By Bola Bolawole
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What you are about to read is an intervention on the ongoing battle over the Value Added Tax set in motion by the Rivers State governor, Nysom Wike. Scripted by two of Nigeria’s foremost Leftist ideologues, Comrade Jaye Gaskia and Comrade (Prof.) Toye Olorode, it throws light on the raging controversy while also proffering a way out of the financial crisis knocking on the country’s door. Known for their pro-poor, pro-people, and pro-masses polemics and activism, Gaskia and Olorode, in “Statements of facts about the Value Added Tax”, gave hard punches to the ruling class for running the country aground but at the same time enjoined the Nigerian masses to keep hope alive and take their destiny in their own hands. Read on:
“In a recent suit filed at the Federal High Court, the Rivers State Government challenged the power of the Federal Inland Revenue Service to impose and collect taxes in Rivers State. It was the argument of the Plaintiff that the Value Added Tax (VAT) falls outside the scope of the items listed in 58 and 59 of Part 1 of the Second schedule of the Constitution of the Federal Republic of Nigeria 1999 (as amended). In the judgment delivered on August 9, 2021, the Court ruled in favour of the Rivers State Government. The presiding judge, Honourable Justice Stephen Dalyop Pam, held that the Rivers State Government and not the Federal Government of Nigeria is constitutionally empowered to impose VAT, enforceable or collectable in Rivers State. Based on the judgment, both the Rivers and Lagos state governments have enacted State Value Added Tax Laws.
“Dissatisfied with the decision, the FIRS filed an appeal to the Court of Appeal together with a motion for stay of execution at the Federal High Court. With this, all parties ought to have allowed the status quo to remain in order to ensure that the appeal is not rendered nugatory. That was the practice in Nigeria when the rule of law reigned supreme but the Buhari administration has put the rule of law in abeyance by saying that court orders can be disobeyed in the interest of national security! Curiously, a regime that has unrestrained disdain for the rule of law has suddenly turned round to insist on full compliance with the order of the Court of Appeal which has granted a stay of execution of the judgment of the Federal High Court! The implication of the order of the Court of Appeal is that the FIRS has been authorized to continue to collect VAT pending the determination of the appeal.
“It is unfortunate that the skewed interpretation of the legal victory recorded by the Rivers State Government in the struggle over the collection of VAT has further widened the north/south dichotomy. But contrary to such misleading interpretation, the judgment has serious implications for the revenue of the majority of the States and Local Governments in the northern and southern parts of the country. The figures speak for themselves. The records show that contributions to VAT are as follows: Lagos (50.5%), FCT (13.2%), Oyo (2.9%), Rivers (2.7%), and Kano (1.4%). The remaining 32 states contribute only 7% with the bottom three being Abia (0.08%), Osun (0.07%), and Zamfara (0.06%). Pursuant to section 40 of the VAT Act, revenue is shared 15% to the Federal Government, 50% to States & FCT, and 35% to Local Governments. The principle of derivation of not less than 20% is reflected in the distribution to states and LGs. The amounts shared by the top states and LGs are Lagos (14.7%), Kano (3.8%), Oyo (3.2%), Rivers (2.7%) and FCT (2.5%). The bottom 3 states: Osun (2%), Abia (1.6%), and Zamfara (1.6%).
“Based on the increase of VAT from 5% to 7.5% last year, the revenue was N1.53 trillion. Out of the total amount, FIRS deducted 4% as cost of collection while the Nigeria Customs Service deducted 2% from import VAT. It has been confirmed that the top contributing sectors are professional services and telecoms 10.6%; other manufacturing 10.07%; commercial & trading 5.06%; breweries, bottling & beverages 3.90%. The contribution of banks and other financial institutions as well as oil companies to VAT is about 2%. This is unacceptable because it is unjust and inequitable. Since FIRS and NCS are public institutions that are performing their statutory duties, there is no justification for allowing them to deduct from the revenue from VAT; more so that the Federal Government is allocated 15% of the revenue from VAT.
“Whatever may be the outcome of the case being pursued in court by the Rivers State Government, VAT collected from the people should not be increased for any reason whatsoever. However, it is recommended that banks and other financial institutions be made to contribute substantially to VAT. Be that as it may, the people of Nigeria are enjoined to demand the provision of services to justify the collection of VAT and other taxes. There can be no legal or moral basis to pay multiple taxes if citizens have no access to constant electricity, potable water, well-maintained roads, well-equipped hospitals, and quality schools.
“No doubt, the VAT controversy has challenged the Federal Government, State and Local Governments to stop paying lip service to the diversification of the economy. Majority of public enterprises have been run aground by the ruling class. Not a few factories have either shut down or relocated to neighbouring countries due to lack of electricity and the exorbitant cost of doing business in Nigeria. This means loss of thousands of jobs and dwindling revenue, including VAT and other taxes. We insist that there is no State in Nigeria that cannot generate enough adequate revenue to address the challenge of infrastructural decay and lack of social amenities.
“For instance, gold and other solid minerals are illegally mined and exported from Nigeria on a daily basis. It was reported that Nigeria lost $3 billion to illegal gold mining between 2012 and 2018. The losses have multiplied with the connivance of public officers, including security personnel. During an investigative hearing by a Senate committee, the Minister of State for Mines and Steel Development accused the elite of undermining the country’s tottering economy by aiding and abetting gold smuggling and illegal mining to the tune of $9 billion yearly. The Minister revealed that smuggling is now carried out by private jet owners. The bulk of the smuggled gold is produced in Zamfara State. Yet, it is one of the poorest States in Nigeria! In the same vein, the Department of Petroleum Resources says that Nigeria consumes 38 million litres of fuel per day while the Nigerian National Petroleum Corporation (NNPC) claims that the figure is 103 million litres due to the criminal activities of smugglers. This means that 45 million litres of fuel imported by NNPC are daily stolen and smuggled out of Nigeria. Thus, hundreds of billions of Naira is diverted from the Federation Account to fund the alleged smuggling of fuel to neighbouring countries.
“We recall that Nigeria was once the largest producer of palm kernel and cocoa in the world. Today, both products sell much more than crude oil in the international market. In the past, Nigeria was self-sufficient in food production. Today, Nigeria spends billions of dollars on food importation. The situation has been compounded by the activities of armed herders and terrorists. The implication is that Nigeria will spend much more on food importation this year and beyond. The Central Bank of Nigeria (CBN) has continued to sabotage the national economy by resorting to the reckless devaluation of the national currency through dollarization. Even though $1 is now exchanged for N560, the CBN says that the Naira has not found its actual value! While it is common knowledge that the cost of food and other items have gone out of control, the CBN claims that inflation is under control! The FG has resorted to borrowing to pay salaries while many states and local governments owe arrears of salaries. The FG has continued to mortgage the future of hapless citizens by piling up external loans. Yet, the CBN and the Federal Ministry of Finance claim that the economy has continued to record growth! ASCAB recently wrote to the FG to recover N94 trillion which has been diverted, withheld or stolen from the Federation Account. The Buhari administration has since abandoned the fight against corruption, which is one of its cardinal programmes. Politicians charged with looting the treasury decamp to the All Progressives Congress to have the criminal charges against them dropped. Once the corruption cases are withdrawn from the courts, the corrupt opportunists keep their loot!
“With worsening insecurity, grinding poverty and increasing unemployment, the majority of citizens have lost confidence in the corporate existence of the country. This is understandable as members of the ruling class drawn from all ethnic and religious groups have run the country aground. But in view of the nation’s abundant human and natural resources, we strongly believe that a new Nigeria is possible. Hence, we urge patriotic citizens not to lose hope but get organized and be prepared to take their political destiny in their own hands”.
The argument could not have been better joined!
Bolawole is a respected columnist and former deputy editor in Chief of The Punch