It is no longer news that the Rivers and Lagos States governments are pushing to be in charge of Value Added Tax (VAT) collection in their respective states. This move however, is being kicked against by the federal government, and some of the Northern states. It should be recalled that VAT is one of the major sources of income for the federal government, and is often redistributed to the states as part of their monthly federal allocations.
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Since the move by Rivers and Lagos States, some people have alleged that some states may not be able to survive if every state is to keep the VAT it generated. It should be recalled that the Gombe State Governor, Inuwa Yahaya, was reported to have urged his Rivers State counterpart, Nyesom Wike, to be his brothers’ keeper, and share the VAT from his state with others (source: The Punch).
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Following this statement, there is no doubt that some states are afraid that stopping the federal government from collecting VAT, could affect their survival. However, I am of the view that the move by the Rivers and Lagos States governments to collect VAT, would rather trigger economic growth across the country. You will agree with me that the reliance on federal allocations is indirectly affecting Nigeria’s economy in a negative way.
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How the move could trigger economic growth.
Arguably, when states begin to keep their VAT, the federal government’s Internally Generated Revenue (IGR), would decline. As a result, what states will receive at the end of every month will also reduce. The knowledge that there will be little or nothing from the federal government as monthly allocations, would put states on their toes to source for an alternative means of generating funds. This could see states invest in different sectors of their economy.
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The investment or revitalization of hitherto abandoned state-owned businesses, would serve as an alternative option for revenue generation. This could trigger economic growth in different states. The need to generate funds can also see states venture into various businesses that would serve as sources of jobs for its people. With this in mind, it is my view that instead of challenging the Rivers and Lagos States governments on the issue of VAT, others should see it as a challenge that should be accepted.
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