Why Lagos, Rivers, FCT, Oyo Take Over 70% Of VAT – FIRS Chairman

The Chairman of the Federal Inland Revenue Service (FIRS), Dr. Zach Adedeji, has revealed that 70 per cent of value-added tax (VAT) proceeds goes to Lagos, Rivers, and the Federal Capital Territory (FCT) while the remaining 34 states share the balance of 30 percent.

Adedeji, who revealed this at an interactive session with members of the House of Representatives on the proposed tax reform bills on Monday, described the development as unfair.

The FIRS boss said that the proposed tax reform bills would ensure a fair distribution of VAT proceeds based on consumption to the States, saying that there was the need for fairness in the distribution of resources across the federation.

While attempting to address the concerns raised by northern lawmakers about potential disadvantages for their states under the proposed tax reforms, Adedeji noted that the existing VAT distribution structure does not serve Nigeria’s best interests.

According to him, “The current framework allows Lagos (42%), Rivers (16%), Oyo (5.2%), and the FCT (10%) to take over 70% of VAT proceeds, primarily because the head offices of many revenue-generating companies are located in these regions”.

He specifically criticised the current arrangement, saying that 70% of Nigerians who consume the products and services provided by the companies are spread across the country.

Adedeji noted that a major mobile telecommunications network, MTN, contributes the highest VAT to Lagos in spite of the fact that its services is being consumed nationwide.

In the words of Adedeji; “What the bill seeks to correct is that the existing structure does not represent the interest of either the President or the nation.

“Today, I just signed the data on VAT for October. Lagos will take 42% of the VAT, Rivers will take 16%, Oyo State will take 5.2%, and the FCT will take 10%. Go and check, these three states are taking more than 70%. Why? Because those are the places where the head offices of those companies are located.

“As we know, 70% of consumption is not accruing to those three states. So, whatever way you look at it, apart from Lagos, Rivers, and FCT, every northern state would benefit. That is the Bill being presented.

“If you look at it, MTN contributed the highest, but because MTN’s head office is in Lagos, all derivation from MTN is accruing to Lagos. With this Bill, irrespective of the economic situation of any state in Nigeria, all states would benefit,” he said.

The FIRS boss expressed concern over the disparity, noting that states like Borno and Bauchi collect only 0.32% and 0.4% of VAT proceeds, respectively, compared to Lagos’ 42%.

“Any day I sign it, I don’t feel like I am a Nigerian because this is not what we represent in our prayer as a nation. That is why, in the wisdom of Mr. President, we need to change this structure,” he stated.

However, conflicting opinions emerged during the session as Babajimi Benson (APC, Lagos) and Adamu Yusuf Gagdi (APC, Plateau) expressed concerns about the impact of the reforms on their respective states.

Gagdi particularly questioned how conflict-displaced citizens in the North could benefit from VAT proceeds tied to consumption and other import-related taxes.