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Opinions of Saturday, 2 October 2021

Columnist: Eric Teniola

New VAT combat is a protest (2)

File photo to illustrate the story File photo to illustrate the story

The reports of Edozien and Ugoh were submitted to Babangida. Afterwards Babangida then set up the implementation committee on VAT headed by Chief Emmanuel Itoya Ijewere, a Chartered Accountant. Ijewere started his accounting career in 1965 with Coopers and Lybrand. He is a past President of the Institute of Charted Accountants of Nigeria, also past President of Institute of Directors and the Nigerian Red Cross Society.

Upon being elected in 1999, President Olusegun Obasanjo invited Professor Adedotun Phillips to submit a comprehensive paper on taxation in Nigeria for implementation. President Obasanjo also appointed another group headed by Seyi Bickerston on taxation in Nigeria. Thereafter, he appointed a taxation expert, Mrs Ifueko Omoigui-Okauru, as Chairman of the Federal Inland Revenue Service.

Obasanjo effected certain reforms in the taxation policy in the country. The main objective of the reform programme was to “operate a transparent and efficient tax system that optimises tax revenue collection and voluntary compliance”. The reform programme was charged with the responsibilities to diversify the revenue base from petroleum-related taxes; treat taxpayers in a fair and responsible manner; promote investment in a diversified economic base in order to promote further economic growth; simplify procedures and policies so that compliance is enhanced; reorganise the tax administration to increase effective compliances, reduce the compliance cost to taxpayers and make it more supportive of tax payer services; promote integrity by both tax administrators and taxpayers and provide reasonable allocation of responsibilities for fiscal matters between the partners in the federal system.

Obasanjo then submitted a bill for the establishment of the Federal Inland Revenue Service to the National Assembly. The bill was passed in the Senate on February 20, 2007.

It was also passed in the House of Representatives on February 21, 2007. The two houses jointly passed the bill and it was signed into law on April 16, 2007and signed into law by Obasanjo.

Every meeting of the Board shall be presided over by the Chairman and if the Chairman is unable to attend a particular meeting, the members present at the meeting shall elect one of them to preside. In fairness, some of the reforms projected by the President have been implemented by the FIRS. To their credit, the past Chief Executives, from Babatunde Fowler who served from August 2015 to December 9, 2019 and the present Chairman, Muhammadu Nami, appointed on December 9, 2019, have been forthcoming in their revenue collection drive. Last year alone, the organisation collected N4.95 tn.

There have been arguments as to the type of revenue the FIRS could collect or not. There are those who still insist that the state governments are entitled to certain percentage of what the FIRS collects in their states.

In the view of Olumide Fusika, SAN, according to Section 162(10) of the Constitution, public revenue refers to any income or returns accruing to or derived by the government of the federation from any source (which, of course, would include taxes) and income tax proceeds of military and police personnel, staff of foreign affairs ministry and residents of the FCT, which belong exclusively to the FGN. All other public revenues must be paid into the Federation Account for sharing among the FGN, the states and the LGs.

In the concurrent legislative list, item 7 provides that in the exercise of its powers to impose any of the said prescribed taxes, the National Assembly may provide that the collection or the administration shall be carried out by the government of a state or other authority of a state. Since the use of “May” in this section isn’t mandatory, the National Assembly chose to confer the authority to collect and administer them on the FIRS, which in turn remits what it collects to the federation account where the FGN distributes, obviously without strict observance of the constitutionally prescribed derivation principle of 100% of the net proceeds (that is, what remains after administrative costs of collection) to the states where the duty it tax are derived from.

The judgment of the Federal High Court, Port Harcourt Division is simply that the taxing powers of the FGN are those listed in items 58 and 59 of the Exclusive Legislative List (apart from PAT from the category of personnel exclusively reserved to the FGN under Section 162(1) of the 1999 Constitution). VAT (that is, taxes on sales and consumption) is not one of them. If for reasons of ease of collection and administration, the FGN (National Assembly), with the buy-in of the states, has made an Act to regulate the collection of VAT in order to prevent the confusion that leaving each state to make its own law on it that should ordinarily be all well and good. But going beyond that to appropriate or use what is collected whimsically without regard to constitutional order is the crux of the matter.

At the time the VAT decree was promulgated by Babangida in 1993, there was little input from the state governors. There could not have been any input because as that time, we were operating a rigid military administration, even appointment of governors at that time was a military posting. At that time, military governors could not travel outside of their state capitals without the approval of the office of the Chief of General Staff or else they would be charged for treason. Even common allocation of plate numbers for governors was part of the schedules of the Chief of General Staff, Admiral August Akhabue Aikhomu.

I remember while serving as the Press Secretary to three military governors in Ondo State (Major General Babakayode Opaleye (retd.), Commodore Olabode George (retd.) and Rear Admiral Sunday Abiodun Olukoya between 1986 and 1992 which is now made up of Ondo and Ekiti states, the plate numbers of their cars at that time wee GHQ22.

When the National Assembly passed the FIRS Act, it did not provide or prescribe a new formula for the sharing of the proceeds. Apparently, this was in recognition of the fact that the Constitution already covers the field by the unambiguous stipulation of its under Section 163 (b) What the NASS did was to allow the Revenue Mobilisation Commission to work out the formula without disregarding the constitutional parameter.

Unfortunately, the commission, oblivious of this constitutional prescription, relied on the existing formula promulgated by General Babangida’s decree. Albeit, the ball is in the court of the central government to resolve this issue through a dialogue. The issue could not have degenerated to this level if there had been enough dialogue between the central and the state government. Fortunately the constitution has provided where this issue and other issues could be resolved. There is a council called the National Council of State which the President could summon for a meeting at any time.

The Council of State consists of the following persons: President, who is the Chairman; Vice-President, who is the Deputy Chairman; All former Presidents of the Federation and all former Heads of the Government of the Federation; All former Chief Justices of Nigeria; President of the Senate; Speaker of the House of Representatives; All the Governors of the states of the Federation; and Attorney-General of the Federation.

The council has the following responsibilities: Advise the President in the exercise of his powers with respect to the:-National population census and compilation, publication and keeping of records and other information concerning the same; Prerogative of mercy; Award of national honours; The Independent National Electoral Commission (including the appointment of members of that Commission);The National Judicial Council (including the appointment of the members, other than ex-officio members of that Council); The National Population Commission (including the appointment of members of that Commission); and advise the President whenever requested to do so on the maintenance of public order within the Federation or any part thereof and on such other matters as the President may direct.

The last schedule of the Council could deal with issues of the VAT and other contentious issues currently dividing the country.