Lere Olayinka, Senior Special Assistant to Nyesom Wike, the Minister of the Federal Capital Territory (FCT), recently expressed his support for a proposal regarding the distribution of Value Added Tax (VAT) based on consumption patterns. In a tweet, Olayinka argued that states that prohibit the consumption of alcohol should not receive a share of VAT generated from alcohol sales in other states.
Olayinka’s comments come amid ongoing discussions about tax reforms in Nigeria, particularly concerning how VAT is currently allocated among the 36 states. He emphasized that it is unjust for states that do not allow alcohol consumption to benefit from taxes collected on alcoholic beverages sold in states where such consumption is permitted. This stance aligns with broader calls for a more equitable distribution of tax revenues, particularly as many states feel marginalized by the existing VAT sharing formula.
According to the tweet by Lere Olayinka, “I support that VAT should be shared based on consumption. For instance, a States that prohibited consumption of ALCOHOL must not share from VAT generated from consumption of the same alcohol in other States.”
The current VAT distribution system has been criticized for disproportionately favoring states like Lagos, Rivers, and the Federal Capital Territory, which host most corporate headquarters and generate significant tax revenue. According to recent data from the Federal Inland Revenue Service (FIRS), these three regions collectively receive over 70% of the total VAT collected, leaving other states with minimal financial returns. Olayinka’s proposal reflects a growing sentiment among various stakeholders who advocate for reforms that would ensure all states benefit fairly from tax revenues based on actual consumption within their borders.
This debate has gained traction as lawmakers consider new tax reform bills aimed at addressing these disparities. Advocates argue that implementing a consumption-based sharing model would not only promote fairness but also encourage states to develop their local economies and consumption patterns. The proposed changes could lead to a more balanced fiscal landscape across Nigeria, where every state has an opportunity to benefit from its economic activities.
Olayinka’s tweet has sparked discussions online, highlighting the complexities of tax policies in Nigeria and the need for reforms that reflect the realities of consumption and revenue generation across different regions. As the dialogue continues, it remains to be seen how policymakers will respond to these calls for change and whether they will prioritize equitable tax distribution in future legislation.