LCCI Advocates Adjustment In VAT Sharing Formula 

VAT: LCCI Seeks Adjustment In Revenue Sharing Formula For States, LGAs

Yemisi Izuora

The Lagos Chamber of Commerce and Industry, LCCI, has commended commended the swift intervention of the Court of Appeal to reduce the uncertainties surrounding controversies about Value Added Tax, VAT ruling by lower court granting Rivers State powers to collect VAT.

The Chamber also advocated an adjustment in the existing sharing formula for purpose of fairness.

Dr. Chinyere Almona, Director-General, of the LCCI, while reacting to the VAT controversies recalled that VAT was introduced in 1993 to replace the sales tax in the States.

Almona, also recalled that the original formula for the distribution was 50% to the Federal Government, 35% to States, and 15% to LGAs, but with effect from January 1999, the formula was adjusted to be 15% to FGN, 50% to States, and 35% to LGAs. Presently, the States and LGAs share their allocation using the factors of equality 50%, population 30%, and derivation 20%.

The Chamber however advised that the current sharing formula for the States and LGAs be adjusted using the factors of equality 20%, population 30%, and derivation 50% going forward.

“This arrangement should be agreeable by all concerned parties. This can drive innovation on revenue generation in all the States towards increasing their internally generated revenue.

It will also make the States more sensitive to the needs of businesses in their respective States, knowing that an enabling business environment is likely to boost tax revenues.” Almona stated.

On the raging legal battle with regard to VAT collection, Almona expressed relief that a stay of execution of the lower court judgement pending the determination of the appeal filed by the FIRS, Court of Appeal in Abuja has reduced tension among business operators.


The Director General reported that first concern of the Chamber is the confusion that businesses face as to who is in charge of VAT collection which is not healthy for the business community and planning. “We, however, hail the swift intervention of the Court of Appeal to reduce the uncertainties surrounding these controversies.

Businesses should not be subjected to unnecessary hurdles and made to pay the same tax twice from different agencies. The Federal Government should urgently establish an understanding with states on what is best for the nation and businesses.” Almona advised.

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