Lagos LGAs seek equal sharing of VAT revenue allocation with state government

The conference of 57 local governments and local council development areas (LCDAs) in Lagos state has asked for equal sharing of the value-added tax (VAT) revenue allocation with the state government. 

Abdulrasak Ajala, Odi-Olowo/Ojuwoye LCDA chairman, made the request at a one-day public hearing on the Lagos VAT bill organised on Wednesday.

The bill, which seeks to empower Lagos to collect VAT, scaled the first and second reading at the state house of assembly.

VAT, charged at a rate of 7.5 percent, is a consumption tax paid when goods are purchased and services rendered.

Section 33 of the bill shows that VAT revenue shall be shared 75 percent to the state government and 25 percent to the LGAs.

Reacting to the allocations, Ajala said for the councils to pursue meaningful development, they required a better sharing formula for its members in the proposed VAT bill.

He explained that the councils, who also host the companies, should benefit from a better share than the 25 percent in the bill.

“On the distribution of revenue, you will agree with me, Value Added Tax is on consumption and production, and all these economic activities are domiciled in our respective communities,” Ajala said.

“In addition, local governments, being the closest to the grassroots, need more revenues given the enormity of the responsibilities the Constitution confers on us.

“Hence, the 25 percent in the bill is grossly inadequate for local governments to execute all the promises we made to our people; and of course all our electoral promises.

“This is the reason we are making a passionate appeal, on behalf of Conference 57, that we should raise the bar higher, from 25 percent to 50 percent.”

According to NAN, Mudashiru Obasa, speaker of the Lagos assembly, said their contributions would be looked into so they could come up with an all-inclusive VAT law for the state.

Meanwhile, controversies regarding VAT collection have been on the trail between the Federal Inland Revenue Service (FIRS) and the Lagos state government.

FIRS, which administers the tax, transfers the generated revenue to the three levels of government via the federation accounts allocation committee (FAAC).

Lagos had directed FIRS to stop issuing demand notices for payment of VAT in the state following the judgement of the federal high court in Port Harcourt on August 9, 2021.

Despite the court ruling in Rivers state, FIRS asked taxpayers to continue to honour their tax obligations under the VAT Act until the court of appeal or supreme court gives a final verdict on the issue.