The Institute of Chartered Accountants of Nigeria (ICAN), yesterday, called on the Federal Government to leverage the ongoing constitutional review to fashion out the most suitable fiscal structure for the country in a manner that strengthens the sub-national levels of government while ensuring uniformity of treatment as much as possible.
It also charged the government that the process should include a review of the Value Added Tax (VAT) law, its administration and revenue sharing formula.
The Registrar/Chief Executive of the institute, Prof. Ahmed Kumshe, made the call in Lagos while reacting to the Rivers State value-added tax law/ judgment of the Federal High Court in suit no. fhc/ph/cs/149/2020 between the Attorney General of Rivers State, the Federal Inland Revenue Service and the Attorney General of the Federation.
He implored the government of Rivers State and the Federal Government to seek an amicable resolution of the issue sooner rather than later.
Kumshe said: “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. We believe that this development presents an opportunity to us to re-examine our fiscal federalism.”
Prior to the introduction of VAT in Nigeria in 1993, some states administered sales tax. However, the VAT replaced the sales tax effective 1994. The law empowered the FIRS to collect the tax, which is to be shared among the three tiers of government, with 15 per cent to the federal government, 50 per cent to states and 35 per cent to local councils.
There have been a series of legal cases against the National VAT law, its administration by FIRS and powers of states to enact similar laws such as sales or consumption tax, which was enacted by Lagos state in 2009. Subsequently, other states have enacted similar laws including Kano, Edo, Ogun, Rivers and Yobe state.
The registrar stated that while the move by the Rivers State government seeks to promote the principle of fiscal federalism, the institute is of the view that the matter should be approached carefully to achieve a win-win outcome for all stakeholders and address areas of concern like the impact on the ease-of-doing-business, vulnerable households and small businesses, the capacity of tax administration and multiplicity of taxes.
Kumshe added, “Many states still have various taxes, which are similar to consumption tax including the hotel occupancy and restaurant consumption tax, entertainment tax. Administering VAT at the state level may add to the myriad of taxes across different levels of government many of which are targeted at the same tax base. Collection of VAT by states may be more demanding, especially in the short to medium term, in the aspect of skills and knowledge, dealing with digital transactions, VAT audit and dispute resolution.”
