FROM OIL TO VAT BULLYING

FROM OIL TO VAT BULLYING
                       By:
         Nurudeen Dauda
          September 9th, 2022
nurudeendauda24@yahoo.com
nurudeendauda24@gmail.com
nurudeendauda.blogspot.com

To begin with, Value Added Tax (VAT) has become the new bullying tool in our country. We have heard enough of name callings by oil producing states; such as: parasites, indolent, leprous, and beggars etc., because of a resource placed by a divine "providence" in their backyards which nobody's hard-work and or effort placed it there.

There is now a new bullying tool in form of VAT Politics which is directed at some states and or region due to their low contribution to VAT. It is said that Lagos and Rivers states contribute over 70% of VAT in Nigeria which is shared by all states and the Federal government. 

It is high time we stop scape -goating previous governments for our woos in industrialization and other activities. Regionalism has eaten so deep in our thoughts, but in my view, individual states efforts matter most in this respect. Let's move on!

Nigerians should not and or must not continue to live under the "illusion" that a state can only get huge taxes when it has industries up and running. As states or regions we are endowed differently just as there are different kinds of taxations from where huge income might be generated. Let's explore our individual potentials!

Apart from Company Taxes and VAT there are other kinds of taxations; such as: Personal Income Tax, Sales Tax, Excise Tax, Education Tax, Development Tax, Toll Tax, Capital Gains Tax, Ground Rent, Tenement Rent, Land Use Charge , and Property Tax, etc.

Only four states of:(1) Lagos,(2) Rivers, (3) Ogun, and (4) Kaduna have above 40% IGR to their FAAC allocation of 2020. Eight states have less than 10% IGR to their FAAC allocation of 2020 which are: (1) Bayelsa; (2) Jigawa; (3) Katsina;(4) Adamawa; (5) Yobe;(6) Niger; (7) Taraba; and (8) Benue (Economic Confidential, Report, 2021).

One must note that only Kaduna state from the North has above 40% IGR to FAAC allocation as far 2020 Reports. It is worth mentioned that Kaduna state rose from 11.5bn Annual Tax collection in 2015 to 50.7bn in 2020 which is more than 400% rise. 

However, Rivers state government got a Court judgement in August 11, 2021 by a Federal High Court in Port Harcourt, which held that VAT collection was for the states and not for the federal government through the Federal Inland Revenue Service (FIRS). There is currently no a Stay of Execution Order pending an Appeal on the Judgement.

Before the said judgement, the FIRS had the responsibility of collecting VAT on behalf of the 36 states and the FCT. Section 40 of the VAT Act requires that the VAT pool be shared 15% to the FG; 50% to states; and 35% to LGs (net of 4% cost of collection by the FIRS). Twenty per cent of the pool is shared based on derivation.

VAT contributes significantly to the total revenue generated by the government, accounting for over 16.2% of the Gross Domestic Product (GDP) in 2019. States depend on funding from the Federal Allocation Account Committee (FAAC) due to their poor Internally Generated Revenue (IGR).

About 30 states in the federation including the so-called oil producing states will be in a serious trouble if this judgement stands.

Governor Wike said: “Let me tell you the injustice in this country. In June 2021, which we shared in July, VAT collected in Rivers State was N15.1billion. What they gave us was N4.7 billion. See the gross injustice and this money includes contracts awarded by the Rivers State Government.

“This is not an issue of a party; it is the issues of infraction of the constitution, issues of illegality. Look at Lagos; it is not the same party as me. In June 2021, the VAT collected in Lagos was N46.4 billion but see what Lagos got, N9.3 billion. Have you seen the injustice in the country? VAT collected in Kano was N2. 8billion and they gave them N2. 8billion. Is there any justice in this country?” he asked.

From independence to- date one would have wished that our country transited from being a "state"- to- a nation-state, but unfortunately we are far from reaching there. The truth of the matter is that, our respective state governments from all over the country must sit up! 

May God bless Nigeria!

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