VAT judgement: FIRS may lose N92bn revenue to states

If the judgement of the Federal High Court asking states government to collect Value Added Tax in their domain is upheld by the Appeal Court, the Federal Inland Revenue Service will lose about N92bn which it is expected to earn as cost of collection.

The law setting up the FIRS allows the agency to a percentage, as determined by the National Assembly, as its cost of revenue collection from non-oil taxes before remitting same into the federation account.

A report on FIRS official website revealed that the service collects four per cent as cost of collection for non-oil revenue collected.

The FIRS is one of the agencies of the government that generates revenue for sharing by the three tiers of government.

Others are the Nigeria Customs Service and the Nigerian National Petroleum Corporation.

The highest source of revenue for the FIRS is Petroleum Tax followed by VAT. Others include Stamp Duty, Company Income Tax.

In the 2016 fiscal period, the FIRS received the sum of N85.99bn as cost of revenue collection, while it got N100.3bn as the cost of revenue collection in 2017.

In the 2018 fiscal year, the service got N114.1bn as the cost of revenue collection out of the N5.32tn actual revenue it generated for that year.

According to documents obtained from the Budget Office, the FIRS received an estimate of N112bn and N121bn as cost of revenue collected in 2019 and 2020 respectively.

With a projected VAT pool of N1.3tn in 2021, the FIRS is expected to earn N68bn in the 2021 fiscal period based on the cost of collection rule.

Based on the Medium-Term Expenditure Framework/Fiscal Strategy Paper 2022-2024, the Federal Government is proposing to generate the sum of N2.3trn from VAT in 2022.

With the FIRS entitled to four per cent as cost of collection, it implies that the service is expected to earn N92bn in 2022 as cost of revenue collection.

A Federal High Court sitting in Port Harcourt, Rivers State, had dismissed an application by the Federal Inland Revenue Service, FIRS, seeking to stop the state governments from commencing collection of Value Added Tax, in the state.

Consequent upon the court ruling last Monday, Governor Nyesom Wike, had directed the Rivers State Revenue Service, to immediately commence collection of Value Added Tax, VAT, from corporate bodies and businesses in the state.