By Sunday Ojeme
Following the reform introduced into the nation’s tax drive, the Federal Government now rakes about N900 billion annually from Value Added Tax (VAT), acting Executive Chairman, Federal Inland Revenue Service (FIRS), Mr. Sunday Ogungbesan, has said. The figure represents a new high from the N8.7 billion recorded at the introduction of the indirect tax system some years ago, the FIRS boss told New Telegraph in Abuja. He said in an exclusive interview that when the tax system was first introduced, a total of N2.6 billion was recorded from all the states of the federation.
“At that time it was 19 states, so, the Committee on Reform of the Tax System came on board and said you need to introduce indirect taxing system, which is Value Added Tax (VAT) and it came on board. First year alone gave us N8.7 billion. Today, that VAT is bringing in close to N900 billion every year,” he stated. While acknowledging the argument that states that contribute more to VAT should earn more as regards derivation, Ogungbesan, said the process of collecting the tax was Federal Government driven and the funds are shared on percentage basis among the federal, state and local government areas. He said: “Lagos State has been crying about VAT. Today, what is the basis for sharing funds from the Federation Account? They use number of hospital beds; they use geographical landmass, nobody is kicking against it. VAT distribution is one.
The Federal Government takes 15 per cent, states take 50 per cent, and local government councils take 35 per cent. So, when each of these entities takes theirs, that’s horizontally now, how do we then share among ourselves the state and LGAs? “In 1994, because we kept that money for about eight months, it wasn’t shared, we didn’t know how to share it and because we didn’t want to use the Federation Account sharing formula, so, we said okay, take 50 per cent of this for the state, distribute equally, all of us will take equal amounts. We take another 30 per cent of that same money due to us and shared on the basis of population. We thought that there was sense in it. Consumption is about people, let’s use population to share 20 per cent. “Okay, you say Lagos State contributes more, the bulk of the money is from import VAT and the Federal Government as at that time said import VAT did not belong to Lagos alone. It is just that everyone is importing into the country and the Nigerian Customs Service is collecting these revenues from Lagos, Port Harcourt and Calabar.”
According to Ogungbesan, in most countries, VAT is not a Federal Government tax. He, however, stressed that as long as there were import components to VAT, the Federal Government was taking only 10 per cent just for the cost of administration, while 30 per cent was kept. “So, we did that for about four years (1994 -1998) before Gen Abdulsalami Abubakar left and at the end of the day, they discovered that Lagos alone takes about half of the entire VAT distribution for the states. Then local government councils also take about 50 per cent of this. Some of the members now felt that it was unfair,” he said. The FIRS boss, however, added that as matter of fairness and recognition for derivation, the share for population was increased to 30 per cent, while that of derivation was reduced to 20 per cent. He said: “People who don’t see statistics will be easily swayed to say oh yes they are depriving some states. You need to know how much each of them goes home with. So, today, 20 per cent of everything you collect on VAT is devoted to derivation and Lagos state still takes more because their share is almost about 67 per cent of the rest.
“Zamfara and the rest of them wouldn’t collect much; they don’t get anything from derivation virtually. They only rely on the population and the equality provisions to get theirs. Anyway, you know me and my colleagues are tax administrators, when it comes to the aspect of policy we shut up, except they ask for our input.” On the desirability or otherwise of taxing churches, the FIRS boss said churches that ran businesses outside places of worship should pay tax from their profits. He said: “You find schools where they are collecting dollars and pounds as school fees and they make profits and they say we are schools, we shouldn’t pay. Churches are doing the same thing collecting so much money. They must pay when they do business. There is a case already decided; a church along Broad Street, Lagos. From the proceeds of the church, they built a guest house and they registered a limited liability company, no problem, even though it was limited by guarantee, they registered that guest house.
“So, some of our people where in town and they went to the hotel, just lodged in because it is relatively cheaper than some of the hotels along Broad Street. So, we took the receipt. We knew they were not paying, they gave everything to God. But God said: “Give unto Caesar what belongs to Caesar,” keep the rest for the church. “So, we then raised assessment on them and said you have been doing business, you are doing something out of the ordinary. This is not ecclesiastical anymore. This is trading. Since then Deeper Life, The Redeemed Church and others pay for their cassettes and printing press. They pay. But those private institutions and churches, especially the Pentecostal churches, think that they don’t have to pay. “No, it is the money they took from you and I which was said to have been given to God. They shared some part of it and said they must construct a guest house and invited people to come and be lodging there. That is trading. So, that is why we want to engage consultants who will help us to talk to them. We are not fighting. We won’t fight. I don’t want to be seen as fighting God or fighting education.”
http://newtelegraphonline.com/fg-records-n900bn-annually-from-vat-says-firs-boss/
