After reviewing the new tax reform bills, I find that the committee has done commendable work, though I seek further clarity on the VAT aspect.
- Currently, VAT revenue is shared as follows: Federal Government receives 15%, State Governments and FCT Abuja get 50%, and Local Governments receive 35%.
- The 50% allocated to state governments is divided into three parts: 50% is equally shared among all states and the FCT, 30% is distributed based on population, and 20% is allocated according to each state’s VAT collection.
- The derivation component has sparked contention, particularly with Lagos State, which collects the highest VAT due to the presence of major company headquarters, not necessarily because of more VAT-generating transactions.
