The Presidency on Wednesday reassured Nigerians that spending from Value Added Tax (VAT) proceeds would be prioritised such that governments at the sub-national levels would not waste the funds on projects that did not address the welfare of the people.
According to the Chairman, Presidential Committee on Fiscal Policy and Tax Reforms, Mr Taiwo Oyedele, the priority areas include addressing poverty, focus on education, health, security and unemployment.
Oyedele, who featured at a One-Day Roundtable on the Tax Reform Bills organised by the National Institute For Legislative and Democratic Studies (NILDS) in Abuja, told the session that the Federal Government had already put in place the frameworks for implementation of the tax revenues as clearly spelt out in the bills.
For instance, he said no governor or local government official would be able to spend the money on ‘white elephant projects’ as doing so would be in breach of the legal frameworks.
Furthermore, he clarified that the Revenue Mobilization Allocation and Fiscal Commission (RMAFC) did not have any roles to play regarding VAT administration as it’s not part of revenues captured in the 1999 Constitution.
He explained, “We have a document we call the National Fiscal Policy that speaks to our principles and framework as a country around taxation; who should pay tax, how much should they pay, how should they pay, among other issues.
“We have another framework for spending. How should we spend our money? What should be the priority, and the quality of spending?
“For example, there are more than 15 airports in Nigeria today built by different states that should not have been built because they were not necessary.
“We have states with flyovers where they have no traffic gridlock. They’ve never had a gridlock in those places since the states were created.
“We have states with malls where people don’t go there, but they have built those malls, even though they have no primary schools with roof and books.
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“They have no health centers. They have no road from the farm to the market. This is a misplaced priority.
“We know the priorities of our people. They are in multidimensional poverty. The four dimensions of poverty is education, health, living standard, insecurity, and unemployment.
“That’s what should be our priority as well. So we’ve stated that clearly in our national fiscal policy. We also have the framework and policy around borrowing.
“What should you borrow for? If you’re borrowing dollars, how should you spend it in Naira? Should you even borrow dollars to do Naira investments?
“Should you borrow and spend it on overhead? Or should it be only infrastructure? What qualifies as infrastructure? What should you subsidize?
“Why is it that it’s the train that we are subsidizing? To the extent that today the money we make from running train services is not enough to pay the interest on the loan.
“What’s going to happen is predictable. Because very soon you suffer budgetary allocations, you suffer funding, and infrastructure will be abandoned.
“Even though we borrowed hundreds of millions of dollars. This framework is also in our fiscal policy, including conditional cash transfer as subsidy.
“Should we subsidize anything as a country? If yes, what should we subsidize and how? Is it production? Is it consumption? Is it agriculture? Is it manufacturing? Is it everybody or just the poor?
“When you are doing a conditional cash transfer, how should you do it? It’s there.”
On the role of RMAFC, he said, “The role of RMAFC is to determine formulas for distributing revenue. Our view is that VAT is not in the constitution.
“Section 162 of the constitution, that speaks to the role of the RMFAC as advisory, is focusing on federation revenues. So this VAT is actually state revenue. And that’s why when the military decreed it in 1993, it replaced the sales tax that states were collecting.
“That is the reason why VAT does not go to the regular Federation Account. It goes to a special pool accounts, then we share it to states and their local governments.
“The federal government keeps a small portion for administering needs and also recognising that if we were to collect VAT by state level, the federal government will be entitled to Import VAT, International VAT, and interstate VAT.
“In fact, if we start collecting VAT at state level, you know the biggest winner will be the federal government. The federal government will keep more than half of the VAT we are collecting today.”
On the speculation that a tax consultancy firm, Alpha Beta, would be engaged from Lagos Company from Lagos to work for the Federal Inland Revenue Service (FIRS),
Oyedele reacted thus, “Some people said, you guys are planning to use a consultant, maybe you want to bring Alpha Beta to the centre.
“I just laughed and said, how do people come up with these ideas? Because you would never have thought about them until somebody makes up the story.
“The FIRS has no need whatsoever for consultants to be able to collect VAT.
“In fact, inside those tax bills, there is a specific language that says, the FIRS cannot hire consultants to do assessments, they cannot hire them to do collection, they cannot hire them to do any work that is a routine work of the tax officers.”
The President of the Senate, Sen. Godswill Akpabio, represented by Sen. Victor Umeh at the event, told the gathering that the bills were all about modernising tax administration in Nigeria.
“Regrettably, the introduction of these bills has been met with some misunderstanding and even politicisation by certain segments of our society.
“Don’t see this as a setback, but rather as a testament to the growing democratic maturity of our nation”, Akpabio stated.
On his part, the Director-General of NILDS, Prof. Abubakar Sulaiman, said the bills were meant to lessen the burden of taxation of all people by the government by making the system more progressive.
