Can Edo race with other Southern states on anti-grazing, VAT bills?
As other southern states are hitting hard on the burning issue of promulgation of anti-open grazing and Value Added Tax (VAT) laws, Edo State, a nodal state to South-south Nigeria and home to an estimated population of 4.5million, seems to dilly-dally.
Months after the southern governors across Nigeria made their positions known as regards outlawing open grazing along their routes, some states have started making good their promises.
The governors, at a meeting earlier this year in Lagos, set September 1 as the deadline to ban open grazing in their states but this is yet to come to fruition in Edo State – where clashes between farmers and herders have continued to threaten lives and livelihoods.
Following the incursion of herders in the region and the subsequent unbridled attacks meted on dwellers, the governors were moved by the growing conflict and unanimously decided to uphold the oath they swore to.
Irrespective of party affiliations, the southern governors placed the lives and property of their citizens above sentiments and made the daring move that has only been taken seriously and implemented in some states.
The states that have so far placed a ban on open grazing include Abia, Bayelsa, Delta, Ekiti, Enugu, Rivers, Oyo and Lagos. A number of them have passed the bill pending the governors’ assent. While the bills are still in some Houses of Assembly, others, including Edo State, are seemingly showing no interest in making the state safe for socio-economic activities.
“Majority of our people are farmers and for some time now, Fulani herdsmen have been invading and ravaging our farm lands that have now been degraded. Farming is our livelihood and, at the moment, we have no farms to run to because all our crops, including cash crops have been destroyed, and that is why we are crying to the government,” Edo community laments over the wanton destruction of their farm crops by suspected herders, a day before the September 1 deadline set for proscribing open grazing.
Edo State government has obviously been on the bench while its peers have resolved in good time to start the race and secure victory for their respective states.
This hesitancy in taking the bull by the horns to make open grazing illegal in the state has also been extended to the issue of Value Added Tax (VAT). Unlike its Rivers State counterpart that has signed into law the Value Added Tax Law No 4 of 2021 that empowers the state government to collect VAT in the State and not the Federal Inland Revenue Service (FIRS), Edo seems to be looking other ways.
Experts say VAT is a levy on commodities and services purchased by citizens that is administered at various stages of the production process, particularly at the end stage of selling. It adds to the total generated revenue in the country and is shared among the three tiers of government with state government and local government taking 50 percent and 35 percent, respectively, while the Federal Government gets 15 percent.
The decision by the Rivers State government was consequent upon the judgment delivered by the Federal High Court sitting in Port Harcourt where it reserved the responsibility to collect VAT on the state government.
In a suit with reference No. FHC/PH/CS/149/2020, filed by the Attorney-General for Rivers State against the Federal Inland Revenue Service and the Attorney General of the Federation, the court had on Monday, August 9, 2021 ruled that the Rivers State Government not the FIRS is entitled to collect VAT in the state.
The court, which was presided over by Justice Stephen Pam, also issued an order of perpetual injunction restraining the FIRS and the Attorney-General of the Federation, from collecting, demanding, threatening and intimidating residents of Rivers State to pay to FIRS, Personal Income Tax and Value Added Tax.
Following the judgment, the FIRS approached the court to seek a stay of execution on the earlier judgment that stopped it from collecting VAT but it was also dismissed by the court which held that the law remains valid until it has been set aside by a court of competent jurisdiction.
The Judge noted that the Rivers State Government and the State Assembly, have duly enacted Rivers State Value Added Tax No. 4, 2021, which makes it a legitimate right of the state to collect VAT.
Dissatisfied with the judgment, the FIRS says it has appealed to the appellate court to review the judgment at the lower court, insisting that the collection of Value Added Tax (VAT) will not work at the state or local government levels and the service will retain the legitimate autonomy to administer VAT despite the court ruling in Rivers state.
Meanwhile, the court ruling has met stiff opposition with Governor Bello Masari of Katsina State saying that the Rivers State VAT judgment is capable of causing chaos across the states of the federation, vowing that, “we will resist its implementation.”
The governor also campaigned for a review of the current revenue sharing formula which he described as “lopsided and stagnant” as it gives more resources to the Federal Government and fewer for states and local governments.
Days after the judgment, Nyesom Wike, Rivers State governor, ordered the enforcement of VAT collection, urging business entities to be ready to pay VAT for the month of September 2021 and subsequent months to the Rivers State Internal Revenue Service (RIRS).
In his words, “As we all know, following the recent judgment of the Federal High Court, Port Harcourt, which upheld the constitutional right and authority of state governments to impose, collect and utilise value added taxes, (VAT) within their respective territorial jurisdictions, Rivers State government enacted the Rivers State Value Added Tax Law 2021 to regulate the effective administration of VAT in Rivers State.
“However, being a government that believes in the rule of law, we decided on our own to suspend the enforcement of the Rivers State VAT Law 2021, pending the outcome of the FIRS’s application for stay of execution.
“With the judgment, the way is now clear for the administration and enforcement of Rivers State Value Added Tax Law 2021 across the entire state until otherwise decided and set aside by the superior courts.
Read also: Lagos Assembly passes VAT, open grazing bill
“Above all, fiscal federalism remains the right path to economic self-reliance and sustainability for all our states and the benefits derivable from this case by all the states in the long run far outweigh the immediate revenue loss that some states may currently suffer.
“All that is required is for all of us to wear our thinking caps as elected governors to collectively fight for the greater devolution of resources, responsibilities and powers to the federating states.
At the same time Rivers State is sailing the ship to ensure VAT collection is vested within its jurisdiction, Lagos has followed suit as the state’s House of Assembly passed the Value Added Tax Bill alongside the grazing ban bill last Thursday.
Marcus Onobun, Speaker, Edo State House of Assembly, however, told BusinessDay that they have received a bill against open grazing and started consultations as regards the Value Added Tax, assuring that both issues will be addressed when the house returns from break in two weeks.
“We got a private bill as regards anti-open grazing bill, and while we were dealing with that we had another similar bill from a member before the southern governors agreed on anti-open grazing bill.
“So, what we are trying to do is to harmonize all position to meet with other states within the southern part of Nigeria. In the course of dealing with it, it fell into our break period. We are currently on break and will be resuming in another two weeks. As soon as we get back, we will tidy up and pass the bill,” Onobun said.
The Speaker continued, “On VAT, it is a new development which got to us while on break. So, we have been talking with members because our major responsibility is to represent the people, make laws and perform oversight functions. For now, it looks as if we are not doing anything because we are currently on break.
“We have started the process of consultation to see how it boosts our economic activity, putting into consideration the argument on both sides. By the time we come back, these will be the first line of challenge that we will need to deal with in the interest of the people,” he added.
“There is need to be conscious about the VAT judgment as it is in court. I think the legal process should be completed so as to get the final decision. And if the apex court agrees that the Federal Government has no business in VAT that it is a state matter, then Edo State will decide to promulgate the law,” says Mike Obadan, a non-executive director of the Central Bank of Nigeria (CBN).
Obadan, a professor of Economics, believes that the Federal Government has the capability and machinery to collect VAT across board.
He opined that most state government do not have the capacity to collect VAT in an efficient manner that will optimise revenue that will accrue to all tiers of government, noting that “If the Federal Government through the FIRS is appealing the judgment, I think it is the right thing to do except they are saying there is a problem with the VAT act in relation to other extant laws which forbids the Federal Government from collecting VAT which I think is a technical issue. If there is defect in the Act, it can be sorted out or remedied in relation to what is actually desired.
On who will lose if it is eventually upheld by the Supreme Court, he said “assuming they have the capacity to administer the VAT, the little portion that has been going to the Federal Government will be lost. Items and activities are not the same across the country. Perhaps, where you have large volume of commercial transactions and if they have the capacity, then they will be able to get more revenues than in other states that have low economic activities and commercial activities to attract VAT.
Responding to the delay in ban on open grazing in Edo State, he said: “I think the government doesn’t want to make noise about it, perhaps, they are waiting for a situation whereby the bill is passed and they can beat their chest about it rather than shout all over the place that the bill is being processed. If they haven’t submitted the bill, then one can say the government is lethargic about it, which I believe it is not the case. It is in the interest of the country that it should be banned.
With the VAT law, Tony Abolo, a development economist said it has set the path for restructuring “which will be interpreted as fiscal federalism which will have an effect on other devolution in the country if it is finally upheld at the Supreme Court level.
According to him, it has also opened the door for restructuring and the possibility of resolving certain inequities in the system.
“It is an interpretation of the law because you know, in Nigeria, we don’t do judicial activism. We take laws that are made or take the constitution as it is and begin to complain or agitate without going into the substance of the matter. So, the Rivers State opened their eyes and decided to make certain parts of the constitution justiciable and therefore, led to this VAT decision.
“This is the reason why Lagos has grown its IGR using law activism to be able to create avenues for itself and every state ought to open its eyes. But in Edo, there is no engagement with the people in this government. Now, the issue of VAT came, and instead of the state government to find a way around it, make money and let the economy of the state run, they seem not to be interested,” Abolo added.
For Olayiwola Afolabi, a legal practitioner, who aligned with the Rivers VAT judgment, posited that every state has exclusive collection of VAT and “I think the Edo State government will soon follow.
“If the FIRS is insisting on collecting VAT despite court order, that will amount to contempt of court and subject the people to double taxation which is not in line with the tax policy.”
Speaking on the seeming on open grazing bill, he said “If the governor is sincere in protecting its citizens, he should follow suit as other states have pronounced the ban. So, I don’t see any reason why he shouldn’t go ahead with the ban in Edo State.
With these two bills concurrently trending in the public space, it was reliably gathered that Edo, unlike the Niger-Delta state, is yet to state their position if they will embrace the decentralisation of VAT collection and prohibit open grazing.
As residents eagerly await the state government to take the plunge, will Edo, dubbed as the heartbeat of the nation, receive a sudden boost so it can race faster and catch up with its counterparts or will it lag behind and watch from the sidelines?