Businesses will suffer if VAT is decentralised – Fast food chain owner
· The Promise CEO says FG has nothing to lose in VAT war; may keep foreign component · Urges VP Osinbajo to quickly summon National Economic Council for negotiation, political solution
Groups of business owners in Rivers State have been putting heads together since the outbreak of the VAT wars as courts give and change verdicts. Oluwatoyin Alabi, the President/CEO of one of the most enduring indigenous fast food chains from the South-South, Integrated Catering Services Limited, owners of the brand name, ‘The Promise’, has spoken on what the business owners think about where to pay VAT.
Confirming that the CEOs would pay wherever the court finally asks them to pay, and that VAT collected by states seems to yield more infrastructural development that would improve businesses, Alabi, however, pointed out loopholes that may not be in favour of the states.
Alabi sees the Appeal Court order for stay-of-execution to mean that the Federal Inland Revenue Service (FIRS) is the one to continue to collect VAT until the highest court in the land decides the substantive case.
He says the matter however, has political as well as economic undertones, and that the political undertone is bringing so much agitation. He says the federal structure is being threatened because of the way the government at the highest level is conducting its affairs. Everyone is now looking for the power to collect VAT.
He went on: “There are always two sides to a coin. If the FG collects VAT, will states fare better, and vice versa? The answer is yes and no. For instance, in 2020, the total VAT collection (both foreign and local) was N1.53 trn, foreign is about N768bn while the local is N760Bn. If you say FG should no longer collects and only to collect the foreign part. So, FG will have more money because the foreign component too which is N768bn was shared to the lower strata. If states say, ok, don’t collect for us anymore, the question remains, will the states fare better than they are now?”
He thus said the FG has nothing to lose in the present scenario. “They have two things going for them: Foreign VAT and structure to collect developed over 28 years. How many states even have the structure to collect PAYEE over the years, let alone VAT?
“Many of the state capitals are mere glorified local council headquarters. The only states that have some developed tax structures are Lagos and Rivers plus one or two more in the South-South. If you ask the states to start collecting, there is the tendency for some like Rivers or Lagos to collect less. Lagos will no longer collect what they have been collecting from national organisations which have their head offices in Lagos. There is central collection in Lagos. SPDC pays in Lagos centrally. This makes the Lagos collection to be very high. Lagos collects 60 per cent generated monthly.”
He says in this kind of scenario, by the time a bank such as Zenith orders that only branches limited to Lagos will pay in Lagos and those in other states should pay to those states, it will whittle down what is supposed to go to each state as VAT returns.
There will be clumsiness in the collection, he went on, and there will be additional cost to businesses. “ See it this way. Before, I was transacting with one agency of Government collecting VAT, now, in every state that we are, we will deal with the Internal Revenue Service of each of the states. I will be losing time, money, peace of mind (making arguments), and my tax unit and external auditors will need to be on the road to all these states waiting to get documents to reconcile accounts. We will be paying for hotel and feeding to keep them at those states to treat the accounts. Businesses will not fare better if VAT collection is decentralized.”
Let Vice President step in with NEC
On the way out, the CEO cautioned against judicial resolution but urged the vice president, Yemi Osinbajo, who is head of the National Economic Council (NEC) to quickly summon the council to discuss this urgent matter. Let the nation not resort to court or judicial resolution, he added, but let dialogue resolve it.
Alabi stated: “Rivers State said N15.1Bn was collected in the state and it got only N4.6Bn back, whereas N2.8Bn was collected in Kano and it got same N2.8Bn back. “So, let the NEC meet and review the sharing formula. I suggest that they can resolve thus: let every state keep 60 per cent of whatever they collect; let the FG take 15 percent, LGAs take 15 percent, and the agency that collected it should take less now to run their operation.”
Customs, he said, keeps seven per cent for collecting foreign VAT while FIRS keeps four per cent for collecting local VAT. “This can be reduced to give more to the states. Leave the FIRS that developed structure over 28 years to handle the physical collection. Free the states trying to grab power to collect and slow down putting pressure on individual businesses. It is more political than economic.”
He said it is political because people seem to be tired of centrist system of the nation’s federalism. People want true federalism, and because of this disenchantment with the way the federal structure is being run, everything that will make the states have more control seems to be exploited. “Years back, nobody cared about who collected VAT. Now, things have got to a point where people feel that ‘Our Mumu Don Do’. We can’t continue the same way.
“There is no way monkey can be working and baboon will be eating. If your state has electoral value, convert it to economic power and eat from it. Leave the other states you said have no electoral value to eat from their economic power. If we had a well structured federal system where states are encouraged to operate with their own resources, each state would be better off than going to Abuja every month to collect from the revenue Mobilisation and Allocation Committee (RMAC).”
He pleaded for political approach before things turn to crisis. “If states take over at last, VAT could now become a way each state will attract businesses. Now, seeing that FG collects 7.5 per cent, Lagos reduced its own to six per cent. It means some states can fix theirs event as low as two per cent just to attract businesses. There are two sides to the issue of VAT in Nigeria but political solution is the way to go.”
The CEO of The Promise commended Gov Nyesom Wike of Rivers State for, according to him, bringing awareness in this area to Nigerians. “There are many salient areas in the 1999 Constitution that can give states power without asking for disintegration or killing anybody. These are constitutional matters that can be explored”.
Business environment in Niger Delta
As CEO of a business that has presence in many states of the Niger Delta, Alabi sees the business environment in the region and Rivers State as a bit harsh of late, no thanks to high inflationary rate in the economy and the galloping rate of the Dollar to Naira that made prices of everything to go up.
Rivers State, he said, however, remains an investment destination despite the challenges. “We still believe that the purchasing power in Rivers State is higher than it is in any other state and city. That is the attraction here.
“To be sincere, we have been able to have a government in this place that has been able to attract investments. This is being done in many ways especially through infrastructural development. The urban renewal scheme of the administration has been huge as never before. It’s kudos to the governor (Barr Nyesom Wike) for taking the bull by the horn to transform Port Harcourt into a very modern garden city.’
He said Rivers State has good infrastructural facilities such as road network, power, and water supply, which he said indirectly affect cost of doing business. By the time these projects are completed, he added, moving around the state capital would become a lot easier and businesses would say bye-bye to perennial traffic jam (gridlock).
Before now, he said, one can be in traffic for hours and will lose man-hours. “If a business executive hangs at traffic jam for hours and can’t access his meeting, it will affect the flow of business. That is why business leaders in this state continue to commend him.’
Rivers should turn to agric for food sufficiency
The fast food investor that sprang up in Port Harcourt to spread nationwide said the state can now turn to agric and produce what it consumes. “What some of us (in the food processing industry) want is how Rivers State can achieve sufficiency in food stuff supply. For now, most of what is needed comes from outside the state. Most times, you get to food centres such as Fruit Garden Market in D-Line and Eleme Roundabout, you won’t find foodstuff. These are inputs as raw materials into our own production (fast food). It will not be available because none is grown in Rivers State.
“I can bet you, Rivers State is so endowed and blessed. There is no way many of these items brought from outside the state cannot be produced in Rivers State in a sustainable manner. The Ogoni axis is another treasure in agriculture that has been under-utilized, as well as the Etche and Emohua axes, etc.
“These are good agricultural and farm zones that can feed Rivers State and beyond in yam and cassava without looking for any other state. Elele axis can feed the state in palm oil, vegetables, butter and margarine requirements of the state and the nation. The focus has been very enormous in infrastructure for which we commend the state government, but you can make Rivers State another ‘food basket of the nation’. The state has what it takes.”
How this can be done
Alabi’s proposition may alarm many persons. He said the state governor can stop bringing in foodstuff into the state, though many think this would lead to smuggling. His words: “When Gov Wike took the bull by the horn (decision) that this traffic jam in the state will be a thing of the past, it has been done. He has demonstrated political will. If the same government decides that foodstuff will not come from outside Rivers State and that if we can’t produce, we won’t eat. If it is only beans Rivers State can produce, that is what we will eat, then, you discover that everybody wakes up. Even the back of your house, you can grow your tomato, pepper, lettuce, etc. You can even grow your yam. It’s all about political will and the direction the government is taking.”
With insecurity plaguing the bushes, fears could be rife about going to the farms in the state, but Alabo commended the Rivers State Government for the fight against insecurity so far in the state. “It is far better than in any other state. Yes, pockets of kidnapping and robbery can occur but in a city as sophisticated and metropolitan as Port Harcourt, you can hardly avoid pockets of security breaches. I want to still give it to the governor who has managed security so well that there is no immediate threat to life and property as in other states and as we had it in the past.
“People go out in the day and night and people still go about as late as 3am. The city is safe. I think with the security in place in Rivers State, all those in Port Harcourt will not have a lot of issues of incessant kidnapping. Where one or two incidents happen, the security response has been swift.
“Take the case of Bonny Island with a lot of incidents on the waterways, the security agencies are rising up to nip it in the bud. The Governor and Commissioner of Police are not sleeping on it. I can say, it is better than in most other states. This has helped businesses. Before, we could only remain open up to 7pm but now, we operate till about 10pm in high density areas. Now, people stay outside till late to patronize some of our outlets. So far, it has been so good.”
Fulfilling ‘The Promise’ in Bonny
He gave update on how far the Bonny Island branch has fared less than one year of official opening. “We thank God so far. The Fast Food centre was technically opened on December 25, 2020, but officially flagged off in April 2021 by the Executive Secretary of the Nigerian Content development and Monitoring Board (NCDMB), Simbi Wabote. From the day it was opened, it has become the flagship for the restraint business in Bonny Island. Patronage has been wonderful, offering has been great and service delivery remains wonderful.”
He said the firm was only waiting for takeoff of Train 7. “Some reasons have accounted for the delay, one of which is the Delta Variant of Covid-19. When the NLNG and partners were about to come to the open, the Delta Variant came. They said, ok, let’s wait a bit.
“Preliminary work is ongoing like building of quarters but we are waiting for the main construction. Bonny outlet has huge prospects.”