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VAT: Another Side To The Drama - Politics - Nairaland

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FG Removes VAT From Cooking Gas. Price To Crash / Femi Fani-Kayode Reacts To The Drama At National Assembly Today / Defections: The Drama, The Facts (2) (3) (4)

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VAT: Another Side To The Drama by jesus19984: 10:11pm On Sep 11, 2021
Any discerning observer of what is happening with the VAT issue will recognise that there is a background to it. The facade of 'fiscal federalism' that protagonists are using is just a smokescreen for underlying causes.

Unfortunately, most people are unable to delve deeper into topical issues in Nigeria today because of a kaleidoscope of bigotry, tribalism, regionalism, sectionalism, religion and other divisive sentiments. The politicians who push these narratives understand so well that we suspend our thinking caps when these sentiments are thrown into the mix.

Furthermore, as a people, we are to shortsighted to even contemplate the medium and long term implications of some of the narratives we parrot.

Data is hard evidence, which cannot be controverted. Truth is a tyrant that doesn't campaign for votes. In the end, we shall be confronted with its brutality when reality stares us in the face.

Let's even start by examining what VAT means. VAT is an acronym for Value Added Tax. Operative word is 'Value Added'. So in a chain of operation in the production of a good or service when value is added, or form changes there is an incidence of taxation. However, the protagonists of the imposition of VAT by state governments want us to believe that VAT is wholly a consumption tax. This is very disingenuous, and far from the truth. I will follow up this with the definition of VAT after posting this.

Matter of fact, is that VAT is collected at the point of consumption of goods and services but doesn't make it wholly a consumption tax. In the chain of production, and for the purposes of taxation the point of consumption of a good or service is the end of the spectrum. In between, there are several levels of value addition and supply chain that must have taken place before the final end of the spectrum of consumption. So, for instance, a good consumed in Lagos that wasn't produced in Lagos doesn't mean that all the value and supply chains took place in Lagos. This is the fundamental principle underpinning value added taxation.

Why is VAT collected at the point of consumption? The reason is quite simple, and it is this fundamental principle that the protagonists want to destroy, which will have serious consequences for the economy and people of Nigeria. The reason for collecting VAT at the point of consumption is to prevent a situation of multiple taxation. If you consider a product or service with varying levels of value addition and supply chain, if taxed at every of these levels, the taxes will be unwieldy. Thus, every jurisdiction in the world where VAT is charged has an agreed formula for calculating value addition, which is then harmonised to come up with a single rate across board. Again, this is the principal reason why VAT in any jurisdiction is not imposed by Sub-Nationals or local authorities. I don't know of any jurisdiction in the world where VAT is imposed by Sub-Nationals or local authorities. I challenge anyone who knows to tell me.

The divisive issues thrown into the mix are simply laughable. So a serious issue has been reduced into just the issue of the restriction of the sales of alcohol in some states. I am a beer man, and I truly love my beer. In all my years of drinking beer, the only times I have recalled paying VAT for beer was when I go to some highbrow hotels or clubs. The vast majority of beer sold and consumed in Nigeria is done at roadside bars, 'abeigi', street corner shops and in-house bars. I can also tell you for free that the volume of alcohol consumed in Sabon Gari in Kano will dwarf that consumed Ado Ekiti or Ijebu Ode.

Governor Wike says that he received 2billion monthly from VAT. He failed to tell you how much the local governments in Rivers State receives from VAT allocation from the FGN. For teasers, in 2020, Rivers State contribution to VAT coffers was 42 billion. The Rivers State Government and local governments got a total of 39 billion. That's a difference of 3 billion.

Now to some data for us to have a better understanding of the issue. Proceeds of VAT is shared amongst the 3 tiers of Government after 4% collection charge in the following way:

Federal Government - 15%
State Governments - 50%
Local Governments - 35%

Of the proceeds of VAT the FG and the FCT generates about 61% via imports from the seaports and international airports while the States generate 39%

Of the 39% generated by the States, Lagos and Rivers State generates less than 70%

Now imagine a situation where the courts strikes VAT off the exclusive list. The Federal Government and FCT get to keep their 61% while the States will hussle for the remaining 39%. So, what now happens to the Local Governments where the transactions actually take place

So, in the not too distant future, the States that are enacting their own VAT laws will realise that they were chasing a mirage. The version of 'fiscal federalism', of 'food is ready' mentality obtained from the courts is just a phyric victory. They don't even have the structures the FIRS built over the last 20 years to even be able to collect the VAT.

What will be their reaction in the circumstance? Brace up for thuggish tax collectors. States will enact their own versions of the VAT law to include things like food that were exempt from the federal law. At the point of buying a goat VAT will be paid. At the point of slaughter VAT will be paid. At the point of eating it at a restaurant VAT will be paid. There will be multiple taxation, increased inflation, and the ease of doing business will be more difficult, as well as and cost of doing business will become higher.

Lagos and Rivers States pride themselves as the biggest contributors to VAT collection in Nigeria. This is another mirage. Lagos State for instance enjoys what you can term as 'headquarters effect'. What this means is that for tax reporting purposes companies with headquarters in Lagos file their VAT returns there. For instance, a company like MTN which sells airtime and internet services all across the country file their VAT returns in Lagos. In Rivers for instance, NDDC has its headquarters in Port Harcourt. If it goes to Innosson Motors in Enugu to buy vehicles, it files its VAT returns from Port Harcourt.

Let me end by going back to the background I alluded to in the beginning.

There are two basic things making the state governments to react the way they are now.

1). Local Government autonomy is bitting hard on them. They are finding it increasingly difficult to corner the resources of the LGAs especially with the NFIU breathing down their necks
2). The Governors are angry that the 3% of COPEX in the PIA is going directly to the oil bearing communities. They want it to come to the state governments just like the 13% derivation.

Interestingly, in the agenda there are sub agendas. Some are being blind sided by the sheninighans playing out. Ultimately, there will be many losers, including those cheering for the faux fiscal federalism carved in the image and likeness of the key players.

'Siddon look' mode activated�

Anthony Inaede

6 Likes 2 Shares

Re: VAT: Another Side To The Drama by Arewalegend: 10:22pm On Sep 11, 2021
So U mean U caclipose and goglivase on bubu

1 Like

Re: VAT: Another Side To The Drama by techwaya: 10:32pm On Sep 11, 2021
Just because we no want ingrate terrorist sympathizing parasites again na why you write this long novel undecided

8 Likes 1 Share

Re: VAT: Another Side To The Drama by Nobody: 10:51pm On Sep 11, 2021
techwaya:
Just because we no want ingrate terrorist sympathizing parasites again na why you write this long novel undecided
I never blame you , I blame the institution that found you worthy to award you certificate as a graduate

4 Likes 2 Shares

Re: VAT: Another Side To The Drama by Lastmankc(m): 10:54pm On Sep 11, 2021
If you don't read this long post to the end, come here we have a meeting

4 Likes

Re: VAT: Another Side To The Drama by ken6488(m): 11:17pm On Sep 11, 2021
grin no more money to share to be Bandits

3 Likes

Re: VAT: Another Side To The Drama by Aganju849: 11:35pm On Sep 11, 2021
jesus19984:
Any discerning observer of what is happening with the VAT issue will recognise that there is a background to it. The facade of 'fiscal federalism' that protagonists are using is just a smokescreen for underlying causes.

Unfortunately, most people are unable to delve deeper into topical issues in Nigeria today because of a kaleidoscope of bigotry, tribalism, regionalism, sectionalism, religion and other divisive sentiments. The politicians who push these narratives understand so well that we suspend our thinking caps when these sentiments are thrown into the mix.

Furthermore, as a people, we are to shortsighted to even contemplate the medium and long term implications of some of the narratives we parrot.

Data is hard evidence, which cannot be controverted. Truth is a tyrant that doesn't campaign for votes. In the end, we shall be confronted with its brutality when reality stares us in the face.

Let's even start by examining what VAT means. VAT is an acronym for Value Added Tax. Operative word is 'Value Added'. So in a chain of operation in the production of a good or service when value is added, or form changes there is an incidence of taxation. However, the protagonists of the imposition of VAT by state governments want us to believe that VAT is wholly a consumption tax. This is very disingenuous, and far from the truth. I will follow up this with the definition of VAT after posting this.

Matter of fact, is that VAT is collected at the point of consumption of goods and services but doesn't make it wholly a consumption tax. In the chain of production, and for the purposes of taxation the point of consumption of a good or service is the end of the spectrum. In between, there are several levels of value addition and supply chain that must have taken place before the final end of the spectrum of consumption. So, for instance, a good consumed in Lagos that wasn't produced in Lagos doesn't mean that all the value and supply chains took place in Lagos. This is the fundamental principle underpinning value added taxation.

Why is VAT collected at the point of consumption? The reason is quite simple, and it is this fundamental principle that the protagonists want to destroy, which will have serious consequences for the economy and people of Nigeria. The reason for collecting VAT at the point of consumption is to prevent a situation of multiple taxation. If you consider a product or service with varying levels of value addition and supply chain, if taxed at every of these levels, the taxes will be unwieldy. Thus, every jurisdiction in the world where VAT is charged has an agreed formula for calculating value addition, which is then harmonised to come up with a single rate across board. Again, this is the principal reason why VAT in any jurisdiction is not imposed by Sub-Nationals or local authorities. I don't know of any jurisdiction in the world where VAT is imposed by Sub-Nationals or local authorities. I challenge anyone who knows to tell me.

The divisive issues thrown into the mix are simply laughable. So a serious issue has been reduced into just the issue of the restriction of the sales of alcohol in some states. I am a beer man, and I truly love my beer. In all my years of drinking beer, the only times I have recalled paying VAT for beer was when I go to some highbrow hotels or clubs. The vast majority of beer sold and consumed in Nigeria is done at roadside bars, 'abeigi', street corner shops and in-house bars. I can also tell you for free that the volume of alcohol consumed in Sabon Gari in Kano will dwarf that consumed Ado Ekiti or Ijebu Ode.

Governor Wike says that he received 2billion monthly from VAT. He failed to tell you how much the local governments in Rivers State receives from VAT allocation from the FGN. For teasers, in 2020, Rivers State contribution to VAT coffers was 42 billion. The Rivers State Government and local governments got a total of 39 billion. That's a difference of 3 billion.

Now to some data for us to have a better understanding of the issue. Proceeds of VAT is shared amongst the 3 tiers of Government after 4% collection charge in the following way:

Federal Government - 15%
State Governments - 50%
Local Governments - 35%

Of the proceeds of VAT the FG and the FCT generates about 61% via imports from the seaports and international airports while the States generate 39%

Of the 39% generated by the States, Lagos and Rivers State generates less than 70%

Now imagine a situation where the courts strikes VAT off the exclusive list. The Federal Government and FCT get to keep their 61% while the States will hussle for the remaining 39%. So, what now happens to the Local Governments where the transactions actually take place

So, in the not too distant future, the States that are enacting their own VAT laws will realise that they were chasing a mirage. The version of 'fiscal federalism', of 'food is ready' mentality obtained from the courts is just a phyric victory. They don't even have the structures the FIRS built over the last 20 years to even be able to collect the VAT.

What will be their reaction in the circumstance? Brace up for thuggish tax collectors. States will enact their own versions of the VAT law to include things like food that were exempt from the federal law. At the point of buying a goat VAT will be paid. At the point of slaughter VAT will be paid. At the point of eating it at a restaurant VAT will be paid. There will be multiple taxation, increased inflation, and the ease of doing business will be more difficult, as well as and cost of doing business will become higher.

Lagos and Rivers States pride themselves as the biggest contributors to VAT collection in Nigeria. This is another mirage. Lagos State for instance enjoys what you can term as 'headquarters effect'. What this means is that for tax reporting purposes companies with headquarters in Lagos file their VAT returns there. For instance, a company like MTN which sells airtime and internet services all across the country file their VAT returns in Lagos. In Rivers for instance, NDDC has its headquarters in Port Harcourt. If it goes to Innosson Motors in Enugu to buy vehicles, it files its VAT returns from Port Harcourt.

Let me end by going back to the background I alluded to in the beginning.

There are two basic things making the state governments to react the way they are now.

1). Local Government autonomy is bitting hard on them. They are finding it increasingly difficult to corner the resources of the LGAs especially with the NFIU breathing down their necks
2). The Governors are angry that the 3% of COPEX in the PIA is going directly to the oil bearing communities. They want it to come to the state governments just like the 13% derivation.

Interestingly, in the agenda there are sub agendas. Some are being blind sided by the sheninighans playing out. Ultimately, there will be many losers, including those cheering for the faux fiscal federalism carved in the image and likeness of the key players.

'Siddon look' mode activated�

Anthony Inaede

The producer pays income tax on his revenue too, at the point of production. That tax is not shared with the authorities in charge of the place where consumption occurs.

Your argument is baseless and false.

16 Likes

Re: VAT: Another Side To The Drama by kenic(m): 2:28am On Sep 12, 2021
All these jargons because we say no to cheating??

9 Likes

Re: VAT: Another Side To The Drama by ehinmowo: 3:34am On Sep 12, 2021
I was expecting this. U can't beat a child and still deny him the right to cry.

Law don pass. The effects will begin to show soon enough. Lagos can help y'all establish a robust tax regime. For a fee of course grin

7 Likes

Re: VAT: Another Side To The Drama by Egalitarian1: 4:24am On Sep 12, 2021
Provided the problem of multiple/over taxation is solved in perpetuity, let every State take charge of VAT from its territory.
It's a welcome development. Next on our list is local government autonomy, and once that is achieved, our corrupt and selfish governors will know that it's "Ite Missa est" for them because, local governments will be in total control of their resources with INEC conducting LG elections not State electoral commissions. With that in place, powers of state governors would have been drastically reduced.

It's such excessive powers they wield at will that makes the likes of Wike to keep installing and uninstalling National Chairmen of PDP like one useless app from play store.

4 Likes

Re: VAT: Another Side To The Drama by mamaafrik(m): 5:26am On Sep 12, 2021
See this sobonde eleja head writing rubbish to convince his paymaster.
Oni kuure

2 Likes

Re: VAT: Another Side To The Drama by Nobody: 6:10am On Sep 12, 2021
1.Interesting article.

2.I have always been suspicious about the VAT thing...and I always knew the governors were using it to pull wool over our eyes. But this article is very detailed and shows us how them governors are doing so.

3.But for me, the VAT thing obscures the fact that Nigeria is still very very undertaxed. That one is where government at all levels have failed. State governors , IMHO, are using the VAT thing to avoid raising taxes on the vast majority of their people who don't pay taxes....both North and South by the way. But even then, the VAT thing is going to eventually force them to tax people more anyway...if they are successful in their endeavor.

4.And Buhari still has not diversified the economy yet. Which is the reason why states are now dragging over VAT.

5 Likes

Re: VAT: Another Side To The Drama by Oksman(m): 7:08am On Sep 12, 2021
Aganju849:


The producer pays income tax on his revenue too, at the point of production. That tax is not shared with the authorities in charge of the place where consumption occurs.

Your argument is baseless and false.

grin grin
Re: VAT: Another Side To The Drama by vedaxcool(m): 7:11am On Sep 12, 2021
Have you noticed almost 80% of the response are from unintelligent folks who have little capacity to engage reasonably.

The most worrying angle to the VAT crap is the bigotry, tribalism and jingoism brought into an issue that is basically a legal issue.

The op tries to educate and explain the issues involved.

2 Likes

Re: VAT: Another Side To The Drama by dahmie2013: 7:12am On Sep 12, 2021
Nice article
Re: VAT: Another Side To The Drama by BeardedMeat(m): 7:25am On Sep 12, 2021
Are we still on this VAT drama?

All these expert analysts should articulate their cases and go to court.
Re: VAT: Another Side To The Drama by stonemasonn: 7:41am On Sep 12, 2021
vedaxcool:
Have you noticed almost 80% of the response are from unintelligent folks who have little capacity to engage reasonably.

The most worrying angle to the VAT crap is the bigotry, tribalism and jingoism brought into an issue that is basically a legal issue.

The op tries to educate and explain the issues involved.
Can you blame anybody for bigotry, tribalism..blah,blah,blah. Who's the biggest bigot, tribalist and ethnic champion today? Is it not Buhari? ...what's good for the goose is good for the gander

7 Likes

Re: VAT: Another Side To The Drama by Oddfinder: 7:57am On Sep 12, 2021
vedaxcool:
Have you noticed almost 80% of the response are from unintelligent folks who have little capacity to engage reasonably.

The most worrying angle to the VAT crap is the bigotry, tribalism and jingoism brought into an issue that is basically a legal issue.

The op tries to educate and explain the issues involved.
Are you saying we should abandon our constitution and follow the shallow novel you put up there?
Isn't it glaring that the constitution, our law book stipulates clearly that vat should be collected by state government? If not for mischief purposes i wounder how you missed that part.abi is it not in your own copy of the constitution?

5 Likes

Re: VAT: Another Side To The Drama by luizpippo(m): 8:05am On Sep 12, 2021
That you think the whole argument is based on alcohol consumption is enough reason why no one should bother about reading your story.

Even using the single bottles you guzzle once a while as a basis for discussion shows you are just trying to piss on whoever takes your story to heart.

The alcohol distributor has paid tax on it when he made purchase at NBC Ibadan, paid for transportation, who also pays some form of tax, the truck is fueled, which also causes Forte oil to pay some form of tax, forte oil needed to refill their reservior which brings in some form of tax, continuing from when the supplier moves to Kano, he rents a shop, which is being taxed, then on getting to Kano, the goods he is supposed to sell and pay tax on is siezed by some religious miscreants,and destroyed, yet nairaland resident tax guru is spewing hogwash.

17 Likes

Re: VAT: Another Side To The Drama by joyandfaith: 8:08am On Sep 12, 2021
stonemasonn:
Can you blame anybody for bigotry, tribalism..blah,blah,blah. Who's the biggest bigot, tribalist and ethnic champion today? Is it not Buhari? ...what's good for the goose is good for the gander

Fixed. The guy is super hypocrite!!!!
Re: VAT: Another Side To The Drama by debayun(m): 11:16am On Sep 12, 2021
jesus19984:
Any discerning observer of what is happening with the VAT issue will recognise that there is a background to it. The facade of 'fiscal federalism' that protagonists are using is just a smokescreen for underlying causes.

Unfortunately, most people are unable to delve deeper into topical issues in Nigeria today because of a kaleidoscope of bigotry, tribalism, regionalism, sectionalism, religion and other divisive sentiments. The politicians who push these narratives understand so well that we suspend our thinking caps when these sentiments are thrown into the mix.

Furthermore, as a people, we are to shortsighted to even contemplate the medium and long term implications of some of the narratives we parrot.

Data is hard evidence, which cannot be controverted. Truth is a tyrant that doesn't campaign for votes. In the end, we shall be confronted with its brutality when reality stares us in the face.

Let's even start by examining what VAT means. VAT is an acronym for Value Added Tax. Operative word is 'Value Added'. So in a chain of operation in the production of a good or service when value is added, or form changes there is an incidence of taxation. However, the protagonists of the imposition of VAT by state governments want us to believe that VAT is wholly a consumption tax. This is very disingenuous, and far from the truth. I will follow up this with the definition of VAT after posting this.

Matter of fact, is that VAT is collected at the point of consumption of goods and services but doesn't make it wholly a consumption tax. In the chain of production, and for the purposes of taxation the point of consumption of a good or service is the end of the spectrum. In between, there are several levels of value addition and supply chain that must have taken place before the final end of the spectrum of consumption. So, for instance, a good consumed in Lagos that wasn't produced in Lagos doesn't mean that all the value and supply chains took place in Lagos. This is the fundamental principle underpinning value added taxation.

Why is VAT collected at the point of consumption? The reason is quite simple, and it is this fundamental principle that the protagonists want to destroy, which will have serious consequences for the economy and people of Nigeria. The reason for collecting VAT at the point of consumption is to prevent a situation of multiple taxation. If you consider a product or service with varying levels of value addition and supply chain, if taxed at every of these levels, the taxes will be unwieldy. Thus, every jurisdiction in the world where VAT is charged has an agreed formula for calculating value addition, which is then harmonised to come up with a single rate across board. Again, this is the principal reason why VAT in any jurisdiction is not imposed by Sub-Nationals or local authorities. I don't know of any jurisdiction in the world where VAT is imposed by Sub-Nationals or local authorities. I challenge anyone who knows to tell me.

The divisive issues thrown into the mix are simply laughable. So a serious issue has been reduced into just the issue of the restriction of the sales of alcohol in some states. I am a beer man, and I truly love my beer. In all my years of drinking beer, the only times I have recalled paying VAT for beer was when I go to some highbrow hotels or clubs. The vast majority of beer sold and consumed in Nigeria is done at roadside bars, 'abeigi', street corner shops and in-house bars. I can also tell you for free that the volume of alcohol consumed in Sabon Gari in Kano will dwarf that consumed Ado Ekiti or Ijebu Ode.

Governor Wike says that he received 2billion monthly from VAT. He failed to tell you how much the local governments in Rivers State receives from VAT allocation from the FGN. For teasers, in 2020, Rivers State contribution to VAT coffers was 42 billion. The Rivers State Government and local governments got a total of 39 billion. That's a difference of 3 billion.

Now to some data for us to have a better understanding of the issue. Proceeds of VAT is shared amongst the 3 tiers of Government after 4% collection charge in the following way:

Federal Government - 15%
State Governments - 50%
Local Governments - 35%

Of the proceeds of VAT the FG and the FCT generates about 61% via imports from the seaports and international airports while the States generate 39%

Of the 39% generated by the States, Lagos and Rivers State generates less than 70%

Now imagine a situation where the courts strikes VAT off the exclusive list. The Federal Government and FCT get to keep their 61% while the States will hussle for the remaining 39%. So, what now happens to the Local Governments where the transactions actually take place

So, in the not too distant future, the States that are enacting their own VAT laws will realise that they were chasing a mirage. The version of 'fiscal federalism', of 'food is ready' mentality obtained from the courts is just a phyric victory. They don't even have the structures the FIRS built over the last 20 years to even be able to collect the VAT.

What will be their reaction in the circumstance? Brace up for thuggish tax collectors. States will enact their own versions of the VAT law to include things like food that were exempt from the federal law. At the point of buying a goat VAT will be paid. At the point of slaughter VAT will be paid. At the point of eating it at a restaurant VAT will be paid. There will be multiple taxation, increased inflation, and the ease of doing business will be more difficult, as well as and cost of doing business will become higher.

Lagos and Rivers States pride themselves as the biggest contributors to VAT collection in Nigeria. This is another mirage. Lagos State for instance enjoys what you can term as 'headquarters effect'. What this means is that for tax reporting purposes companies with headquarters in Lagos file their VAT returns there. For instance, a company like MTN which sells airtime and internet services all across the country file their VAT returns in Lagos. In Rivers for instance, NDDC has its headquarters in Port Harcourt. If it goes to Innosson Motors in Enugu to buy vehicles, it files its VAT returns from Port Harcourt.

Let me end by going back to the background I alluded to in the beginning.

There are two basic things making the state governments to react the way they are now.

1). Local Government autonomy is bitting hard on them. They are finding it increasingly difficult to corner the resources of the LGAs especially with the NFIU breathing down their necks
2). The Governors are angry that the 3% of COPEX in the PIA is going directly to the oil bearing communities. They want it to come to the state governments just like the 13% derivation.

Interestingly, in the agenda there are sub agendas. Some are being blind sided by the sheninighans playing out. Ultimately, there will be many losers, including those cheering for the faux fiscal federalism carved in the image and likeness of the key players.

'Siddon look' mode activated�

Anthony Inaede



Wow now I'm educated about it I knew something was fishy
Re: VAT: Another Side To The Drama by Ngorbungor(m): 11:39am On Sep 12, 2021
jesus19984:
Any discerning observer of what is happening with the VAT issue will recognise that there is a background to it. The facade of 'fiscal federalism' that protagonists are using is just a smokescreen for underlying causes.

Unfortunately, most people are unable to delve deeper into topical issues in Nigeria today because of a kaleidoscope of bigotry, tribalism, regionalism, sectionalism, religion and other divisive sentiments. The politicians who push these narratives understand so well that we suspend our thinking caps when these sentiments are thrown into the mix.

Furthermore, as a people, we are to shortsighted to even contemplate the medium and long term implications of some of the narratives we parrot.

Data is hard evidence, which cannot be controverted. Truth is a tyrant that doesn't campaign for votes. In the end, we shall be confronted with its brutality when reality stares us in the face.

Let's even start by examining what VAT means. VAT is an acronym for Value Added Tax. Operative word is 'Value Added'. So in a chain of operation in the production of a good or service when value is added, or form changes there is an incidence of taxation. However, the protagonists of the imposition of VAT by state governments want us to believe that VAT is wholly a consumption tax. This is very disingenuous, and far from the truth. I will follow up this with the definition of VAT after posting this.

Matter of fact, is that VAT is collected at the point of consumption of goods and services but doesn't make it wholly a consumption tax. In the chain of production, and for the purposes of taxation the point of consumption of a good or service is the end of the spectrum. In between, there are several levels of value addition and supply chain that must have taken place before the final end of the spectrum of consumption. So, for instance, a good consumed in Lagos that wasn't produced in Lagos doesn't mean that all the value and supply chains took place in Lagos. This is the fundamental principle underpinning value added taxation.

Why is VAT collected at the point of consumption? The reason is quite simple, and it is this fundamental principle that the protagonists want to destroy, which will have serious consequences for the economy and people of Nigeria. The reason for collecting VAT at the point of consumption is to prevent a situation of multiple taxation. If you consider a product or service with varying levels of value addition and supply chain, if taxed at every of these levels, the taxes will be unwieldy. Thus, every jurisdiction in the world where VAT is charged has an agreed formula for calculating value addition, which is then harmonised to come up with a single rate across board. Again, this is the principal reason why VAT in any jurisdiction is not imposed by Sub-Nationals or local authorities. I don't know of any jurisdiction in the world where VAT is imposed by Sub-Nationals or local authorities. I challenge anyone who knows to tell me.

The divisive issues thrown into the mix are simply laughable. So a serious issue has been reduced into just the issue of the restriction of the sales of alcohol in some states. I am a beer man, and I truly love my beer. In all my years of drinking beer, the only times I have recalled paying VAT for beer was when I go to some highbrow hotels or clubs. The vast majority of beer sold and consumed in Nigeria is done at roadside bars, 'abeigi', street corner shops and in-house bars. I can also tell you for free that the volume of alcohol consumed in Sabon Gari in Kano will dwarf that consumed Ado Ekiti or Ijebu Ode.

Governor Wike says that he received 2billion monthly from VAT. He failed to tell you how much the local governments in Rivers State receives from VAT allocation from the FGN. For teasers, in 2020, Rivers State contribution to VAT coffers was 42 billion. The Rivers State Government and local governments got a total of 39 billion. That's a difference of 3 billion.

Now to some data for us to have a better understanding of the issue. Proceeds of VAT is shared amongst the 3 tiers of Government after 4% collection charge in the following way:

Federal Government - 15%
State Governments - 50%
Local Governments - 35%

Of the proceeds of VAT the FG and the FCT generates about 61% via imports from the seaports and international airports while the States generate 39%

Of the 39% generated by the States, Lagos and Rivers State generates less than 70%

Now imagine a situation where the courts strikes VAT off the exclusive list. The Federal Government and FCT get to keep their 61% while the States will hussle for the remaining 39%. So, what now happens to the Local Governments where the transactions actually take place

So, in the not too distant future, the States that are enacting their own VAT laws will realise that they were chasing a mirage. The version of 'fiscal federalism', of 'food is ready' mentality obtained from the courts is just a phyric victory. They don't even have the structures the FIRS built over the last 20 years to even be able to collect the VAT.

What will be their reaction in the circumstance? Brace up for thuggish tax collectors. States will enact their own versions of the VAT law to include things like food that were exempt from the federal law. At the point of buying a goat VAT will be paid. At the point of slaughter VAT will be paid. At the point of eating it at a restaurant VAT will be paid. There will be multiple taxation, increased inflation, and the ease of doing business will be more difficult, as well as and cost of doing business will become higher.

Lagos and Rivers States pride themselves as the biggest contributors to VAT collection in Nigeria. This is another mirage. Lagos State for instance enjoys what you can term as 'headquarters effect'. What this means is that for tax reporting purposes companies with headquarters in Lagos file their VAT returns there. For instance, a company like MTN which sells airtime and internet services all across the country file their VAT returns in Lagos. In Rivers for instance, NDDC has its headquarters in Port Harcourt. If it goes to Innosson Motors in Enugu to buy vehicles, it files its VAT returns from Port Harcourt.

Let me end by going back to the background I alluded to in the beginning.

There are two basic things making the state governments to react the way they are now.

1). Local Government autonomy is bitting hard on them. They are finding it increasingly difficult to corner the resources of the LGAs especially with the NFIU breathing down their necks
2). The Governors are angry that the 3% of COPEX in the PIA is going directly to the oil bearing communities. They want it to come to the state governments just like the 13% derivation.

Interestingly, in the agenda there are sub agendas. Some are being blind sided by the sheninighans playing out. Ultimately, there will be many losers, including those cheering for the faux fiscal federalism carved in the image and likeness of the key players.

'Siddon look' mode activated�

Anthony Inaede

Your write up is educative, but my question is why would Lagos state collect VAT that is meant for other state like in the oil sector that have all their headquarters in Lagos but the their production or service are in the Niger Delta? So how are we going to balance this abnormality
Re: VAT: Another Side To The Drama by Wallade(m): 6:16am On Sep 13, 2021
Ngorbungor:


Your write up is educative, but my question is why would Lagos state collect VAT that is meant for other state like in the oil sector that have all their headquarters in Lagos but the their production or service are in the Niger Delta? So how are we going to balance this abnormality

Can you say the products of the the oil producing states that Lagos collects VAT?

Petroleum products are majorly shipped into Nigeria through Lagos, hence Lagos earns the VAT. Oil producing states product is crude oil which they should earn the VAT, if not, they should channel their grievance to Federal Govt.
Re: VAT: Another Side To The Drama by blackpanda: 6:22am On Sep 13, 2021
jesus19984:
Any discerning observer of what is happening with the VAT issue will recognise that there is a background to it. The facade of 'fiscal federalism' that protagonists are using is just a smokescreen for underlying causes.

Unfortunately, most people are unable to delve deeper into topical issues in Nigeria today because of a kaleidoscope of bigotry, tribalism, regionalism, sectionalism, religion and other divisive sentiments. The politicians who push these narratives understand so well that we suspend our thinking caps when these sentiments are thrown into the mix.

Furthermore, as a people, we are to shortsighted to even contemplate the medium and long term implications of some of the narratives we parrot.

Data is hard evidence, which cannot be controverted. Truth is a tyrant that doesn't campaign for votes. In the end, we shall be confronted with its brutality when reality stares us in the face.

Let's even start by examining what VAT means. VAT is an acronym for Value Added Tax. Operative word is 'Value Added'. So in a chain of operation in the production of a good or service when value is added, or form changes there is an incidence of taxation. However, the protagonists of the imposition of VAT by state governments want us to believe that VAT is wholly a consumption tax. This is very disingenuous, and far from the truth. I will follow up this with the definition of VAT after posting this.

Matter of fact, is that VAT is collected at the point of consumption of goods and services but doesn't make it wholly a consumption tax. In the chain of production, and for the purposes of taxation the point of consumption of a good or service is the end of the spectrum. In between, there are several levels of value addition and supply chain that must have taken place before the final end of the spectrum of consumption. So, for instance, a good consumed in Lagos that wasn't produced in Lagos doesn't mean that all the value and supply chains took place in Lagos. This is the fundamental principle underpinning value added taxation.

Why is VAT collected at the point of consumption? The reason is quite simple, and it is this fundamental principle that the protagonists want to destroy, which will have serious consequences for the economy and people of Nigeria. The reason for collecting VAT at the point of consumption is to prevent a situation of multiple taxation. If you consider a product or service with varying levels of value addition and supply chain, if taxed at every of these levels, the taxes will be unwieldy. Thus, every jurisdiction in the world where VAT is charged has an agreed formula for calculating value addition, which is then harmonised to come up with a single rate across board. Again, this is the principal reason why VAT in any jurisdiction is not imposed by Sub-Nationals or local authorities. I don't know of any jurisdiction in the world where VAT is imposed by Sub-Nationals or local authorities. I challenge anyone who knows to tell me.

The divisive issues thrown into the mix are simply laughable. So a serious issue has been reduced into just the issue of the restriction of the sales of alcohol in some states. I am a beer man, and I truly love my beer. In all my years of drinking beer, the only times I have recalled paying VAT for beer was when I go to some highbrow hotels or clubs. The vast majority of beer sold and consumed in Nigeria is done at roadside bars, 'abeigi', street corner shops and in-house bars. I can also tell you for free that the volume of alcohol consumed in Sabon Gari in Kano will dwarf that consumed Ado Ekiti or Ijebu Ode.

Governor Wike says that he received 2billion monthly from VAT. He failed to tell you how much the local governments in Rivers State receives from VAT allocation from the FGN. For teasers, in 2020, Rivers State contribution to VAT coffers was 42 billion. The Rivers State Government and local governments got a total of 39 billion. That's a difference of 3 billion.

Now to some data for us to have a better understanding of the issue. Proceeds of VAT is shared amongst the 3 tiers of Government after 4% collection charge in the following way:

Federal Government - 15%
State Governments - 50%
Local Governments - 35%

Of the proceeds of VAT the FG and the FCT generates about 61% via imports from the seaports and international airports while the States generate 39%

Of the 39% generated by the States, Lagos and Rivers State generates less than 70%

Now imagine a situation where the courts strikes VAT off the exclusive list. The Federal Government and FCT get to keep their 61% while the States will hussle for the remaining 39%. So, what now happens to the Local Governments where the transactions actually take place

So, in the not too distant future, the States that are enacting their own VAT laws will realise that they were chasing a mirage. The version of 'fiscal federalism', of 'food is ready' mentality obtained from the courts is just a phyric victory. They don't even have the structures the FIRS built over the last 20 years to even be able to collect the VAT.

What will be their reaction in the circumstance? Brace up for thuggish tax collectors. States will enact their own versions of the VAT law to include things like food that were exempt from the federal law. At the point of buying a goat VAT will be paid. At the point of slaughter VAT will be paid. At the point of eating it at a restaurant VAT will be paid. There will be multiple taxation, increased inflation, and the ease of doing business will be more difficult, as well as and cost of doing business will become higher.

Lagos and Rivers States pride themselves as the biggest contributors to VAT collection in Nigeria. This is another mirage. Lagos State for instance enjoys what you can term as 'headquarters effect'. What this means is that for tax reporting purposes companies with headquarters in Lagos file their VAT returns there. For instance, a company like MTN which sells airtime and internet services all across the country file their VAT returns in Lagos. In Rivers for instance, NDDC has its headquarters in Port Harcourt. If it goes to Innosson Motors in Enugu to buy vehicles, it files its VAT returns from Port Harcourt.

Let me end by going back to the background I alluded to in the beginning.

There are two basic things making the state governments to react the way they are now.

1). Local Government autonomy is bitting hard on them. They are finding it increasingly difficult to corner the resources of the LGAs especially with the NFIU breathing down their necks
2). The Governors are angry that the 3% of COPEX in the PIA is going directly to the oil bearing communities. They want it to come to the state governments just like the 13% derivation.

Interestingly, in the agenda there are sub agendas. Some are being blind sided by the sheninighans playing out. Ultimately, there will be many losers, including those cheering for the faux fiscal federalism carved in the image and likeness of the key players.

'Siddon look' mode activated�

Anthony Inaede


Why are u wasting your time. The people against VAT are not interested in being rational or reading any data. The only thing they like to believe is that VAT Judgment is against FGN so they rather suffer hardship than apply common sense grin

1 Like

Re: VAT: Another Side To The Drama by blackpanda: 6:25am On Sep 13, 2021
Ngorbungor:


Your write up is educative, but my question is why would Lagos state collect VAT that is meant for other state like in the oil sector that have all their headquarters in Lagos but the their production or service are in the Niger Delta? So how are we going to balance this abnormality

That is the more reason why FG should collect it once and from one source. Otherwise is will amount to multiple taxation. Many companies will fold up and leave. To be honest I think that rivers state judge was being partisan and irrational.
Re: VAT: Another Side To The Drama by Wallade(m): 6:33am On Sep 13, 2021
jesus19984:
Any discerning observer of what is happening with the VAT issue will recognise that there is a background to it. The facade of 'fiscal federalism' that protagonists are using is just a smokescreen for underlying causes.

Unfortunately, most people are unable to delve deeper into topical issues in Nigeria today because of a kaleidoscope of bigotry, tribalism, regionalism, sectionalism, religion and other divisive sentiments. The politicians who push these narratives understand so well that we suspend our thinking caps when these sentiments are thrown into the mix.

Furthermore, as a people, we are to shortsighted to even contemplate the medium and long term implications of some of the narratives we parrot.

Data is hard evidence, which cannot be controverted. Truth is a tyrant that doesn't campaign for votes. In the end, we shall be confronted with its brutality when reality stares us in the face.

Let's even start by examining what VAT means. VAT is an acronym for Value Added Tax. Operative word is 'Value Added'. So in a chain of operation in the production of a good or service when value is added, or form changes there is an incidence of taxation. However, the protagonists of the imposition of VAT by state governments want us to believe that VAT is wholly a consumption tax. This is very disingenuous, and far from the truth. I will follow up this with the definition of VAT after posting this.

Matter of fact, is that VAT is collected at the point of consumption of goods and services but doesn't make it wholly a consumption tax. In the chain of production, and for the purposes of taxation the point of consumption of a good or service is the end of the spectrum. In between, there are several levels of value addition and supply chain that must have taken place before the final end of the spectrum of consumption. So, for instance, a good consumed in Lagos that wasn't produced in Lagos doesn't mean that all the value and supply chains took place in Lagos. This is the fundamental principle underpinning value added taxation.

Why is VAT collected at the point of consumption? The reason is quite simple, and it is this fundamental principle that the protagonists want to destroy, which will have serious consequences for the economy and people of Nigeria. The reason for collecting VAT at the point of consumption is to prevent a situation of multiple taxation. If you consider a product or service with varying levels of value addition and supply chain, if taxed at every of these levels, the taxes will be unwieldy. Thus, every jurisdiction in the world where VAT is charged has an agreed formula for calculating value addition, which is then harmonised to come up with a single rate across board. Again, this is the principal reason why VAT in any jurisdiction is not imposed by Sub-Nationals or local authorities. I don't know of any jurisdiction in the world where VAT is imposed by Sub-Nationals or local authorities. I challenge anyone who knows to tell me.

The divisive issues thrown into the mix are simply laughable. So a serious issue has been reduced into just the issue of the restriction of the sales of alcohol in some states. I am a beer man, and I truly love my beer. In all my years of drinking beer, the only times I have recalled paying VAT for beer was when I go to some highbrow hotels or clubs. The vast majority of beer sold and consumed in Nigeria is done at roadside bars, 'abeigi', street corner shops and in-house bars. I can also tell you for free that the volume of alcohol consumed in Sabon Gari in Kano will dwarf that consumed Ado Ekiti or Ijebu Ode.

Governor Wike says that he received 2billion monthly from VAT. He failed to tell you how much the local governments in Rivers State receives from VAT allocation from the FGN. For teasers, in 2020, Rivers State contribution to VAT coffers was 42 billion. The Rivers State Government and local governments got a total of 39 billion. That's a difference of 3 billion.

Now to some data for us to have a better understanding of the issue. Proceeds of VAT is shared amongst the 3 tiers of Government after 4% collection charge in the following way:

Federal Government - 15%
State Governments - 50%
Local Governments - 35%

Of the proceeds of VAT the FG and the FCT generates about 61% via imports from the seaports and international airports while the States generate 39%

Of the 39% generated by the States, Lagos and Rivers State generates less than 70%

Now imagine a situation where the courts strikes VAT off the exclusive list. The Federal Government and FCT get to keep their 61% while the States will hussle for the remaining 39%. So, what now happens to the Local Governments where the transactions actually take place

So, in the not too distant future, the States that are enacting their own VAT laws will realise that they were chasing a mirage. The version of 'fiscal federalism', of 'food is ready' mentality obtained from the courts is just a phyric victory. They don't even have the structures the FIRS built over the last 20 years to even be able to collect the VAT.

What will be their reaction in the circumstance? Brace up for thuggish tax collectors. States will enact their own versions of the VAT law to include things like food that were exempt from the federal law. At the point of buying a goat VAT will be paid. At the point of slaughter VAT will be paid. At the point of eating it at a restaurant VAT will be paid. There will be multiple taxation, increased inflation, and the ease of doing business will be more difficult, as well as and cost of doing business will become higher.

Lagos and Rivers States pride themselves as the biggest contributors to VAT collection in Nigeria. This is another mirage. Lagos State for instance enjoys what you can term as 'headquarters effect'. What this means is that for tax reporting purposes companies with headquarters in Lagos file their VAT returns there. For instance, a company like MTN which sells airtime and internet services all across the country file their VAT returns in Lagos. In Rivers for instance, NDDC has its headquarters in Port Harcourt. If it goes to Innosson Motors in Enugu to buy vehicles, it files its VAT returns from Port Harcourt.

Let me end by going back to the background I alluded to in the beginning.

There are two basic things making the state governments to react the way they are now.

1). Local Government autonomy is bitting hard on them. They are finding it increasingly difficult to corner the resources of the LGAs especially with the NFIU breathing down their necks
2). The Governors are angry that the 3% of COPEX in the PIA is going directly to the oil bearing communities. They want it to come to the state governments just like the 13% derivation.

Interestingly, in the agenda there are sub agendas. Some are being blind sided by the sheninighans playing out. Ultimately, there will be many losers, including those cheering for the faux fiscal federalism carved in the image and likeness of the key players.

'Siddon look' mode activated�

Anthony Inaede

The fact that NDDC bought Inosson Vehicles and filed VAT returns in Port Harcourt doesn't change the fact that the VAT was collected by Inosson and remitted to the government of Enugu on behalf of NDDC. The VAT filing is just to trace the VAT collection and remittance.

Moreover, by the time FIRS hands off VAT, such VAT will be claimed by Enugu State government.

MTN, Glo and Airtel would have to review their VAT remittance process to reflect states where the recharges are done to remit the VAT in that order to the appropriate state.

2 Likes

Re: VAT: Another Side To The Drama by Wallade(m): 6:41am On Sep 13, 2021
blackpanda:


That is the more reason why FG should collect it once and from one source. Otherwise is will amount to multiple taxation. Many companies will fold up and leave. To be honest I think that rivers state judge was being partisan and irrational.

A product should not suffer VAT more than once hence, when a product is made in Aba or Delta and sold to a buyer, the bill should include VAT which is remitted at the state of production.

When the product gets to Lagos, the VAT has already been paid so Lagos can't charge another VAT on it. Simple.

1 Like

Re: VAT: Another Side To The Drama by blackpanda: 6:42am On Sep 13, 2021
Wallade:


A product should not suffer VAT more than once hence, when a product is made in Aba or Delta and sold to a buyer, the bill should include VAT.

When the product gets to Lagos, the VAT has already been paid so Lagos can't charge another VAT on it. Simple.

Do u think Lagos state govt in this scenario will care about that If u allow the states they are all selfish and thinking about only themselves. Each state will collect the same vat over and over again
Re: VAT: Another Side To The Drama by Wallade(m): 6:51am On Sep 13, 2021
blackpanda:


Do u think Lagos state govt in this scenario will care about that If u allow the states they are all selfish and thinking about only themselves. Each state will collect the same vat over and over again

No, it is the right of the re-seller or buyer in Lagos to inform the Lagos State tax officials that the VAT has been collected on that product already. No product is eligible for double or multiple VAT except if it was further transformed into another finished product.

The re-seller in Lagos only needs to present evidence of VAT payment on the bill paid in Delta or Aba.

1 Like

Re: VAT: Another Side To The Drama by blackpanda: 7:41am On Sep 13, 2021
Wallade:


No, it is the right of the re-seller or buyer in Lagos to inform the Lagos State tax officials that the VAT has been collected on that product already. No product is eligible for double or multiple VAT except if it was further transformed into another finished product.

The re-seller in Lagos only needs to present evidence of VAT payment on the bill paid in Delta or Aba.

Smh. Are u living in nigeria or mythical fantasy land
Re: VAT: Another Side To The Drama by Nobody: 8:21am On Sep 13, 2021
blackpanda:


That is the more reason why FG should collect it once and from one source. Otherwise is will amount to multiple taxation. Many companies will fold up and leave. To be honest I think that rivers state judge was being partisan and irrational.
But, the FG shouldn't be the ones in charge of collecting VATs in a Federal system of Government.

In fact, it was under IBB the states agreed that the FG should start collecting it on there behalf.

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