VAT and Wike’s winning wedge
The economic equation does not add up. And it hardly makes common sense too. If not, how do we explain the paradox of the pitiable penury of most of the states generating much of Nigeria’s common wealth in the midst of plenty resources? The painful irony is such that their state governors keep going cap-in-hand to the federal centre to collect peanuts, every month-end! It is a crying shame, to say the least that decades after the agriculture-driven First Republic, Nigeria is still being run with a military-imposed constitutional aberration, characterized by a bloated centre that controls what it should not. Is this how the American democracy, from which we borrowed ours is being run? Not at all.
As yours truly has often highlighted, it would have been impossible for the then Chief Obafemi Awolowo-led Western Region to have brought to bear the praise-worthy achievements of Free Education policy, the vast infrastructural development, the first television station in Sub-Saharan Africa, the Liberty stadium and the iconic Cocoa House back in the ‘60s. That was especially so if the cocoa revenues went to the purse of the federal government. Ditto for the Michael Opara-led Eastern Region that championed the agricultural, educational and infrastructural development of the region.
Ordinarily, the Federal Government should concern itself with the issues of the formation and running of military structures, the federal police, international relations and some infrastructural developments relating to its offices. But here and now, in the 21st century Nigeria issues such as education, healthcare delivery, transportation and even internal security have been hijacked by the pseudo-democratic might of the all-conquering federal government. It goes further to attempt to brow-beat states with anachronistic and outdated policies of open-grazing of cattle, long-lost cattle routes and farm settlement centres. This has outraged not a few patriots including the no nonsense-Governor Nyesom Wike of Rivers state, of course.
Recently, Wike threatened that henceforth the oil-rich state will be collecting the Value-Added Tax (VAT) instead of the Federal Inland Revenue Service (FIRS). He threatened to shut down all FIRS offices in the state if they continue to bully the state.This was made known by the governor while speaking at a stakeholders’ meeting that included representatives of oil companies and business owners in the state capital, Port Harcourt. Putting it point blank, he stated that he does not care a hoot if the heavens fall, insisting that Rivers money is not meant for Abuja people but for the development of his state.
“In June, Kano generated N2.8bn and was given N2.8bn. Lagos State generated over N46 billion, but got just over N9 billion. Rivers generated N15bn but got N4.7bn. Have you seen injustice in this country?”
-Gov. NyesomWike of Rivers State.
Bolstering his bravado, Wike explained that Rivers state generated about N15 billion as VAT in June 2021 but received a paltry N4.7 billion. Lagos State generated over N46 billion as VAT in June, but got just an insulting amount of over N9 billion, whereas Kano State generated N2.8 billion and also got N2.8 billion as allocation! That is one of the states where Hisbah openly destroys bottles of lager beer, yet it enjoys the VAT that comes from states such as Lagos and Ogun. Can you beat that?
In his memorable words, Wike stated that: “People say that let heaven not fall but sometimes I believe that heaven should come down so that everybody will rest…When we do the right thing, heaven is at peace. So, the right thing must be done at all times. Rivers State is challenging FIRS from collecting VAT in Rivers State. I am not challenging FIRS from collecting VAT in Abuja. Let it be understood. But the law says Rivers must collect VAT in the state.”
Going further, he explained that: “The Federal Government surreptitiously lobbied to amend the constitution to place VAT collection under the exclusive legislative list. We have challenged it and we have no apologies to anybody.
“I don’t want to be in the good book of anybody but in the good book of God. You don’t bully a state like us. FIRS should be very careful. I have the political will to do a lot of things. If they continue to bully us, I will take all their offices in the state.’’
It would be recalled that on August 9, 2021, a Federal High Court sitting in Port Harcourt in its judgment in a suit marked FHC/PH/CS/149/2020 held that the Rivers State Government had the powers to collect VAT and Personal Income Tax within its territory. The FIRS, which had earlier appealed the judgment, applied for a stay execution on the judgment. However, the presiding judge, Justice Stephen Pam, rejected the application, saying that granting it would negate the principle of equity.
The judge also ruled that it may be a difficult task for the Federal Government to refund the state if his judgment authorising the state to collect the tax is upheld at the appellate courts. This is because the Federal Government already has a huge liability arising from the many years it has collected the tax on behalf of Rivers State. The judge agrees that whatever amount Rivers State may have collected within the litigation period can easily be remitted to the FG if the state loses at the Appeal Court.
Recently, the Lagos State Government toed the path of Rivers State as a bill to empower it to collect VAT was passed Thursday by the House of Assembly. The next day, Governor Babajide Sanwo-Olu signed the bill into law.
According to the state Attorney-General and Commissioner for Justice, Mr.Moyosere Onigbanj (SAN) no booby trap will affect its implementation. It is titled: ‘A bill for law to impose and charge Value Added Tax on certain goods and services provided for the administration of the tax and other related matters‘. So, what is VAT all about? That is the million-Naira question.
VAT is a consumption tax paid when goods are purchased and services are rendered. It is charged at a rate of 7.5 per cent. It means that this judgment is a landmark one as Prof. Kingsley Moghalu, former CBN Deputy Governorrightly noted. Said he: “The Federal High Court ruling on VAT is the correct one, though we can expect litigation all the way to the Supreme Court. It strikes a strong blow at the lazy federal government whose head once called our youth “lazy”. Nigeria has long been a fiscally failed state. Why should states in a supposed federation be producing mainly for the Federal Government? Restructuring has already begun, by fire by force. I pity those who think they can stop the wind.”
That is the crux of the matter. Why would some power-poaching politicians continue to wallow in self-delusion, thinking that fiscal federalism along with political restructuring which they use as bait for the southern voters would remain only in the realm of dreams?
It should have been obvious by now that the revenue sharing formula involving the three tiers of government- federal, state and local governments and predicated on the pillars of the principle of derivation, population, balanced development and equality of states have not guaranteed equity. Instead, it has always swung to favour the northern geo-political zones, right from its creation with the regions in 1946 and backed with the federalism of 1954 Lyttelton Constitution.
Finally, the smokescreen is off. The political cookies have crumbled. And like it or not, restructuring has come to stay, great thanks to Governor Wike’s winning wedge, that separates the fratricidal federal might from the boldness of the states to take what rightly belongs to them.