By Temitope Ajayi
For me, every situation provides a learning opportunity. The issues thrown up by the VAT debate provided me another chance to know what I didn’t know before now.
Here are my takeaways or what I have learnt so far.
1. Headquarters Effect: I have never heard the phrase before. Now, I know what this means, thanks to the tax experts who have educated us on why Lagos holds the diadem as the biggest contributor to VAT revenue. Companies with Headquarters in Lagos with operations across the country remit all VAT collections through their head office in Lagos. A chunk of what is collected as VAT in Lagos are activities that took place outside Lagos.
2. Derivation Principle: Like oil producing states that enjoy 13% derivation from proceed of oil production, 36 states plus FCT also enjoy 20% baseline share from VAT proceeds before equality of states and population are factored into sharing formula. So, the oil producing states are not the only states enjoying derivation. Great!
3. VAT on Agricultural produce: By deliberate design of the Federal Government, VAT is not charged on some agricultural products to make food cheap and affordable.
4. Father Xmas FG: More than 50% of the VAT revenues are from imports via Customs, Port Authority and Federal government contracts across MDAs. The Federal government just collects its own money, take 15% and share 85% of total sum to states and local government.
5. Ethnic Baiting Works: If you want to provoke popular sentiments to win support for any self-serving agenda in Nigeria, you don’t need to be imaginative. Just say there is ‘injustice’ in Nigeria and that the resources of one part of the country is used to prop up the other part. Wait to see people whose states are sponging off Federal largese become emergency placard-carrying freedom fighters.