VAT brouhaha: Moment of truth for weeping boys
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The four bills on tax reforms transmitted to the National Assembly in September by President Bola Tinubu, which last week passed second reading in the Senate, has been generating a lot of brouhaha especially the aspect that seeks to alter the existing sharing formula of the value added tax (VAT) on consumption of goods. The current sharing formula is premised on the model of ‘monkey dey work baboon they chop the best meal.” A group condemn a practice but that same group positioned themselves to be the greatest beneficiaries of what they condemned. So, the model seen as fueling complacency and dulling the spirit of entrepreneurship that holds the key to accelerated revenue generation drive, has been reworked awaiting legislative imprimatur. The “baboon” however is out fiercely fighting against it. The controversy is deepening.
Ismaila ABUBAKAR sends this piece from Makurdi to air his view on the subject.
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I have watched with amusement the debate on value added tax (VAT) new sharing formula being proposed, and l am prompted to make the following submission. VAT collection on alcohol, lottery (gambling) and usury (interest) in banks is forbidden in Islam, and should not be channeled to the Federation Account, FAAC, for sharing among the three tiers of government. But it is not possible to.legislate for separation of VAT; it thus means that the collection of the consumption tax , which VAT is, should be exclusive right of states.
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The fact is that states that host industries bear the brunt of air pollution, water pollution, environmental degradation from industrial wastes and whatnot. It is therefore right of those states to demand for more financial derivation accruing from their activities.
It is in the light of this that Rivers and Lagos states took the Federal Government to the Supreme Court challenging its eligibility to collect VAT. Some argue that VAT is neither in exclusive list nor in concurrent list in the Constitution, which means it is termed residual as an exclusive right of peripherals (states) to collect VAT. Lacuna in the Constitution is being explored by Rivers and Lagos states having identified that VAT collection started during Gen. Babangida military era when Chief Olu Falae was Minister of Budget, the former SGF, a financial expert, initiated it.
The 1999 Constitution is a product of the 1979 Constitution but VAT was omitted during the making of the Constitution by the 11 wise men.
The process to amend the Constitution to include VAT in the exclusive list is cumbersome, so, we await the verdict of the Supreme Court on who owns the right between Federal and State Governments to collect VAT.
NASS is supposed to legislate on VAT to supersede any law to be enacted by State Assemblies on VAT but it is still dilly dallying.
Lagos and Rivers states’ governments have right to demand for arrears if the judgement of Supreme Court is in their favour from 1999 to date when the Constitution came into operation, having encroached their jurisdiction by the Federal Government.
The last straw that will break the camel’s back is the awaiting verdict or interpretation of the law by Supreme Court. If favourable to the two contending states, it will increase the tears of the “33 weeping boys” cut across North and South who are so weak that they cannot go for revenue drive in their respective states. They need to move out of their comfort zone and think outside the box.
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The weeping boys who are opposed to tax reforms want to continue to enjoy what is forbidden and partake in the sharing.
Below is a data on the current VAT sharing formula extracted from the social media by ogbomosoinsightonline.comt (though its authenticity and source cannot be independently verified).
- Bayelsa contributed ₦7.12billion to VAT purse & received ₦5.58billion from VAT purse
- Imo contributed ₦235.41Million to VAT purse & received ₦6.01billion from VAT purse.
- Katsina Contributed ₦1.68billion to VAT purse & received ₦7.27billion from VAT purse.
- Delta contributed ₦13.09billion to VAT purse & received ₦7.72billion from VAT purse.
- Zamfara contributed ₦432.8Million to VAT purse & received ₦5.65billion from VAT purse
- Rivers contributed ₦70.54billion to VAT purse & received ₦15.54billion from VAT purse.
- Abia contributed ₦663.42million to VAT purse & received ₦5.43billion from VAT purse.
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- Kebbi contributed ₦665.17million to VAT purse & received ₦5.66billion from VAT purse.
- Cross River contributed ₦1.08billion to VAT Purse & received ₦5.51billion from VAT purse.
- Lagos Contributed ₦249.77billion VAT & received ₦40.22billion from VAT sharing…
- Jigawa contributed ₦1.59billion to VAT purse & received ₦6.42billion from VAT purse.
- Kaduna contributed ₦2.03billion to VAT purse & received ₦7.47billion from VAT purse.
- Niger contributed ₦1.73billion to VAT purse & received ₦6.21billion from VAT purse….
Present sharing formula:
Equality…50%
Population..30%
Derivation..20%
Proposed NEW sharing formula:
Equality…..20%
Population….20%
Derivation…..60%
