Prominent youth organization, Youth Bureau has Lagos state allocation from redistribution of Value Added Tax (VAT) proceeds as “abysmal and poor, urging the President Bola Tinubu-led administration to address the anomaly.
The group’s Acting Publicity Secretary, Yemi Yusuf made the call at a press conference on Thursday in Lagos, describing the about 17 percent of VAT contributions that get to Lagos state as meagre and unfair.
He urged President Tinubu to look into the disparity with a view to ensuring a more equitable distribution of huge VAT generated by Lagos state. Noting that it is worrisome that Lagos is amongst the four states that receive less than they contributed.
Youth Bureau’s concern comes on the heels of an analysis of revenue allocation data from Nigeria’s Federation Account Allocation Committee (FAAC) highlighted inequalities in VAT distribution among states.
“There is no equity and fairness in the redistribution of VAT collected in different states of the federation. The case of Lagos is disheartening and heart-wrenching and we condemn it in totality.
“This is marginalization of Lagos people and the revenue that should accrue to them must be looked into by the President Tinubu-led government and we are calling on him to address this misnomer urgently.
What Lagos receives is too poor and abysmal for a nation’s commercial capital.
“The state cannot continue to contribute so much and receive little; therefore the federal government must not treat this with kids’ gloves or sweep it under the carpet, what is right is supposed to be done right, “He stated.
Data analysis from the policy think tank, Agora Policy had highlighted how Lagos State, the top VAT contributor for the first 10 months of 2024, was allocated 16.78 percent of its contributions. Meanwhile, Imo State received a staggering 1,715.98 percent of its contributions during the same period.
The data, which covers VAT contributions and disbursements from January to October 2024, reveals some distortions in how funds are distributed under the federal system.
Lagos contributed N2.21 trillion in VAT, accounting for the highest share of the total pool. Meanwhile, Imo’s contributions stood at N3.33 billion, the lowest among the states. But Imo received N57.09 billion, a figure significantly higher than what it contributed.
The report categorised states based on the proportion of VAT they received relative to their contributions.
Only four states—Lagos, Rivers, Oyo, and Bayelsa—received less than they contributed.
Seventeen states, including Kano and Kaduna, received between 101 percent and 300 percent of their contributions, while eleven states, such as Bauchi and Ekiti, were allocated 301 percent to 500 percent.
Four states—Imo, Abia, Cross River, and Kebbi—benefited the most, each receiving more than 500 percent of their VAT contributions.
For the ten months under review, the highest total VAT allocation to a state was N371.09 billion. In contrast, Nasarawa received the least allocation, totalling N47.07 billion with a difference of N324.02 billion.
Recall that Value Added Tax (VAT) remains a crucial revenue source in Nigeria’s fiscal framework, with collections distributed among the federal, state, and local governments through a set formula.
The federal government currently retains 15 percent, states receive 50 percent, while local governments are allocated the remaining 35 percent.
On October 3, 2024, President Bola Tinubu submitted four fiscal bills to the National Assembly, including the Nigeria Tax Bill 2024 and the Tax Administration Bill.
Among the proposed measures is a plan to reduce the federal government’s VAT share to 10 percent, while states’ allocations would reflect a derivation principle, allowing states to earn more based on the revenue collected within their borders.
The Senate on Thursday passed the four tax bills for second reading through voice votes.
