The debate on tax reforms is not likely to go away given the vehemence some individuals have taken to lead the opposition to the bills which seeks to re-jig taxation, including the way it relates to the sharing of the Valued Added Tax (VAT), writes KUNLE ODEREMI.
IT was declared in 2019 that Nigeria had lost at least $600 billion to corrupt officials since the country gained political independence from Britain in 1960. The Human Environmental Developmental Agenda Resource Centre, gave the figure in a report of an intensive global research conducted by HEDRC, in collaboration with its international partners. In 2021, YIAGA Africa also said more than $1.3 trillion public funds were laundered out of Nigeria by some citizens between 2011 and 2015 alone. Besides, the organization said the country was fleeced of a whopping $582 billion in 61 years since independence.
Till date hordes of former top government functionaries from 1999 when the country restored civil rule have been indicted by anti-graft agencies for gross abuse of office. While a number of them were convicted, others were able to wangle their way of the path to conviction, just as others are locked in a whiff of legal tangle with the anti-graft agencies. Ironically, many of them are not just highly politically exposed politicians but are governors, who had the privilege to upscale the revenue base of their individual states so that they could usher in a new era of financial independence and jump-start the pace of meeting the needs of the citizens in their individual domains. And just a few weeks ago, the Economic and Financial Crimes Commission (EFCC) said it recovered N248 billion, $105.4 billion and other foreign currencies between October 18, 2023 and October 18 this year.
In its latest report, the National Bureau of Statistics (NBS) indicated that all the 36 states, including the Federal Capital Territory (FCT) raked in ₦2.43 trillion in Internally Generated Revenue (IGR) in 2023. The main sources are taxes and ministries, departments and agencies (MDAs) revenue. The NBS figure showed that Lagos, FCT, and Rivers states led with Lagos hauling ₦815.86bn, representing 33.6 percent of the total IGR in 2023 to top the list. Rivers came next with ₦195.41bn, FCT recorded ₦211.10bn, Delta generated N90.91bn; and Ogun recorded ₦146.87bn. On the other hand, Taraba generated the least IGR (₦10.86bn) in 2023, followed by Yobe (₦11.19bn), Kebbi (₦11.73bn) and Gombe (₦15.17bn). According to NBS, the South-West zone recorded the highest revenue in 2023, totalling ₦1.1tn; followed by the south-south zone with ₦468.7bn. A further breakdown of the NBS report indicated that Lagos generated 73 percent of the entire IGR of the South-West. The total revenue recorded from the South-East zone is ₦142.9bn, the North-West recorded ₦206.2bn, and the North-Central had ₦387.6bn. The North-East zone recorded the least IGR with ₦104.3bn. From the data, the Lagos IGR in 2023 (N815.86b) is more than 18 states combined and more than the total amount generated in three regions; South East, North West, and North East. South-West generated the highest IGR (N1.12 trillion) in the period under review, followed by South-South (N468.74 billion), North Central (N387.65 billion), North West (N206.22 billion), South East (N142.95 billion), and North-East (N104.35 billion).
All these figures speak about the state of the Nigerian federal structure, the sustained inadequacies and inertia, especially on the distributable funds in the federal allocation and the ability or otherwise of the managers of resources at the levels states to contribute more convincingly in baking the proverbial national cake that is shared at the end of every month. There is a belief among the preponderance of Nigerians that most of the states cannot survive without the allocations from the Federation Account. The issue is, however, subject to public discourse as many experts differ on that ground because of what they described as the vast opportunities that states have either refused to explore or have tapped into haphazardly in spite of the existing convoluted federal arrangement. Besides, the failure of the governors to raise the ante, IGR-wise, also raises posers on their frequent trips abroad to seek direct foreign investment need to grow their individual state economies. haven’t those efforts yielded dividends with a direct impact on the economy and investments in strategic areas that the states boat comparative advantage?
Matters arising
At their meeting held in Kaduna on the heels of the proposed bills, governors from the North vehemently objected to the move to reform the existing taxation models in the country. Thus, they asked the representatives in both the Senate and the House of Representatives to be fully on guard and kill the bills and others that are not in tandem with what they described as the interest of the North. But in another breadth, the governors lauded the government for creating a Ministry of Livestock, in spite of the existence of a Federal Ministry of Agriculture. Part of the communiqué of the governors read: “Forum notes with dismay the content of the recent Tax Reform Bill that was forwarded to the National Assembly. The contents of the bills are against the interests of the North and other sub-nationals, especially the proposed amendment to the distribution of Value Added Tax (VAT) to the derivation-based model. This is because companies remit VAT using the location of their headquarters and tax office and not where the services and goods are consumed. In view of the foregoing, the Forum unanimously rejects the proposed Tax Amendments and calls on members of the National Assembly to oppose any bill that can jeopardise the well-being of our people. For the avoidance of doubt, the Northern Governors Forum is not averse to any policies or programmes that will ensure the growth and development of the Country. However, the Forum calls for equity and fairness in the implementation of all national policies and programmes so as to ensure that no geopolitical zone is short-changed or marginalised.”
The position of the governors elicited a spontaneous fury from other interest in the common patrimony of the country, including some individuals and groups in the North, who accused the governors and their co-travellers on the tax reform plan as doublespeak and self-serving. Pan-Niger Delta Forum (PANDEF) and the Middle Belt Forum (MBF) said the North cannot claim to be unaware of the lack of justice, equity and fairness in the existing taxation system, especially on Valued Added Tax (VAT). Notwithstanding the criticism from the broad spectrum of other stakeholders, a former Chief Whip of the Senate, Senator Ali Ndume, and deputy Minority Whip in the House of Representatives, Aliyu Madaki Gini, keyed into the advocacy of the northern governors, promising to mobilize their colleagues to frustrate the passage of tax reform bills in the national Assembly. Ndume sees the bills as an overkill, accusing the government of adopting prescriptions from the IMF and World Bank that he believes are not conducive to Nigeria’s economic well-being. He promised to lead the campaign against the tax reform bills to protect the interests of the northern region and its constituents, which he has kept alive since then. Similarly, Senator Madaki stated that the bill would further plunge the entire northern region into misery, poverty, and economic woes, pledging that, “As representatives of the people, we will mobilise, God willing, to defeat the bill.”
Perhaps, the current controversy trailing the open declaration of war by northern governors against the move to reform the taxation system in the country could have been avoided if those opposing it had been more tactical and circumspect. Apart from the clarifications made by the government, the agencies that generated the idea further expatiated on the motive behind the bills and the North and other stakeholders in the country have nothing to lose. Contrary to the insinuations by a few vocal elements that the four bills on Tax Reforms is a way to further burden the citizens, the FIRC said the proposals are designed to lay a solid foundation that will ensure fiscal stability of the country. The four executive bills are: Nigeria Tax Bill, Nigeria Tax Administration Bill, Nigeria Revenue Service (Establishment) Bill, and Joint Revenue Board (Establishment) Bill, which are based on the recommendations by the Presidential Committee on Fiscal Policy and Tax Reforms, chaired by Taiwo Oyedele. It would be recalled that in his inauguration speech, President Bola Tinubu, had unveiled his plan to address the nagging problems of multiple taxation with the sole aim of eliminating all obstacles impeding investment. The frontal push against those hurdles is necessary to consolidate the variegated laws, including Companies Income Tax Act, Personal Income Tax Act, Capital Gains Tax Act, Value-Added Tax Act, Stamp Duties Act, Petroleum Profits Act, Tertiary Education Fund Act, Petroleum Industry Act. The list also comprises tax provisions in non-tax laws such as the NLNG Act, Tertiary Education Trust Fund Act, NASENI Act, Lottery Act, Companies and Allied Matters Act.
Incidentally, the raging fury of Ndume, Madaki and northern governors coincided with a time a former governor of Rivers state, Dr Peter Odili spoke on the wave of injustice ravaging the constituent parts of the country. He expressed bitter and near frustration over what he considers as the grave injustice the country has been doing to the South-South geopolitical zone, which constitutes the goose that lays the golden egg called crude oil. Proceeds from the export have not allowed Nigeria to asphyxiate from gasps arising from economic challenges for decades. Yet, each state of the federation sits on goldmines and other resources that if tapped into, could boost their internal revenue base, federal allocation and leverage on development strides in a highly competitive environment, locally and globally. Dr Odili, at the induction of five graduates of the Pamo University of Medical Science, Elelenwo in Rivers State, into the Radiographers Registration Board of Nigeria (RRBN) said: “I am one of those who believe that if you withdraw the South-South, Nigeria will collapse. Like what is said, if you go to every home, the fattest people are those who work in the kitchen, therefore, whatever good Nigerian resources can produce in every sector, the South-South will always come best.” Another elder statesman, Major General Zamani Lekwot drew a similar parallel on what he regarded as the fulcrum of the country. He said the Middle Belt remains the umbilical cord of the fragile Nigerian federal structure, lamenting the continued marginalisation against certain ethnic groups in the scheme of things. “If you cut off the Middle Belt, there will be no Nigeria. So, the Middle Belt is the foundation of Nigeria. The ethnic nationalities of the North are the Middle Belters,” Lekwot.
Another aide of FIRS chairman, Aderonke Atoyebi, in an open letter to the northern governors, shed light on the importance of the proposed tax reforms in the bid to douse the misplaced fears in certain circles among northerners. Aderonke, the Technical Assistant, Broadcast Media to the executive chairman of the agency, said: “Looking more closely at this reform reveals opportunities to benefit not only northern states but also the entire nation. I believe that with your leadership and support, this reform could unlock opportunities that advance the North’s growth and empower its communities. I wish to share some perspectives on the vision and benefits of this reform.” In clearer terms, she added, the reform is designed to ensure that those with greater means and profits contribute fairly while also reducing redundant taxes that impact small businesses and local communities. According to her, the streamlined approach offers simplicity, making tax compliance easier and more efficient for businesses, farmers, and traders alike, thereby allowing our local enterprises to grow without unnecessary hindrances. “In the past, VAT revenue has been centralized, but this reform offers a new direction, allowing each state to gain more from its own economic activities. A localised VAT model values the strengths and contributions each region brings to the country and ensures that these efforts benefit local communities directly. It’s a way to support each state’s growth and allow funds collected within a state to have a greater impact on its residents. I understand your concern but the new bill will help in developing the region into a prosperous North if you look inward in line with the following: One, it will strengthen North the more to focus on some of the things they have comparative advantage of and make them stronger. Two, it will make the North to be more creative in developing what they have, instead of relying on other sections of the country for progress and development. Third, it will also make the North look inwards into their ability and capability to develop themselves,” she said.
It is important to note the submission of some scholars and experts on the state of the Nigerian federation and what it portends for the future. There is unanimity and consensus among most of them that the country is still taking for granted some fundamental issues bordering on the quest for it to attain nationhood. The assertion of Dr Sam Ugwu Chijiokeand Eme Okechukwu Innocent and Emeh, Ikechukwu Eke Jeffry of the Department of Public Administration and Local Government of the University of Nigeria Nsukka (UNN), Nsukka, very many years ago are instructive today. In a paper titled: Issues in Nigerian Fiscal Federalism; the Relationship between the Principle of Derivation and Resource Control, they noted that “true federalism in the real sense of the word promotes accelerated economic development. It unifies and binds people together; it triggers intellectual dialogue and provokes a healthy rivalry in revenue generation. These laudable goals are only achieved where the federating units are allowed free access in decision making and inputs into governance.” They also quoted the submission of another scholar and expert, Denisa, to buttress their position on the predicament of the convoluted federal system of government in Nigeria. According to Denisa, “Federalism, as practised in Nigeria today, is likened to a lion chasing an antelope and squeezing out life from it (the lion represents the Federal Government while the antelope represents the states government). The federal structure of Nigeria today is a gross anomaly. This present structure has positioned itself as an octopus firmly gripping the federating units with its poisonous clutch and constantly dictating its destiny.”
1914 misstep
History indicated that at the time of 1914 amalgamation of the North and Southern Protectorates of Nigeria, the principle of derivation held sway. Each of the regions collected revenue of its internal resources mainly from agricultural cash or export crops, taxable import and excise duties. The system largely subsisted despite the number of constitutional frameworks and setting up fiscal commissions before and post-independence in 1960. However, the indiscriminate balkanization of the federal structure though the whimsical creation of states worsened the federal allocation crisis, encouraging indolence and thoughtlessness in political leadership. Again, Egwu and his co-researchers situated the predicament of the country on those issues in a more proper perspective, declaring: “The creation of states from the regions and continuous fragmentation of states from the regions became instruments for promoting a concentration of fiscal authority at the center. In addition to this, various decrees were promulgated, expropriating tax authority and jurisdiction from the state. The centrist philosophy found its way into the 1999 Constitution of the Federal Republic of Nigeria handed down by the military.”
Way forward
Senator Ali Ndume is perhaps the most vociferous on the issue of planned tax reforms. Since governors from the North called on lawmakers from the North currently in the National Assembly to reject the tax reform bills, including the one on VAT likewise other bills not in the interest of the North, Ndume has declared the bills dead before delivery. His advocacy is at variance with the way forward for Nigeria out of its political quagmire. Again and again, scholars, experts, other concerned individuals and organizations involved in the Nigerian project have admonished the country against postponing the evil due to the unjust revenue allocation arrangement as it represents the biblical saying of robbing Peter to pay Paul. Thus, they have led the advocacy on the imperative of a vigorous and meticulous review of the Nigerian fiscal federalism with emphasis on resource control and derivation principle. They have unequivocally called for a return to the principle of derivation as it is the impetus for a proper allocation of oil revenue in a federal system like Nigeria. They also canvassed for the elimination of the Petroleum Act, Land Use Act, the National Waterways Decree, and any other law or decree which concentrates too much power in the hands of the national government and contributes to the unequal distribution of oil revenue to ensure faithful application of a fair and new derivation principle formula that will engender peaceful and harmonious co-existence in the country. In their views, the geese that lay the golden egg should be specially taken care of hence there is nothing wrong in developing the oil-producing communities as such act will only help in the development of the entire nation.
But for how long shall the country sustain a parasitic system that also encourages what a former deputy president of the Senate, Senator Ike Ekweremadu once labeled military-imposed feeding bottle federalism, where the greatest beneficiaries still fail to harvest even the lowest-hanging fruits? Ekweremadu had defined the feeding bottle federalism to mean where self-reliance, hard work, enterprise and resourcefulness to catalyse national development and economic prosperity is regarded as an anathema. There is no doubt that Nigeria is currently on the cliffhanger, and requires an urgent and deliberate action to save it from the emergency ward it has found itself due to the lack of political will to tackle headlong issues pertaining to its diversity and ethno-religious heterogeneity. Successive political leadership had preferred to tow the path of cosmetic treatment of worsening open wounds that requires exorcising.
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