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VAT Tussle: Nigeria and possible implications

By Okesanya Adenola

The current Legal tussle on VAT ongoing between some State Vis-à-vis the naturally endowed VAT generating State against the wish of Lazy endowed State and Federal Government will have direct implications on Nigerians no doubt.

When Some States are rejoicing for the Stay of Execution judgment by a Federal Court of Appeal on the matter, the opposite is the present condition of the unfavourable State and the FIRS, a revenue-generating body for Federal Government.

In the submission of Honourable Minister of Finance, Hon. ZAINAB AHMED, during her Budget defence before House Committee on Finance headed by Hon. JAMES FALEKE, she was quoted as saying that “based on fiscal assumptions and parameters in the Budget proposals, total federally disputable revenue is estimated at #8.433trillion in 2021. Total Revenue available to fund 2021 federal budget is estimated at #7.88Trillion. This includes grants and aid of #354.85b as well as the revenue of sixty government-owned enterprises. Oil revenue projected at #2.01Trillion, non-oil revenue is estimated at #1.49Trillion”.
In the process of achieving the Budgetary plan, the Federal Government proposed plans to introduce an additional 2.5% VAT rate in 2021 fiscal year as efforts aimed at increasing revenue generation for the actualisation of the Budget.

This pointed to the fact that VAT is a lifeline to Federal Government Budget plans and a source of revenue generation. The federal monthly Allocation to Federal, State, and Local Governments will be greatly affected.

The 2021 Federal budget will be staggering on this singular effect. Many Nigerians had been yearning for true federalism, for a State to Administered over her revenue is a pointer on true Federal system of government. With other factors put in place, the call for secession may fade away.

Many State will be unable to pay Civil Servants salaries and other emoluments. Prior before now, all the revenue generated are shared according to Federal plans, 13 percent of derivatives specially and legally are given to oil-producing states. A state like Lagos State that generates 70 percent of National VAT has been agitating for special status which is denied. About 19, Northern State, due to Sharia Law are against sales of alcohol but they are beneficial to the VAT generated from Southern State sales on Alcohol.

The style has been described as robbing Paul to pay Peter.

Governor of Rivers State, Nyesom Wike, has gone off the State address on this judgment. He is optimistic that his State will go all out to abide by the Court ruling. Lagos State House of Assembly Bill on VAT has scaled through the Second reading. With all these, the State highly favoured with the judgement are repositioning to hit the ground running on increment in revenue generation for the betterment of their different States. On the contrary, the purported ill-fated States led by Katsina State Governor, Aminu Masari are jostling for the reversal of the judgement.

On this note, monthly Allocation to FG, State, and LG will be low and diminished. Infrastructure will be affected as funds available will be only meant for first-line charges. Many states that cannot think outside the box will reduce their Civil Servants’ strength, obtained loans, and experienced deteriorating infrastructure. Cutting clothes according to size may not be applicable.

Okesanya Adenola is the immediate past Leader of the House, Eredo Local Council Development Area (LCDA), Lagos State.

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