Appeal to reduce the uncertainties surrounding these controversies.”
She stated further that businesses should not be subjected to unnecessary hurdles and made to pay the same tax twice from different agencies, saying that the federal government should urgently establish an understanding with states on what is best for the nation and businesses.
She explained that VAT was introduced in 1993 to replace the sales tax in the states.
According to her, the original formula for the distribution was 50 per cent to the federal government, 35 per cent to states, and 15 per cent to LGAs. But 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. Presently, the states and LGAs share their allocation 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 be adjusted using the factors of equality 20 per cent, population 30 per cent and derivation 50 per cent going forward.
“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,” Almona said.