….as Sanwo-Olu calls for review
By Bankole Taiwo, Abeokuta
The governor of Ogun state, Prince Dapo Abiodun has called for more share from the fund realised from the Value Added Tax (VAT), to reflects its status as the host to largest industries in the country
Prince Dapo Abiodun made the call when he received the management staff of the Federal Inland Revenue Service (FIRS) led by its Chairman, Mr. Mohammed Nami, on a courtesy call on him at his office at Oke-Mosan, Abeokuta.
The governor who expressed disappointment on the money that accrued to the State from Value Added Tax, noted that as the State with largest concentration of industries, the principles of derivation should be used in the distribution of VAT.
“There is no meaningful industry that is not here, however, when VAT are computed, what we see is different. Because these industries have their headquarters in Lagos, Lagos gets the benefit of VAT. I believe we should revisit this and we should try and find a way to be more equitable by compensating us.
“I believe that most of the factories that are here have distributors and when they take delivery of their goods here in Ogun State, VAT are paid at the point of sales and further down the line. We will like that the principles of attribution or derivation be used in the distribution of VAT”, the Governor pleaded.
He said the State with the largest deposit of solid minerals was blessed with silica, while one third of the entire State has limestone deposit, saying that this has enable the State generate the highest of revenue to the coffers of the Federal government.
Prince Abiodun solicited for a synergy between the Federal Inland Revenue Service and the Ogun State Internal Revenue Service in the exchange of information between the two agencies in the area of Corporate Tax payers and others in their various tax net.
“We are also looking for how to collaborate in the area of capacity building. We appreciate that the Federal Inland Revenue Service has lots of programmmes that are aimed at training and capacity building and we believe that we can tap into that to help our tax administrators up to the Local Government level for better performance”, he said.
The Governor revealed that the State revenue service has over the last eight months of his administration, recorded the highest revenue since the creation of the agency, without recourse to land sale, saying now that the intention was to properly dimension the revenue by blocking leakages and being more effective in financial management.
Meanwhile, the Governor of Lagos State, Mr. Babajide Sanwo-Olu, has called on the Federal Government to review its revenue sharing formula, stating that the current standard is non-equitable and unfair.
The Governor stated this on Monday, at the Opening of the Federation Accounts Allocation Committee (FAAC) 2020 Retreat holding in Lagos with the theme: “Efficient Federation Revenue Allocation as a Nexus for National Economic Diversification.”
In his submission, the Governor called on the Committee to consider giving attention to revising some provisions of the revenue sharing formula to place priorities to current realities.
The Governor submitted that to ensure “fairer, equitable, and more development-oriented” revenue sharing formula, priority must be given to population density and derivation.
Describing as “neither fair nor equitable”, he lamented a situation where with the Lagos State contribution of one trillion naira (55%) of the total VAT collection in 2019, what came back to Lagos State from the sharing formula was about 10%.
In his submission the Governor averred:
“But it must be said, that equally vital is the need for a new, fair and just revenue-sharing formula, for federation revenue.
“The necessity of this cannot be swept under the table. There is actually a correlation between an appropriate revenue formula and the ability of the federating units to achieve a meaningful diversification and sustainable growth in IGR.
“This occasion of your annual retreat being hosted by our state, provides another opportunity for me to restate the need to consider Lagos State for a special status recognition in the allocation of federation revenue.
“First is the need to attach increased value to population density as a critical factor, in addition to the nominal population figure.
“The population density of Lagos State, measured as number of persons per square kilometer, is more than twenty times the national average. This is not surprising considering our State actually has the distinction of hosting the largest population on the smallest land mass in the country.
“The second issue is the need to increase the share of Lagos State from Value Added Tax allocation. While the contribution of Lagos State to VAT collection in 2019 was one trillion naira or 55% of the total, what came back to Lagos State from the sharing formula was about 10%.
“You will agree with me that this scale of returns is neither fair nor equitable, and is also nowhere near sufficient to mitigate the burden of the economic activities that generate VAT.”
Moreover, the Governor who lamented the effects of over-dependence on oil, stressed that it is time Nigerian governments take heed on the need to diversify the economy, stating that the Country have all the necessary human and material resources to facilitate the processes.
He added that diversification will boost the Country’s economy through receipts from new sources of export, particularly through agriculture and manufacturing.
The Governor further called on States in the Federation to adopt creative and innovative strategies to boost Internally Generated Revenue (IGR) rather than solely depending on the monthly federal allocation.
He said: “It is a fact that almost all the states of the federation depend largely on the monthly allocation from the federation account to meet their salary obligations and also finance development projects.
“It is therefore not difficult to understand the seriousness and passion with the clamour for the review of the current revenue allocation formula is being canvassed.
“There is no one who will not agree that Nigerian governments urgently and seriously need to diversify their sources of revenue. A situation in which a commodity as volatile in pricing as oil accounts for the bulk of our public revenues and foreign exchange is not at all desirable.
“We must do everything within our power to create and boost new sources of export, especially along the lines of value-added agriculture, and manufacturing.
“And we have everything we need to make this happen; we have the land, we have the people, we have the energy and the can-do spirit.”
He stressed that the status of Lagos as the leading State in economic strength, is a function of creative and successful approaches to internal revenue generation which has been aiding the funding of the State’s annual budgets.
“On our part as States, it is clear that we must explore ways of reducing our dependence on what comes from the federation account on monthly basis, by adopting creative and innovative strategies to boost Internally Generated Revenue (IGR). There is no doubt about this.
“I am delighted to note that Lagos is showing the rest of Nigeria the way regarding this. The bulk of our annual budgets are funded by our creative and successful approach to internal revenue generation,” he said.
Governor Sanwo-Olu stressed that Lagos State as a former Federal Capital, “the nation’s commercial and industrial nerve Centre, and also Nigeria’s most populous State, Lagos shoulders a heavy burden, which if not properly discharged, poses great danger to the attainment of National economic growth aspirations.”
“It is projected that by 2050, Lagos will be the fifth or sixth most populated city in the world. Available statistics estimate that as many as half a million people currently migrate to Lagos from other parts of Nigeria, annually.
“The implications of this are clear – and we can see it in the mounting pressure on public facilities and utilities in the State: transport, energy, water, and so on. We are now in a race against time to not only catch up but hopefully create capacity that exceeds the demand in all of these areas.
“But we need all of the support we can get on this. The imperative to start planning and building for the distant future cannot be over-emphasized,” he added.