The federal government said unremitted value-added tax (VAT) or withholding tax would henceforth be deducted directly from the revenue due to the affected state and local government, as well as ministry, department or agency (MDA).

The move, according to the government, is aimed at compelling government entities to live by example to individuals and businesses.

The Executive Director, Large Taxpayers and Government Directorate, Nigerian Revenue Service (NRS), Amina Ado, stated this on Tuesday in Abuja at the opening of a national workshop organised by the Nigerian Revenue Service (NRS).

She said it has been observed that while many sub-national entities are exemplary in their civic duties, there are still some significant structural leakages, especially in the prompt deduction and delay in remittance of VAT and withholding tax.

She said under the Nigerian Tax Administration Act, the Office of the Accountant General of the Federation has been empowered to deduct all unremitted revenue due from all MDAs or government from its budgetary allocation and remit to the relevant tax authorities.

“Whereas some jurisdictions work hard to fill the national revenue pool, others participate in the distribution without making their fair contribution”, she said, adding: “This compliance gap distorts and creates an imbalance in our fiscal federalism.”

She said the workshop, which had in attendance the 36 states’ commissioners for finance and accountants general, was organised for critical stakeholders at federal and sub-national levels to engage, share insights and forge stronger alliances in a bid to optimise revenue collection across the country.

“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”, she said.

Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, said for Nigeria to fully benefit from tax, the tax system needs to be transparent, open and deeply ingrained at all levels of government.

“Taxes are the social contract in action, turning contributions by citizens into vital public goods like roads, health care, education, and national security.”

The minister, who was represented at the event by Tolu Adegbiye, said the Nigeria Revenue Service (NRS) is charged with the responsibility of managing the federal tax administration.

This, he said, includes the collection of taxes from transactions executed by all tiers of government, MDAs and government-owned enterprises (GOEs).

Oyedele said the workshop was designed 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, for 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.

Executive Chairman of NRS, Dr Zacch Adedeji, in his keynote address, promised that there would be a reward for most tax-compliant states and local governments.

He said 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.

He said the major role of the Nigeria Revenue Service is to sustainably finance the Federation Account Allocation Committee (FAAC).

“The fund is the financial lifeblood of the three tiers of government, and it is used to finance the 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”, Adedeji said.