Claim by FIRS that Nigeria is the only country that collects VAT at subnational level is false

LEAD of the Special Tax Operations Group at the Federal Inland Revenue Service  (FIRS) Mathew Gbonjubola claimed that there was nowhere in the world, where the administration of Value Added Tax was done at the sub-national level, but checks by The ICIR have shown this claim to be false. 

Gbonjubola made this claim on Wednesday at a press briefing in Abuja while defending reasons why FIRS, a federal agency, could not devolve powers to collect VAT to Nigeria’s 36 states.

“It is extremely difficult, if not impossible, to operate VAT at the sub-national level,” he declared.

To drive home his point, he added, “…That is why there is no country in the world that does that.”

The ICIR has checked the administration of tax in other jurisdictions and found countries where value-added taxes are collected at the subnational level contrary to the claim of the FIRS officer.

One of such countries is India where states operate different VAT rules and implementation guidelines. An Indian company with a turnover of more than Rs.5 lakh is required to register and file for VAT at the state where it operates.

Similarly, VAT, locally referred to as sale tax, is levied at 17 per cent in Pakistan by four provinces: Sindh, Balochistan, Khyber Pakhtunkhwa, and Punjab, and not by the federal authorities.

In fact, rates in other provinces and cities are lower. For example, the Capital Territory of Islamabad, as well as Gilgit-Baltistan, Kashmir, and Azad Jammu, charge different rates of VAT on their goods and services ranging between 13 and 16 per cent.

Brazil, the largest federation in South and Latin America, has two kinds of VATs. One is a state sales tax (Imposto sobre Circulação de Mercadorias e Serviços – ICMS) and the other is a federal excise tax (imposto sobre produtos industrializados – I PI). And the rate of VAT varies from one state to the other.

While Rio de Janeiro charges 19 per cent VAT, states such as Santa Catarina, Espírito Santo, Alagoas and others collect their VAT at 17 per cent rate. States such as Bahia, São Paulo, Sergipe and 11 others charge 18 per cent VAT.

A check of the tax administration system in Canada also reveals that sales taxes are collected at both federal and provincial levels.

The tax collection system in Canada is harmonised in a way that while the federal government collects 5 per cent of sales tax, the provincial governments collect 8 per cent. And some provinces collect as much as 10 per cent in sale tax.

As for the goods and service tax, most businesses collect the tax at the point of sale and then remit the tax to the Canada Revenue Agency (CRA) on behalf of the federating units.

The United States from which Nigeria borrows several of its laws does not collect VAT. The federal government collects income tax, while the states and local governments collect sales taxes and property tax respectively.

In European Union, member states agree to individually collect a minimum of 15 per cent VAT rate, which may be lower for some goods and services.

Therefore, tax administration varies from one EU country to the other. In fact, Switzerland has its own VAT rates, separate from the European Union rate.



    These examples have shown that the information shared with the Nigerians by the FIRS official at the press conference on Wednesday was false.

    Notwithstanding, The ICR finds that value-added taxes are collected by federal authorities in countries such as Russian Federation, Malaysia and Mexico.

    FIRS and state governments such as Lagos and Rivers currently have been at loggerheads regarding who has the legal power to collect VAT.

    So far, FIRS is on the wrong side of the law.

    Ajibola Amzat, Managing Editor at The ICIR. He can be reached via [email protected]
    and @ajibolaamzat on Twitter.

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    1. In the same manner that the FIRS official exaggerated that there is no country where VAT is administered at the sub-national level, so are proponents of state collection of VAT in Nigeria exaggerating by saying that in fiscal federalism only sub-nationals collect VAT. That is equally untrue. I just discovered that in South Africa, a federal state, the South African Revenue Service is responsible for VAT administration. In Canada, VAT was introduced by the federal govt in 1991. It caused a lot of problems between the federal govt and the provinces. Prior to 1991, the provinces were collecting sales tax. After a long drawn battle between the central govt and the provinces, there is now what they call a harmonized sales tax, being collected and administered by the Canada Revenue Agency, with revenues divided among participating governments according to a formula. Precisely what is happening in Nigeria. In the UK, VAT is collected by Her Majesty’s Revenue and Customs, a central authority. VAT in most EU countries are collected by central authorities, mainly because they want a single integrated market. In Brazil there is a state VAT and a federal VAT simultaneously. There is merit for allocating a fairer share of VAT revenue to states that contribute more but let’s stop making it look like the federal govt of Nigeria is committing a massive fraud by being in control of VAT administration in Nigeria. The situation calls for round table discussions and negotiations, not the grandstanding that is currently going on.

    2. The Nigerian federation has a lot of problems not just with vat, the Personal income tax act is also one, the FIRS has no locus standing in also enforcing none paymen of personal income taxes, driver licensing is also under state law, it’s not under d exclusive list, as well as vehicle registration which is supposed to be made by states and issued by local governments

    3. This vat issue is purely Hausa Fulani advantageous system. Wine victory is going to be short lived as those benefiting from the corrupt and enslavement system are in charge of the federal courts. Since the statusquo benefits them, they will do anything to protect it. However, Wine has fought a good fight. We must continue to mount pressure on them till.will get what is due for us. Gombe state governor pleaded to River state and Lagos state to be their brother keeper by allowing Federal government to collect VAT to their own benefit against the south. My question is, have we not been our brothers keepers enough. Is the allocation from oil money not enough? These people are taking us for a fool.

    4. The FIRS officials or workers are system workers, and it is not possible that they will ever see anything wrong with their legitimate source of daily bread: they were all carefully recruited or “corrupted” into d system to sustain d fraudulent system.
      D write up is a good enlightenment to many people who were confused with d technical jargon VAT, not knowing it is d same thing as sales tax, which by d way is not collected by d federal here in d U.S, but by d states and even by d counties, cities or even districts or streets that are well organized.

    5. Some of the helmsmen in Nigeria, including,minister of information who is supposed to be better knowledgsble will just dish out false comparative information to defend bad government policies and bad governance to the people thinking that Nigerians are fools. The same thing Ngige did when he was arrogantly trying to defend the ignoble position of FG on doctors recent strike. They should know that doing this in modern IT time will always expose their ignorance and low competence level in the office they hold which is a disgrace to the government in power. Laid Muhammed, Ngige and others should better learn from this.


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