Nigeria: Like Rivers, Lagos Seeks Law to Commence VAT Collection

LAHA Speaker, Rt. Hon. (Dr.) Mudashiru Ajayi Obasa

Just like Rivers State in the Niger-Delta which recently enacted its Value Added Tax (VAT) Law 2021 to regulate the effective administration of VAT in the state after a Federal High Court sided with the state in its judgment on the matter, Lagos State in Nigeria’s southwest has also taken steps to enact a law on VAT collection by the state.

To this end, a bill seeking to empower the state government to collect VAT has scaled the first and second reading at the Lagos House of Assembly (LAHA).

Titled “Lagos State Value Added Tax Law: A Bill for a Law to Impose and Charge Value Added Tax On Certain Goods And Services, Provide for the Administration of the Tax and for Related Matters,” seeks to empower the state to charge VAT at the rate of six per cent on the value of goods and services.

According to the Bill, “the value of taxable goods and services shall be determined in the following ways: where the supply is for money consideration, its value shall be deemed to be an amount which with the addition of the tax chargeable is equal to the consideration.”

It further states that revenue accruing for the VAT would be shared on a ratio of 75 per cent to 25 per cent between the State and the Local Government Council Areas.

The Bill empowers the Lagos State Internal Revenue Service to administer and implement the Law and account for money collected in accordance with the law.

Speaking on the Bill, the Speaker, Rt. Hon. (Dr.) Mudashiru Ajayi Obasa, asserted that the state stands to benefit if the Bill is passed into law, saying the state would channel the fund to develop schools, hospitals, and infrastructure.

Obasa noted that the focus of the bill should not be on the sharing formula between the state and the local government, but on the opportunity to practice constitutional development to the state.

Deputy Majority Leader, Hon. Noheem Adams, stated that VAT was introduced as far back as 1954 in France before it spread global to developed countries in the world.

He said: “VAT is an indirect tax levied on expenditure that is been paid by a final consumer on goods and services, was introduced in Nigeria in 1993 by the Value Added Tax Act of 1993.

“In 1994, Nigeria started full operation of the Value Added Tax of 1993 which Nigeria generated N8.189 billion and in 1995, Nigeria generated N21 billion.”

Speaking to the Bill, Hon. Richard Kasunmu noted that if passed expediently, it would create more employment opportunities and increase more revenue to the state, as section 16(2) prohibit an importer of taxable goods to pay for the service on the goods before clearing, putting the responsibility of customs in relation to import duties, remit transfers, into consideration.

Justice Stephen Pam of the Federal High Court sitting in Port Harcourt on Monday dismissed an application by the Federal Inland Revenue Service (FIRS) seeking to stop the Rivers State Government from collecting Value Added Tax (VAT) in line with an earlier judgement in favour of the state. Pam had held that granting the application would negate the principle of equity.

Accordingly, Rivers State Governor Nyesom Wike had warned the FIRS against sabotaging the authority of the state to freely administer the VAT in line with the court ruling. In a state broadcast in Port Harcourt, Wike had alleged that the FIRS was bullying corporate bodies and business entities in the state for refusing to pay VAT to the federal agency. He said Rivers State would not allow further collection of VAT from corporate bodies and businesses operating in the state by the federal government agency.

Segun James