The Institute of Chartered Accountants of Nigeria (ICAN) yesterday called on the federal government to take advantage of the ongoing constitutional review to shape the most appropriate tax structure for the country in a way that strengthens subnational levels of government while ensuring consistency of treatment as much as possible.

He also instructed the government that the process should include a review of the Value Added Tax (VAT) law, its administration and its revenue sharing formula.

Institute Registrar / Director General Professor Ahmed Kumshe made the appeal in Lagos in responding to the Rivers State Value Added Tax Law / Federal High Court judgment in the case no. fhc / ph / cs / 149/2020 between the Attorney General of Rivers State, the Federal Inland Revenue Service and the Attorney General of the Federation.

He implored the Rivers State government and the federal government to seek an amicable resolution of the problem as soon as possible.

Kumshe said, “This should not be allowed to escalate given the country’s precarious tax revenue situation and the general business environment. It is important to protect taxpayers and provide certainty for businesses. We believe that this development offers us an opportunity to re-examine our fiscal federalism.

Before the introduction of VAT in Nigeria in 1993, some states administered sales tax. However, the VAT replaced the sales tax from 1994. The law empowered the FIRS to collect the tax, which is to be shared among the three levels of government, with 15 percent to the federal government, 50 percent to the states. and 35 percent. cent to local councils.

There have been a series of court cases against the national VAT law, its administration by the FIRS, and state powers to enact similar laws such as the sales or consumption tax, which was enacted by the Lagos State in 2009. Subsequently, other States enacted similar laws. including Kano State, Edo, Ogun, Rivers and Yobe.

The Registrar said that while the Rivers State Government’s decision seeks to promote the principle of fiscal federalism, the institute believes the issue should be approached with caution to achieve a win-win outcome for all stakeholders and address issues of concern such as impact on ease of doing business, vulnerable households and small businesses, tax administration capacity and multiple taxes.

Kumshe added, “Many states still have various taxes, which are similar to consumption tax, including hotel occupancy tax and restaurant consumption tax, entertainment tax. State-level VAT administration can add to the myriad of taxes across different levels of government, many of which target the same tax base. State VAT collection may be more demanding, especially in the short to medium term, when it comes to skills and knowledge, digital transaction processing, VAT control and dispute resolution.