New VAT combat is a protest (1)

The actions of Governor of Rivers State, Chief Nyesom Wike, and Governor of Lagos State, Mr. Babajide Sanwo-Olu, have made us to take another look on the issue of taxation in Nigeria. Specifically, the actions of these governors, their state Houses of Assembly and the Southern Governors’ Forum that met recently have reawakened our thoughts on the issue of the Value-Added Tax.

Tax simplification is not simple. The tax system is too complex and too complicated. The concept of tax complexity turns out to be quite elusive when one tries to pin it down. Very difficult to understand. What the governors have done so far is that they have ignited a flame out of emotions. No one knows how long it will burn out. The Supreme Court and its interpretation will not be the final arbiter on the issue. In the end, some state governors may realise later that they have been shortchanged. If it’s not too late, let the sleeping dogs lie. One thing seems certain, there will be duplication of taxes in this country and the people might not be truly sure of whom to pay their tax to, is it FIRS or state functionaries. The average Nigerian will be financially strangulated. There will be emergence of tax enforcers or tax brigades who will be worse than political thugs or motor park touts. It will lead also to over-taxation and will cripple various businesses in the country. And in a country where unemployment is high, where super inflation is on the increase, with insecurity all around, debt profile keeps rising, bad roads, bad medical facilities, the system itself may collapse.

For some time now, we have been debating on how to share the bread, (Federal Inland Revenue Service collected N1.53 trillion on VAT alone last year), no one is talking about how to bake the bread. If we are not careful, very soon, there will not be any bread to share on the table.

I am aware that the current VAT war is a protest on the central government and its certain policies of exclusion, partisanship, nepotism, ethnicity, non-consultation and unfairness. To top it all, the central government has been lackadaisical, indifferent and slothful to some areas in the country in an arrogant manner. In some instances, the central government has been turning deaf ears to genuine advice and appeals treating its citizens like conquered and captured people. And that is not good for a fragile country like Nigeria.

Albeit, all relationship goes through hell, rare relationships get through it. A relationship is like a house, when a light bulb burns out, you do not go out to buy a new house. You fix the bulb.

Protest movements are often synonymous with inspiring leaders. Lack of leaders may exacerbate tensions and violence when protesters have no one to provide direction on how to confront the authorities. Interestingly, the leaders of those protesting against the centre today were themselves products of the centre itself.

The present chairman of the Nigerian Governors’ Forum, Dr. Kayode Fayemi from Isan-Ekiti in Oye Local Government in Ekiti State, served as Minister of Solid Minerals Development from November 11 2015 to May 30, 2018. His term as Governor of Ekiti State ends in less than 10 months from now. Wike, an Ikwerre from Rumuepirikom in Obio-Akpor, Rivers State, served as Minister of State for Education from July 14, 2011 till 2014. The present Governor of Benue State, Samuel Ortom, from Guma Local Government Area of Benue State, was Minister of Industry, Trade and Investment from July 11, 2011- October 25, 2015. As for Rotimi Akerodolu alias Aketi, from Owo in Owo Local Government Area of Ondo State, he has always been a chronic fighter. Aketi has always been in the forefront in any struggle from Aquinas College, Akure to Loyola College in Ibadan to Comprehensive High School, Aiyetoro in Ogun state and to Obafemi Awolowo University in Ile-Ife, Osun State. It is his nature to lead in any struggle, his close friends, Dele Adigun, former Secretary to the Oyo State Government, Olumide Akintan alias Oloor, Remi Osiberu, Dickson Akingbade, Professor Segun Tony Adegulugbe, will affirm to this.

If these governors and many others are rebels today, the Federal Government made them so.

 I am one of those who believe that the arrogance of the central government is creating problems in this union called Nigeria. The VAT matter could have been solved if there was a strong dialogue and a line of communication between the federal, state and local governments.

The Value Added Act decree of 1993 was promulgated by General Ibrahim Babangida. In fact, it was part of the military legacy. The programme was first introduced by the first Minister of Finance under Babangida, Dr. Kalu Idika Kalu. He first served as Commissioner for Finance in Imo State under the administration of Major General Ike Omar Sanda Nwachukwu. In his 403-page book titled, “Letting a thousand flowers blossom”, Dele Sobowale narrated how VAT came to be. He said, “VAT was one of Dr Kalu Idika Kalu’s unpopular proposals and for which he would have been lynched if the economic illiterates dominating discussion in the media could lay their hands on him. It was not even accepted by the majority of the cabinet members. On the day General Babangida adopted the proposal, Dr. Kalu was invited, as was usual before such monumental decisions were made, to defend the initiative. The matter was thrown open for discussion. Dr. Kalu’s reliable supporters-Chief Samuel Oluyemi Falae, Dr. Chu S.P. Okongwu, Alhaji Abubakar Alhaji, Professor Jubril Aminu and Professor Bolaji Akinyemi -constituted a small minority. The rest went after Dr. Kalu Idika Kalu’s with every verbal arsenal at their proposal. Suddenly, General Babangida stopped the discussions and started to summarise in a way that indicated that he had accepted the minority view. But, he was also politically sagacious enough to realise that it would be a tough sale. So, when he mentioned one of the sticking objections of those against, Dr. Kalu raised his hand. It was fortunate that sitting next to him was Professor Jubril Aminu who kicked Dr. Kalu under the table and asked him to put down his hand. Later, Aminu, warned him by saying “When the boss apparently adopted your proposal you have nothing more to say.” That was how VAT came to be.

By the way, talking about Okongwu, he is now almost blind, with loss of memory, coping alone in the only house he has in the world in Nnewi, Anambra State built for him by his former boss. Yet, this was a man who was Minister of National Planning between 1985 and 1986, Minister of Finance between 1986 and 1990 and Minister of Petroleum thereafter.

According to the Value Added Tax decree, Item 40 (distribution of revenue) states that notwithstanding any formula that may be prescribed by any other law, the revenue accruing by virtue of the operation of this Act shall be distributed as follows, that is-(a) 15% to the Federal Government (b) 50% to the State Government and the Federal Capital Territory, Abuja and (c) 35% to the Local Governments.

In 1992, Babangida appointed a study group headed by Professor Emmanuel Edozien, the late Ojiba of Asaba. It was this group that established the Federal Inland Revenue Service as the operational arm of the Federal Board of Inland Revenue and set up revenue services at other tiers of government-states and local governments.

In the same year, 1992, Babangida also established another study group on indirect taxation headed by Dr. Sylvester Ugoh, which culminated in a policy shift from direct to indirect/consumption tax (VAT evolved). To most Nigerians, Ugoh is mostly remembered as the running mate of Alhaji Bashir Tofa in the June 12, 1993 presidential election. But he was more than that, he was an outstanding economist.

To be continued

Teniola, a former Director in the Presidency, lives in Lagos


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