The Federal High Court’s ruling last month, which gives states right to collect Value Added Tax (VAT) from businesses operating under their jurisdiction, is resulting in conflict between governments. The federal government is seeking stay of execution to stop states from implementing the judgment while in Lagos State, a rift has blown out between the State and local governments over the proposed VAT sharing formula.
The Lagos State government had proposed 75% for state and 25% for local governments in VAT bill being considered in the State House of Assembly. In response to the bill, the Local Government Authorities in Lagos State under the aegis of Conference of 57 Local Governments and Local Council Development Areas (LCDAs) have requested for an equal sharing formula with the state, asking for a 50-50 sharing formula.
The News Agency of Nigeria (NAN) reports that the request was made by the Secretary of the Conference 57 and Chairman of Odi-Olowo/Ojuwoye LCDA, Abdulrasak Ajala, at a one-day public hearing on the bill organized by the Lagos State House of Assembly on Wednesday,
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According to Ajala, the councils required a better sharing formula in the proposed VAT law to pursue meaningful development adding that being the closest to the grassroots, those councils that host the companies, should benefit from a better share than the 25% in the bill.
“On the distribution of revenue, you will agree with me, Value Added Tax is on consumption and production, and all these economic activities are domiciled in our respective communities. In addition, local governments, being the closest to the grassroots, need more revenues given the enormity of the responsibilities the Constitution confers on us.
“Hence, the 25 per cent in the bill is grossly inadequate for local governments to execute all the promises we made to our people; and of course all our electoral promises. This is the reason we are making a passionate appeal, on behalf of Conference 57, that we should raise the bar higher, from 25 per cent to 50 per cent,’’ Ajala said.
The revolutionary VAT judgment, which has been widely hailed as a bold step to fiscal federalism in Nigeria, was led by the Rivers State government. The governor of the state, Nyesom Wike, has ordered the Rivers State Revenue Service (RSRS) to fully implement the judgment.
Lagos is the only other state hastily enacting law to implement the judgment. The Lagos State Attorney-General and Commissioner for Justice, Moyosere Onigbanjo (SAN), said the judgment on the VAT law was not valid only in Rivers state, but any state in the country stood to benefit from it.
He noted that the National Assembly does not have powers on VAT, which was what brought them to where they are today.
In support of Onigbanjo, the Chairman, House Committee on Finance, Rotimi Olowo, had said that it would make no sense if all monies accruable to Lagos state was taken by the Federal Government.
While the economic independent states are likely going to benefit more from the ruling on VAT collection, the call by the Conference of 57 Local Governments and Local Council Development Areas for equal sharing of the revenue with the state government, is suggesting that states will have their own domestic scores to settle with local governments if the Appeal and Supreme Courts eventually uphold the trial judgment.
Update: Lagos Passes VAT Bill
Meanwhile, the Lagos State House of Assembly has passed the VAT bill along with an anti-grazing bill. The state joins Rivers State on the VAT bill.
The Lagos State House of Assembly has passed the Value Added Tax (VAT) bill, a few days after the bill passed the first and second readings at the State House of Assembly.
The House also passed a bill prohibiting the open grazing of cattle in the state after unanimous votes by the lawmakers at a sitting where the 2 bills were read for the third time during the plenary session on Thursday, September 9, 2021.
Following the passage of the 2 bills, the Speaker of the House, Mudashiru Obasa, commended his colleagues for their passion to see that the state continues to grow and also directed the Acting Clerk of the House, Mr Olalekan Onafeko, to transmit clean copies of the bills to the state governor, Babajide Sanwo-Olu, for assent.