VAT SHARING FORMULA: A TECHNIQUE THAT CAN UPSET NIGERIA’S MIDDLE TIER GOVERNMENT FINANCES
Keywords:
Fiscal Disparities, Fiscal Federalism, VAT Sharing FormulaAbstract
This study examines the potential impact of proposed changes to Nigeria's Value Added Tax (VAT) revenue sharing formula on the financial resources available to states and the Federal Capital Territory (FCT). The research investigates whether the new formula will disproportionately benefit states with high VAT revenue generation and exacerbate fiscal disparities among states. Using descriptive statistical analysis of secondary data, the study finds that the proposed formula will disproportionately favor states with high VAT revenue generation, such as Lagos, while states like Imo will experience significant declines in VAT revenue allocation. The study recommends a more equitable VAT sharing formula, that properly considers the principles of derivation, equity, and population, as the real factors for addressing fiscal disparities among states, the FCT and their regions, while promoting fiscal sustainability.
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