September 18, 2021

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VAT Laws and Misguided Fights

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VALUE ADDED TAX

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By  Abdull-Azeez Ahmed Kadir


The sad reality of our time is that we have lost sense of history, as well, allow self-centered rulers to turn our sense of reasoning is ruled by primordial sentiment.

This is discernible from the ongoing Value Added Tax (VAT) debate. Those with no sense of history and knowledge of the issues are jumping high and clapping loud, to celebrate the decision of Rivers and Lagos State Governments. But this WILL be short-lived.

We have seen the Appeal Court ruling that pronounced maintaining the status quo.
Many of the proponents are quick to cite “fiscal federalism” in their arguments. But ask them what they mean by Fiscal Federalism and they mumble some fumbling trite to confuse you in trying to convince you.
For starters, when Nigeria was practicing regionalism, the subnational were collecting taxes and redeemed to the center which redistributed them to the regions.

In fiscal federalism, the federal government ensures those with less are taken care of by those with excess. Wealth distribution to cater for all is a character of fiscal federalism.

In the 60s and 70s, the Northern Nigeria Region, for instance, the home of vast agric produce which was the major export hub, was contributing up to 70 percent of the entire revenue of the federation and getting far less from the center when redistributed. Documents abound for those who care for facts and figures, and for those who appreciate knowledge based on data.

The north never claimed or advocated “owner takes all” as we see today, nor did it ever refer to other regions with less as “parasites”. Rather, it allowed its resources to be utilized to develop and grow other less endowed regions in the true sense of fiscal federalism, regions that today flourished as a result of that foundation.

Secondly, VAT as it is today, was not a creation of states, but creation of the Federal Government in 1993, just like most the  states too. VAT is in the exclusive list.In fact, VAT is not collected by the federal government for the federal government, but collected by it for the federation; Federal, States and Local Governments. Federal Inland Revenue Service FIRS has made a progress in VAT collection, saving and distribution  over the years, that will take states years to master and operationalize.

But, for those applauding Rivers and Lagos State Governments, please tary a while. Yes, the decision is an outcome of a judicial process, but even senior and highly learned judicial practitioners have faulted the Judge’s decision. But even at that,  imagine a local government taking same step and getting similar court pronouncement. The Governors and or state governments now thumbing chests with aplomb will end up with deflated ego.

Majority of Nigerians have been, and are clamoring for Local Government Autonomy. Should this come to be, most of these states Governors throwing caution into the winds and screaming hosannas, would suffer serious financial erectile dysfunction that their silence would be deafening.

Even under current laws, most of the taxes states collect are the exclusive rights of the Local Governments. But because they have pocketed and are strangulating the local governments, we think it is hosanna. States are but stack poor, but the grandstanding of these Governors is nothing but political mischief.

Go check Nigeria Bureau of Statistics NBS data. Lagos, Rivers, FCT, Kano and Kaduna tops VAT scale. Take out the ports; water and air from Lagos, and it will not be better than Ebonyi, Kebbi or Ekiti. And if the federal government so wishes, especially having a President like Obasanjo, that can be done.

If you think this is impossible, imagine Lokoja, Baro, Onitsha ports among other functioning in full capacity. Imagine dry inland ports across the nations coming on board with magnificent road and rail networks. Places like Lagos would end up so orphaned economically it will begged to be fed.

Let’s not also loose sight of the fact that as the states of Lagos and Rivers are wont to do, Nigerians may end up with multiple taxation if this grandstanding and muscle flexing is allow to stand, which will worsen your condition.

The quest for revenue generation by some state governors, have led them to commit economic hara kiri which is hurting, not just their people, but their economy and internally generated revenues. In fact, it has turned some of them into emperors as wounded lions.The argument that Kano State benefits from VATable alcohol, yet bans alcohol in the state, seems to have hit a void. The document waved by governor Nyesom Wike shows that Kano doesn’t even receive from the federation more than the VAT it generates.

 So, this means, even if states are allowed to collect and spend their VAT, Kano loses nothing as it gains nothing now. Rather, it may device means to earn more from places like Sabon Gari where such consumption may be legendary.But let’s pause here and ask; if VAT is all about economic boom, why are places hosting high economic activities like Aba and Onitsha not VAT havens? I am sure development economists and experts can aid us with answers.

Again, you may have more consumers of telecommunications services and products in Kaduna than another state for instance, but because that telecom is headquartered and declare tax returns in that state aside Kaduna does not in any way make Kaduna fir instance less VAT-income prone. Neither does it make the other state more VAT-valuable.

And wait for it, despite or inspite of where you are from or resident, though recent Appeal Court ruling asked the parties to maintain status quo, should Rivers and Lagos; two states that hurriedly passed and accented to their version of the VAT law, have their ways, be rest assured, states, especially in the North and  beyond could and would device means to an end on this VAT if the governors know their onions. But the north has always played the moderating role, balancing acts, listen to sense of reaosning and defer to stakeholders.

As we speak, agricultural produce that the northern region utilised in the past to contribute more than 70 percent of the federation revenue, which remains the mainstay of the region till date, is tax free.
Should push come to shove and the region, or most of the states that make up the northern region decide to tax those agricultural produce, the result, especially for the southern states, is better imagined. May we never come to that.

For now, as the constitutional amendment is in gear, the National Assembly must assert the fiscal federalism in the interest of majority of Nigerians by ensuring the VAT remains in the exclusive list and operationalised. Otherwise, from the pictures above, the day states now grandstanding go solvent, which is not if but when, they would understand that political activism albeit in thuggish form to score cheap personal political goal, is but entrusting ones financial safety in blood, and they would find but a bloody safety.

May God give us leaders and not rulers. Leaders with national clout and foresight. And not rulers with dwarfed mindsets and temporary focus.

Abdull-Azeez Ahmed Kadir. Is a Kaduna, Journalist and Public Affairs Commentator, can be reached at the following email, azeeznews@gmail.com.

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