As reactions continue to pour in over the struggle that states and not the federal government should be responsible for Value Added Tax collection being championed by Rivers state governor, Nyesom Wike, a notable authority on tax related matters Taiwo Oyedele of PWC says the Federal government will interestingly be the biggest beneficiary of the new regime should it come to stay.
According to Oyedele, the regime will see the federal governments total VAT receipts go up. He made this assertion while speaking on Channels TV Politics Today.
Earlier the FIRS at a press conference in Abuja today had said that collection of VAT at the state level cannot work as there is no country in the world where VAT works at the subnational level.
Mr. Oyedele further stated that Lagos contributes 60-65% of domestic VAT. But Lagos also has what is called the ‘HQ effect’ which essentially means that all companies with head quarters in Lagos (which is most of the biggest companies in the country) pay their national VAT in Lagos.
However, with the proposed new regime, that will have to change. The VAT which before now was being paid wholly to Lagos will now have to be spread across all the States where such companies have offices/branches/operations, based on the relative contributions of those offices.
This in essence means that Lagos will see its currently-estimated contribution go down. He also stated that the States’ collection efficiency cannot match FIRS in the next 2 to 3 years. It has taken FIRS 28 years to get to this level of collection efficiency. VAT, he says, is a complicated tax to administer.
