VAT : Current sharing formula for the States and LGAs be adjusted …. LCCI

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The Lagos Chamber Of Commerce and Industry LCCI has expressed concern over the confusion that businesses face as to who is in charge of VAT collection. This is not healthy for the business community and planning.

The Director General LCCI Dr. Chinyere Almona, FCA, however, hail the swift intervention of the Court of Appeal to reduce the uncertainties surrounding these controversies.

Aloma said Businesses should not be subjected to unnecessary hurdles and made to pay the same tax twice from different agencies. The Federal Government should urgently establish an understanding with states on what is best for the nation and businesses.

VAT was introduced in 1993 to replace the sales tax in the States. The original formula for the distribution was 50% to the Federal Government, 35% to States, and 15% to LGAs. But with effect from January 1999, the formula was adjusted to be 15% to FGN, 50% to States, and 35% to LGAs. Presently, the States and LGAs share their allocation using the factors of equality 50%, population 30%, and derivation 20%.

“We advise that the current sharing formula for the States and LGAs be adjusted using the factors of equality 20%, population 30%, and derivation 50% 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”.

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