THE TAXING POWER OF VALUE ADDED TAX AND FISCAL FEDERALISM IN NIGERIA: THE PATH AHEAD

Abstract

It is a notorious fact that the taxing power of Value Added Tax (VAT) as a consumption tax is a prominent issue that has consistently put Nigeria’s federalism on trial. This paper explores the taxing power of the Value Added Tax (VAT) within the context of fiscal federalism in Nigeria. It aims to examine the historical and current state of VAT in Nigeria, analyze its impact on fiscal federalism, and propose a way out. The study delves into the complex VAT tax powers between the central and state governments, its legal challenges and constitutional implications as well as the consequences for revenue generation in relation to fiscal autonomy. The major point of argument is that VAT as a consumption tax by whatever nomenclature it may be enacted should not be put solely in the hands of the Federal Government so as to ensure the states' financial viability. The finding of this paper is that there is a legal basis upon which consumption tax could be enacted by the state government subject to some limitations. The ultimate objective is to provide policymakers with insights and recommendations for fostering a more sustainable fiscal federalism framework in Nigeria.