A bill seeking to empower the Lagos State government to collect Value-Added Tax (VAT) scaled the first and second reading at the state House of Assembly on Monday.
The bill seeks to empower the Lagos Internal Revenue Service (LIRS) to collect VAT generated by businesses in the state as against the custom whereby the Federal Inland Revenue Service (FIRS) does the collection.
The legislators directed the House Committee on Finance, which is handling the bill, to report back on Thursday.
The Speaker, Mr Mudashiru Obasa, said the VAT bill would lead to an increase in revenue and infrastructure development.
By its action, Lagos State is seeking to follow in the footsteps of Rivers State, where the governor, Chief Nyesom Wike, on August 19, signed into law the VAT bill.
A federal high court in Port Harcourt had issued an order restraining the FIRS from collecting VAT and Personal Income Tax (PIT).
On Monday, Obasa, Lagos Assembly Speaker, urged the state government to do everything legally possible to ensure the judgement of the court in Port Harcourt is sustained up to the Supreme Court.
LIRS had on August 10 written to the FIRS demanding that the latter should cease to issue demand notices for payment of VAT in the territory of Lagos State and to render account, within seven days, of all sums collected as VAT in the current accounting cycle in the territory of Lagos State.
However, FIRS is insisting it “shall continue to collect VAT and administer the VAT Act until the final resolution of the legal dispute by the relevant appellate court.”
Whereas progress on the VAT bill will be made known at the plenary tomorrow, below are the highlights of the proposed Lagos State VAT Law, as stated by the Fiscal Policy Partner and the Africa Tax Leader at PricewaterhouseCoopers, Mr Taiwo Oyedele:
• The tax is to be administered by the Lagos State Internal Revenue Service (LIRS).
• The rate of the tax is 6%.
• Section 16(2) requires an importer of taxable goods to pay the tax on the goods to the LIRS before clearing the goods.
• Taxable persons are to register for tax within 6 months of the commencement of the law or 6 months of commencement of business, whichever is earlier. Commencement date has yet to be indicated.
• Based on Section 9, non-residents are to register for tax payment if they carry on business in the state. There is no provision for self-charging of VAT.
• Monthly returns and remittance of VAT is due by the 21st of the succeeding month in a manner specified by the LIRS. This means the first return under the law will become due by 21st of month after enactment.
• Any appeal against the decision of the LIRS regarding the VAT matters goes to the VAT Appeal Tribunal to be established under the new law. Members are to be appointed by the governor on the recommendation of the Attorney General and Commissioner for Justice.
• The VAT revenue is to be shared 75% to the state and 25% to the local governments.
• The list of exempt items is similar to the old national VAT law, including basic food items, medical services and educational materials.
• There is no registration exemption for small businesses, unlike the N25m exemption under the national VAT Act.