Lagos kicks against FG’s moves to reduce income tax rates

The Lagos State Government has condemned alleged plans by the Federal Government to effect a reduction of income tax rates through the National Tax Policy, saying it would resist an attempt to impose the policy on the state.

The decision was contained in a seven-point communiqué issued at the state’s sixth executive/legislative parley on “Good Governance and Strategic planning” held at the Golden Tulip, Mile 2, Lagos.

The communiqué, read by a member of the House of Representatives representing Surulere Federal Constituency I, Femi Gbajabiamila, stated that it was necessary to resist the planned reduction as it would adversely affect the revenue base of the state government without giving it any opportunity to make up for the loss of revenue.

It also seeks an alteration of the present revenue allocation formula, so as to increase the share of states and local councils in the Federation Account as well as amend the Value AddedTax (VAT) Act to preserve the revenues exclusively for states and local government areas, stressing that this would enable them to cope with increasing challenges of governance at the local level.

The state argued that even though the National Tax Policy seeks an increase in indirect tax rates and decrease in income tax rates, experience had shown that only the rate reduction could easily be achieved.

The parley recalled that the crisis generated by the attempt to increase the VAT rates through the VAT Order 2007 clearly illustrates the difficulty that would be encountered if the proposed increase of indirect taxes is attempted.

Furthermore, the state reminded that despite the National Assembly reserving the legislative authority for the Personal Income Tax (PIT), the importance of the state government cannot be jettisoned as the PIT revenues belong exclusively to the state.

“It is important for states to be given an enabling environment to collect all forms of sales and consumption taxes, as these are not on the exclusive legislative list and are regarded as residual matters for the State House of Assembly,” the parley submitted.

In his keynote address, the state governor, Mr. Babatunde Fashola, said the visible progress being made by the state was largely due to its commitment to effective tax policy, budget implementation and commitment to the budget in the last three years. He said no other government had posted such budget performance in the federation.