VAT: Present Sharing formular doesn't favour Northern States as Lagos and 3 other states takes 70% - FIRS boss

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FIRS HQ Abuja
Dr. Zacch Adedeji, Chairman of the Federal Inland Revenue Service (FIRS), has emphasized the urgent need for Nigeria to reform its revenue collection framework and address inequities in the distribution of value-added tax (VAT) proceeds. Speaking during an interactive session with lawmakers on proposed tax reform bills, he criticized the current VAT allocation system, which disproportionately favors Lagos, Rivers, and the Federal Capital Territory (FCT) due to the location of corporate head offices.

Adedeji revealed that Lagos alone receives 42% of VAT proceeds, with Rivers and the FCT taking 16% and 10%, respectively. This distribution leaves other states, including many in the North, with minimal allocations—Borno and Bauchi, for instance, collect less than 0.5% each. He argued that this system neglects the fact that 70% of VAT revenue is generated from nationwide consumption, not just activities in the headquarter states.

The FIRS chairman illustrated the disparity by citing MTN Nigeria, which contributes significantly to VAT revenue. Despite the company’s nationwide service, Lagos reaps the benefits due to MTN's headquarters being located there.

Adedeji called for a VAT distribution model based on consumption rather than the location of corporate offices, ensuring fairness across all states. He stressed that the reforms would align with President Bola Ahmed Tinubu's vision of equity in resource allocation.

His proposal has drawn mixed reactions from lawmakers. While many supported the push for fairness, concerns were raised about how the reforms would address unique challenges, such as the situation in conflict-affected northern states, where consumption levels are lower due to displacement.

The session also highlighted the need to regulate emerging sectors like cryptocurrency, which Adedeji described as critical for enhancing Nigeria’s revenue collection mechanisms. The chairman advocated for legislative action to create a framework that supports both economic growth and equitable distribution of resources.

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