Out of the N5.718 trillion distributable Value Added Tax (VAT) revenue shared by the Federation Accounts Allocation Committee (FAAC) between January and November 2024, three states and the FCT earned N4.183 trillion as their share, leaving the remaining 33 states to share the remaining N1.534 trillion.
Based on the current VAT revenue sharing formula, Lagos State gets 42 per cent, meaning that the state alone takes home N2.401 trillion as its share during the period; Rivers State, which takes 16 per cent, got N914.88 billion during the same period, FCT with 10 per cent got N571.8 billion; while Oyo state that takes 5.2 per cent got N297.336 billion.
The VAT sharing formula has become a contentious issue in recent times following the introduction of a new tax reform bill, which proposes radical changes to the current sharing formula.
According to the current formula, the Federal Government receives 15 per cent of VAT, states and the FCT take 50 per cent, while local governments take 35 per cent.
Of the 50 per cent meant for the states, each state retains 20 per cent of the VAT collected within its borders as derivation, 30 per cent is distributed based on the states’ population, while the remaining 50 per cent is shared equally among all the states.
According to the Presidential Committee on Fiscal Policy and Tax Reforms, this sharing formula does not take into account the fact that over 70 per cent of goods and services are consumed outside the head offices of the firms rendering those services or producing those goods but only recognises where VAT is remitted.
The new formula, which it proposes, gives Federal Government 10 per cent of VAT revenue, states and FCT, 55 per cent and local governments 35 per cent.
Guardian.
