CITN, VAT

By Providence Adeyinka

At the backdrop of the on-going legal tussle between the Federal Inland Revenue Service, FIRS, and the Rivers State Government over right to collection of Value Added Tax, VAT, the Institute of Chartered Accountants of Nigeria, ICAN, has called for a review of the VAT law, its administration and sharing formula.

In a statement signed by Registrar/Chief Executive, Mr Ahmed Kumshe, and made available to Vanguard, ICAN implored the litigants to seek an amicable resolution on the issue sooner, rather than later.

Kumshe stated: “It should not be allowed to degenerate given the country’s precarious tax revenue position and the general business environment. It is important to protect the taxpayers and provide certainty to businesses.

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  “We believe that this development presents an opportunity to us to re-examine our fiscal federalism and leverage on the ongoing constitutional review to fashion out the most suitable fiscal structure for the country in a manner that strengthens the sub-national level of government while ensuring uniformity of treatment as much as possible. This process should include a review of the VAT law, its administration and revenue sharing formula.

“We are of the view that the matter should be approached carefully to achieve a win-win outcome for all stakeholders and address the following areas of concern: impact on the ease-of-doing business; multiplicity of taxes; capacity of tax administration; impact on vulnerable households and small businesses.”

Highlighting some of the historical perspective, he said that prior to the introduction of VAT in Nigeria in  1993, some states in Nigeria administered sales tax.

However, according to him, “the VAT law replaced the sales tax effective from 1994. The law empowered the FIRS to collect the tax which is to be shared among the three tiers of government – 15 percent to the Federal Government, 50 percent to States, and 35 percent to Local.”

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