The federal government would most likely lose billions of naira in tax revenue amidst dwindling income if the recent court judgement in favour of Rivers State to collect Value Added Tax (VAT) and two other taxes stands and other states follow a similar path. Daily Trust reports that the federal government had been struggling to augment its income following serious setbacks occasioned by COVID-19 pandemic that rattled its revenue from oil revenue. A verdict by a Federal High Court in Rivers on Monday, August 9, 2021, on who has the power to collect VAT favoured the state government; a development seen as a serious setback for the federal government, which heavily relied on income from non-oil sources. The government at the centre is viewed as “very powerful” because it gets a large chunk of federal allocation and in some cases subsidises the states and local government areas. Most states in the country struggle to make ends meet due to their weak internal revenue drive initiatives as they wait for monthly allocation from the federal allocation committee, which shares the monies collected from oil sales and some taxes. Some analysts told the Daily Trust Wednesday that while there is the likelihood of a legal tussle up to the Supreme Court over the judgement that favoured Rivers State, others viewed the development as “positive”, saying it would strengthen the revenue profile of states and by extension their prospect of becoming truly independent without prejudice to a viable federal structure. At a 7.5 per cent VAT rate, Nigeria might have raked in 2.5 trillion from VAT in the last 18 months- January 2020 to June 2021. In 2020, total VAT collection was about N1.53tr with import VAT being N348 billion (or 22.7%) while foreign non-import VAT was N420bn (or 27.4%) and local VAT amounted to N763bn (or 49.8%). In the first quarter of 2021, VAT collection was N496.39bn while it increased by N15.8bn in the second quarter to N512.25bn, according to data from the National Bureau of Statistics (NBS), filed by FIRS. The breakdown VAT generation for Q2 (April to June) showed that N187.4bn was from non-import VAT locally, N207.7bn from non-import VAT for foreign goods. The balance of N117.1bn VAT was from the Nigeria Customs Service (NCS) VAT on imports. According to the 2020 report of BudgIT, out of the 36 states and the FCT, only five can boast of contributing the highest VAT collection in Nigeria even as Lagos, Ogun, FCT, Rivers are the highest contributors of VAT. Rivers State is one of the major contributors of income to the federal purse and with the latest judgement, there are fears that the FGs income would be affected. Counsel to FIRS, O.C. Eyibo, said he would study the judgement that favoured Rivers State and advise his client. When contacted on the position of the Service on the judgment, the Director, Communications and Liaison Department, FIRS, Dr Abdullahi Ismaila Ahmad said that they would appeal the decision made by the court. “We are appealing the matter immediately,” he said. In the same vein, the office of the Attorney General of the Federation and Minister of Justice, Abubakar Malami (SAN), said it will take a step after studying the court judgement. The media aide to the minister, Dr Umar Gwandu, said in a reaction on Wednesday that, “We will study the judgement and decide on the next line of action.” Source :Daily Trust