Nigerian states are able to generate more revenue, including through taxes such as the now topical Value Added Tax (VAT), but have over the years been ‘spoilt with freebies’, in what should be a federation but sees states perpetually waiting to be spoon-fed. This was one of the views expressed by Emmanuel Ijewere, who in 1993, was chairman of the VAT committee that was supposed to provide a template for tax administration in the country.
“Most of the states are capable of increasing revenue base through internally generated revenue, but they have been spoilt over the years of going to Abuja to go and collect money for spending,” said Ijewere in a televised interviewed on Channels TV. According to him, this has also created a situation where since states were not responsible for generating whatever money was being shared, it made it difficult for their citizens to question government spending or misuse. Worse still, governments also saw little reason to generate more money as the general pool was perpetually available to them.
“But if you pay your taxes through value added tax, income tax or other taxes, you can challenge the government,” he said.
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Ijewere recalls that introduction of VAT in Nigeria as a replacement to sales tax that was then administered by states, was a recommendation by the World Bank because it observed that a lot of the states were not financially viable but could raise a lot of capital through taxes from their own bases. They noticed that some very progressive states were trying to raise their own internally generated revenue to improve their incomes, but it was not very efficient.
Way back 1991/1992, Ijewere recalled the quality of people who were administering taxation at the state and federal level were just civil servants who saw it as a job, whereas taxation is a profession that should be taken very seriously. Today, however, he says there is capacity at the state level to collect more taxes, even though there should be dialogue among both states and the federal government to iron out issues that could lead to double taxation.
He emphasised VAT is meant to be borne by the final consumer, and as such, needs to be factored in when goods move across state lines but not yet bought for final consumption. This, he says, could see a particular good bearing layer of taxes paid by different persons, while only in the process of getting to the eventual consumer.
He also recalled that while it was proposed in 1993 to have a commission collect VAT on behalf of all states, this was only supposed to be for a period of not more than five years, during which states were meant to be fully trained to take over. More importantly, VAT revenue was never meant to be shared but, retained by each state following a rendering of account by that federal commission (entitled to only 5 percent) before certain interests truncated the idea.
For him, however, the solution to the impasse is dialogue. “The law or the court does not take away the rights, which is that the final consumer pays tax so that their welfare can be looked after by the government where they are resident,” he said.
“Assuming the supreme court says the VAT should still be collected at the federal level, I assure you there will be no end to it because what’s involved is a huge amount of money and states who have political responsibility will not allow it to stay there. The fighting will continue, confusion will continue and sabotaging may come into it,” he further said. “I would prefer that all parties start talking to each other, and can create some principles and then we start working on that.”
