The federal government has announced that unremitted value-added tax (VAT) or withholding tax will henceforth be deducted directly from the revenue due to the affected state and local government, as well as ministries, departments, or agencies (MDAs). This measure is intended to compel government entities to set an example for individuals and businesses regarding tax compliance.
NRS Official Highlights Compliance Gaps
Executive Director of the Large Taxpayers and Government Directorate at the Nigerian Revenue Service (NRS), Amina Ado, made this known on Tuesday in Abuja during the opening of a national workshop organized by the NRS. She noted that while many sub-national entities are exemplary in fulfilling their civic duties, significant structural leakages persist, particularly in the prompt deduction and delayed remittance of VAT and withholding tax.
Ado explained that under the Nigerian Tax Administration Act, the Office of the Accountant General of the Federation is empowered to deduct all unremitted revenue due from MDAs or government bodies from their budgetary allocations and remit it to the relevant tax authorities. She stated, “Whereas some jurisdictions work hard to fill the national revenue pool, others participate in the distribution without making their fair contribution. This compliance gap distorts and creates an imbalance in our fiscal federalism.”
Workshop Aims to Strengthen Collaboration
The workshop, attended by commissioners for finance and accountants general from all 36 states, was organized to bring together critical stakeholders from federal and sub-national levels. The goal is to engage, share insights, and forge stronger alliances to optimize revenue collection across the country. Ado emphasized, “This workshop is coming at a time when the Nigeria Revenue Service has taken the huge responsibility of raising about N40 trillion in tax revenue for the Federation. This historic goal requires us to approach our compliance gaps with sincerity and complete transparency.”
Minister Calls for Transparent Tax System
Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, represented by Tolu Adegbiye, stressed that for Nigeria to fully benefit from tax, the system must be transparent, open, and deeply ingrained at all levels of government. He stated, “Taxes are the social contract in action, turning contributions by citizens into vital public goods like roads, health care, education, and national security.”
Oyedele noted that the NRS is responsible for managing federal tax administration, including collecting taxes from transactions executed by all tiers of government, MDAs, and government-owned enterprises (GOEs). He added that the workshop aims to foster deeper institutional collaboration, ensure compliance with tax law, and prompt remittance of withheld taxes. “For sustainable success, there must be alignment of policies between the Federal Government, sub-national administrations and our public enterprises. True fiscal federalism cannot be a one-way street; it can only flourish based on shared commitment and mutual accountability. We have to be honest about the structural imbalances affecting voluntary tax compliance within our system. Going forward, we must create an environment where every taxpayer contributes fairly to the seed, and everyone can expect to share in the harvest,” he said.
Rewards for Compliant States
Executive Chairman of the NRS, Dr. Zacch Adedeji, in his keynote address, promised that there would be rewards for the most tax-compliant states and local governments. He announced that starting this year, the Service will launch an initiative to identify the most tax-compliant states across multiple dimensions. “Excellence deserves recognition, and we look forward to honouring our top performers at the end of the year,” he said.
Adedeji emphasized that the major role of the NRS is to sustainably finance the Federation Account Allocation Committee (FAAC). He described the fund as “the financial lifeblood of the three tiers of government, used to finance critical developmental projects that our citizens depend on. We provide a steady, reliable and equitable revenue stream that goes directly to the betterment of the lives of the Nigerian people.”
