VAT Not Administered at Sub-national World Over – FIRS

By By Tony Obiechina, Abuja 

The Federal Inland Revenue Service (FIRS) on Wednesday insisted that it has the sole responsibility to collect and administer Value Added Tax (VAT) in the country.

Addressing journalists in Abuja, the Group Lead, Special Operations Group, FIRS, Mathew Gbonjubola, said there is nowhere in the world where the administration of VAT is done at the sub-national level.

A Federal High Court sitting in Port Harcourt, Rivers State, had on Monday dismissed an application by the  FIRS, seeking to stop the state government from commencing collection of VAT in the state.

Following the court ruling, Governor Nyesom Wike directed the Rivers State Revenue Service, to immediately commence collection of VAT, from corporate bodies and businesses in the state threatening to shut down any concern that fails to comply.

Speaking on the development, Gbonjubola said the that contrary to misconceptions in some quarters, the FIRS administers VAT on behalf of the three tiers of government and not for the Federal Government alone.

He said the decision of the Federal High Court to grant powers to states to administer Value Added Tax will make it difficult for businesses to operate under the new dispensation.

According to him, the revenue from VAT is administered under an arrangement that allows the Federal Government to collect 15 per cent, States 50 per cent and Local Government 35 per cent.

He said by implication the State and Local Government take about 85 per cent of VAT proceeds leaving the Federal government with only 15 percent. 

“The VAT is not paid to the Federation Account but to VAT pool account for distribution to the three tiers of government. It is after the sharing that the portion of the Federal Government is paid to the Consolidated Revenue Fund Account.

“VAT works only at a national level but not at a sub-national level. There is no country in the world where VAT works at the sub-national level”, he said.

According to him, the VAT Act differentiates between two kinds of VAT; Input VAT and Output VAT, pointing out that the input VAT is the tax paid to suppliers on the purchase of taxable goods and services, while output VAT is the tax received from customers on the value of taxable goods and services sold or rendered.

 Gbonjubola stated that the VAT Act allows taxpayers to offset their input VAT (Allowable Input VAT) against their output VAT, to the extent that such input VAT only relates to such goods that are purchased or imported for resale or form the taxpayers’ stock-in-trade used for the production of new products on which output VAT will be charged.

He explained that the output VAT exceeds the recoverable input VAT, while the taxpayer is expected to remit the excess to the FIRS.

In the instance where the input VAT exceeds the output VAT, he further explained that the taxpayer will be entitled to a refund of the excess after following the due process as contained in the FIRS Establishment Act.

But with the decision of some states to go ahead with the implementation of the Court Judgement, he said that such refund may not be possible because the administration of VAT will be done by different states tax authorities.

He attended the media chat with the Group Lead, Digital and Innovation Support Group, FIRS, Mrs Chiaka Ben-Obi.

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