From Uche Usim, Abuja
As the face-off between the Rivers State government and Federal Inland Revenue Service (FIRS) over the collection of Value Added Tax (VAT) deepens, the latter has insisted that there is no place in the world where sub-national governments champion VAT administration as it would turn controversial.
To this end, the tax authority noted that the decision of the Federal High Court to grant powers to states to administer VAT makes it difficult for businesses to operate under the new dispensation.
The Group Lead, Special Operations Group, FIRS, Mathew Gbonjubola, said this during a chat with journalists on Wednesday in Abuja.
He attended the media chat with the Group Lead, Digital and Innovation Support Group, FIRS, Mrs Chiaka Ben-Obi.
Gbonjubola stated 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.
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. The implication of this, according to him, is that the state and local government takes about 85 per cent of VAT proceeds.
He said: “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 the VAT Act differentiate between two kinds of VAT; Input VAT and Output VAT.
Put simply, he said 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.
According to Gbonjubola, 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.