Institute of Chartered Accountants of Nigeria (ICAN) has urged the federal and Rivers State governments to seek an amicable resolution to the ongoing legal tussle on Value Added Tax (VAT) in order to protect taxpayers.
The accounting boy, in a statement on Wednesday, said it was important to protect taxpayers and provide certainty to businesses, urging both parties not to allow the situation to degenerate given the country’s precarious tax revenue position and the general business environment.
“This development presents an opportunity to re-examine Nigeria’s fiscal federalism and leverage on the ongoing constitutional review to fashion out the most suitable fiscal structure for the country in a manner that strengthens the sub-national level of government while ensuring uniformity of treatment. This process should include a review of the VAT law, its administration and revenue sharing formula,” ICAN said in the statement signed by Ahmed Kumshe, its registrar
Giving further details, the registrar said while the move by the Rivers State government seeks to promote the principle of fiscal federalism, ICAN is of the view that the matter should be approached carefully to achieve a win-win outcome for all stakeholders.
“Given the rapid development of events since the judgment, there is the need to guide our members, share our view with policymakers and educate the public and other stakeholders on the possible implications”
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On impact on the ease-of-doing business, ICAN said if the position is sustained and replicated by other states, it will increase the cost and time required for compliance by businesses in addition to the complexity of administering VAT at the sub-national level such as treatment of international and inter-state transactions”.
The accounting body said many states already have various taxes which are similar in nature to consumption tax, including the hotel “occupancy and restaurant consumption tax, entertainment tax etc.
It argued that administering VAT at the state level may add to the myriad of taxes across different levels of government many of which are targeted at the same tax base.
On the capacity of tax administration, ICAN noted that the collection of VAT by states may be more demanding, especially in the short to medium term, in the aspect of VAT skills and knowledge, dealing with digital transactions, VAT audit, and dispute resolution.
On the impact on vulnerable households and small businesses, ICAN submitted that in the absence of exemption threshold for small businesses and limited list of exempt goods and services, there may be adverse effect on the masses in Rivers State especially poor households and SMEs.
