According to him, “Lagos is the biggest loser in the reform bill because most companies headquartered in the state currently remit their VAT there due to their centralised finance departments”.
He stated that the framers of the constitution mirrored the 1979 version, but without the VAT. In 1999, when the constitution was introduced, VAT was not included, yet the government continued to collect it.
“Some states like Rivers State and Lagos State are in court saying that VAT should be collected by the state because they feel that they are not getting enough for the contribution they are making into the pot, and therefore if they collect it as a state tax, they will be better off”, he added.
Oyedele pointed out that while Lagos and Rivers States have argued that direct VAT collection would more accurately reflect their contributions, granting them the authority to collect it independently could lead to chaos for businesses.
”That is the equivalent of 100 per cent derivation. For us, as we’re working on these tax reforms. We said if we get states to start collecting VAT in Nigeria, it will be chaotic for business because we know for a fact that states in Nigeria will not respect input-output.
“However, under the reforms, VAT collection would be adjusted to address inequities, redistributing revenue away from Lagos despite its significant contributions”, he noted.
Oyedele said, “As of today, when companies remit their VAT, they do so from their head office because that’s where they have the finance department. So MTN, BUA, Dangote, Airtel, all the banks, most of them are headquartered in Lagos. Some of the oil companies are headquartered in Rivers State.”
In October 2024, President Bola Tinubu introduced four Tax Reform Bills to the National Assembly, aimed at overhauling Nigeria’s tax system.
These proposed laws—the Nigeria Tax Bill 2024, the Tax Administration Bill, the Nigeria Revenue Service Establishment Bill, and the Joint Revenue Board Establishment Bill—are designed to streamline existing tax laws, improve tax administration, and boost revenue generation.
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