VAT row threatens Fed Govt’s N8.36tr 2022 revenue target

The controversy over the Value Added Tax (VAT) may derail the Federal Government’s projected N8.36 trillion 2022 revenue should the matter be resolved in favour of states.

The revenue projection for 2022 is part of the three-year expenditure plan approved by the Senate yesterday.

In the 2022-2024 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) passed yesterday, there is a projection of N2.26 trillion revenue target from VAT in 2022.

The Federal Government said yesterday it will seek a declaration from the Supreme Court to lay the VAT controversy to rest.

Attorney-General of the Federation and Minister of Justice Abubakar Malami stated this yesterday in New York. He is in President Muhammadu Buhari’s delegation to the ongoing United Nation General Assembly.

The projected VAT revenue of N2.26 trillion represents 16.2 per cent of the total approved expenditure of N13.98 trillion for 2022.

A Federal High Court in Port Harcourt had ruled that states, and not the Federal Inland Revenue Service (FIRS), should collect VAT and Personal Income Tax.

Read Also: VAT dispute is about constitutional issues and not the capacity of states to collect it
Sequel to the ruling, Lagos State and Rivers State enacted enabling laws to activate their collection of VAT.

The uncertainty around VAT was one of the concerns at the debate on the MTEF yesterday, although the upper chamber finally retained VAT collection as part of the Federal Government’s revenues.

But many analysts said a Supreme Court judgment in favour of states’ collection of VAT could have a material impact on national budget implementation.

Speaking yesterday, Senate President Ahmad Lawan said the collection of VAT by the Federal Government would continue until there is a definite ruling by the Supreme Court granting state governments the right to collect VAT.

“One of our colleagues in his contribution mentioned that we should not include the VAT. I think there is nothing wrong with continuing with the VAT as part of our revenues because there is no final judgement yet.

“Therefore we should not confuse our system until there is such a very clear-cut definite judgement by the Supreme Court, we should go ahead with VAT as part of the revenue resources available to us,” Lawan said.

The upper chamber also approved the sum of N13.98 trillion as the total aggregate expenditure of the Federal Government for the 2022 fiscal year.

The approval followed the consideration of the report of the Senate Joint Committee on Finance, National Planning and Economic Affairs; Foreign and Local Debts; Banking, Insurance and Other Financial Institutions; Petroleum Resources (Upstream); Down Stream Petroleum Sector; and Gas, on the 2022-2024 MTEF/FSP by the Senate. Chairman of the Joint Committee, Senator Solomon Adeola, presented the report.

Adeola said the N13.98 trillion aggregate expenditure for 2022 was made up of total recurrent (non-debt) expenditures of N6.21trillion; Personnel Costs (MDAs) of N3.47 trillion; Capital expenditure (exclusive of transfers) N3.26 trillion; Special Intervention (recurrent) amounting to N350 billion; and Special intervention (Capital) of N10billion.

Recommendations of the joint committee which were approved by the Senate include: “That the daily crude oil production of 1.88mbpd, 2.23mbpd, and 2.22mbpd for 2022, 2023 and 2024 respectively, be approved, in view of average 1.93mbpd over the past 3 years and the fact that a very conservative oil output benchmark has been adopted for the medium term in order to ensure greater budget realism.

“That the benchmark oil price of USD$57 per barrel should be approved because of the clear evidence of wide consultations with key stakeholders and the age long fiscal strategy of addressing the oil price shocks by the adoption of a higher than forecast oil price benchmark for fiscal projections over the medium term.”

“That the Exchange Rate of N410.15/US$ proposed by the Executive for the 2022-2024 be approved;

“That the projected GDP growth rate of 4.20% be approved; That the projected Inflation rate of 13.00% be also approved;

“That the Fiscal deficit estimate ofN5.62 trillion (including GOEs) also be sustained due to the Federal Government’s conservative approach to target setting and its determination to improve the collection efficiency of the major revenue-generating agencies while it continues to enforce the implementation of the Performance Management Framework for GOEs by ensuring that they operate in more fiscally responsible manner whilst reviewing their operational efficiencies, and costs-to-income ratios, as declared;

“That the projected New Borrowings of N4.89 trillion (including Foreign and Domestic Borrowing) be approved, subject to the provision of details of the borrowing plan to the National Assembly;

”That the USD$3.5 billion International Monetary Fund (IMF) loan at the rate of 0.01% to 0.02% be approved to shore up its internal borrowing and to reduce external borrowing because of the exchange rate risks.

“That the following sundry parameters in the 2022-2024 MTEF/FSP Document be also approved: FGN retained revenue of N8.36 trillion; total FGN proposed expenditure of N13.98 trillion; Fiscal deficit of N5.62 trillion (including GOEs);

“New Borrowings of N4.89 trillion (including Foreign and domestic Borrowing), subject to the provision of details of the borrowing plan to the National Assembly;

“Statutory transfers, totaling, N613.4 billion; Debt Service estimate of N3.12 trillion; Sinking Fund to the tune of N292 billion; Pension, Gratuities & Retirees Benefits of N567 billion; and

“Aggregate FGN Expenditure of N13.98 trillion; made up of total recurrent (Non-debt) of N6.21 trillion; Personnel Costs (MDAs) of N3.47 trillion; Capital expenditure (exclusive of Transfers) of N3.26 trillion; Special Intervention (recurrent)totalling to N350 billion; and Special intervention (Capital) of N10 billion.

“That the Salaries and Wages Commission should review the salary structure of all the MDAs, in other to come up with a new salary structure for the MDAs that will reflect the true financial position of the Agencies.

“That there should be a continuous review of the Fiscal Responsibility Act to ensure that all revenues are remitted to the CRF as at when due, to curtail frivolous deductions and diversion of funds by the MDAs.”

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