By Aniedi Ukoenang
The trending issue in the news about some state Governors making bold steps to widen their revenue net through the domestication of VAT payments to the state covers is a very interesting one and worth given prime attention.
Once again, the radical and vocal Governor Nyesom Wike of River State is initiating a very cogent conversation and leading a legal battle against the Federal Government, through the Federal Inland Revenue Service, FIRS.
Wike is asking that companies or businesses should pay their Value Added Tax, VAT to the states that they operate from and not the Federal Government.
His argument is that, for example, beer and other alcoholic beverages are prohibited in most parts of Northern Nigeria where Sharia law is being practiced. In fact tankers and trucks conveying beer brands are usually intercepted and burnt in these states for allegedly contravening sharia laws, however, when these companies pay VAT (tax) to the FG from beer being drunk or bought in other states that are not practicing sharia, all the 36 state Governors plus FCT would gather with their plates in Abuja and share the money, nearly equally, with the FG taking the lion share.
The argument is, why should someone in Kebbi State for example, be sharing in the VAT of bread or eaten in Uyo or beer drank in Osun?
Sensing danger, some state Governors are screaming loudly against this move, while FIRS have gone to court to stop this move. Meanwhile, Governor Wike has won a court case against FIRS’s move to stop Rivers and other state Governors from changing the status quo through the Federal High Court in Port Harcourt, as expected, the FIRS Is already appealing the judgement.
Is Nigeria on her way to Federalism? Because a state like Lagos would be the greatest beneficiary of what Governor Wike is doing. Lagos has smartly initiated a law immediately that demands companies to pay VATs to the state government, the law has passed second reading, and this means taking out upto 55% of VAT that usually accrue to the Federation’s revenue net for sharing amongst the 36 states plus FCT and FG.
In fact, reports have it that only six states contribute 90% of VAT that are usually shared.
Should all the states begin to keep their VAT or should they bring to the national table for sharing, will this move better Nigeria or worsen the economy? Governor Wike calls it robbing Peter to pay Paul.
Finally, it is a season for state Governors to bend down and work. This is a reminder that if a Governor ignores insecurities in his state, and investments are being driven away, sooner than later, there will be no BIG allocation to go and share in Abuja. So Governors would have to market their states properly and make it attractive for people to live and do businesses so that they can generate taxes.
This is indeed a wake-up call, and there wouldn’t be a better time to take this bull by the horn than now.
Aniedi writes from Uyo
