FIRS: States VAT collection to lead to double taxation for businesses

The move by state governments in Nigeria to start collecting Value Added Tax (VAT) and the push forward by the Federal Inland Revenue Service (FIRS) to maintain status quo despite a court judgment is likely to lead to double taxation for businesses. According to the FIRS, VAT is operated through an input-output method which may result in duplication of payments if in control of states. This ongoing battle between the federal and state governments has created a wave of uncertainty and anxiety among businesses and manufacturers across the country. This conflict could potentially have severe implications for the Nigerian economy, as it threatens to deter foreign investment and destabilize the ease of doing business in the country. Winston Osuchukwu, Co-founder at Trans-Sahara Incorporated, shared his insights on the matter in a recent interview with CNBC Africa. The stalemate between the federal and state governments regarding VAT collection has left many businesses in a dilemma. With the federal government insisting on maintaining the status quo and state governments pushing to take control of VAT payments, businesses are caught in the middle, facing the possibility of paying both parties to avoid repercussions. This uncertainty has the potential to disrupt business operations and create financial strains for companies trying to navigate this complex tax landscape. The lack of clarity and harmonization in the tax laws governing VAT collection in Nigeria has only added to the confusion, leaving room for different interpretations and gray areas that further complicate the issue. The Minister of Finance has been called upon to intervene and provide clarity on the matter, given the significant impact it could have on the revenue source for the federal government. The looming threat of double taxation poses an existential risk to businesses in Nigeria, prompting urgent action and resolution from all levels of the government. If left unresolved, this contentious issue could deter foreign investors and hinder economic growth in the country. The endgame of this VAT collection dispute remains uncertain, with the possibility of the matter escalating to the Supreme Court for interpretation. However, a collaborative and inclusive approach involving dialogue and negotiation between the state and federal governments is crucial to finding a sustainable solution. Ultimately, the resolution of this conflict will require a coordinated effort to rewrite the tax laws in a manner that is agreeable to all stakeholders, ensuring a fair and efficient tax system that supports business growth and economic development in Nigeria.