Value Added Tax (VAT) is the tax levied by government on consumer goods and products. It was introduced into Nigeria in the year 1993 via decree 102 of 1993 by the then military government to replace the Sales tax in the states introduced in 1987. The then formula for the distribution when it was first introduced was 50% to FGN; 35% to the States; and 15% to LGAs. The formula was later adjusted to 15% for the FG, 50% for the states and 35% for the LGAs and area councils of the FCT. (source; pwc Nigeria).
The VAT collection ruse and fuse between the FG and states all started when some states that generates more VAT for the FG began to feel cheated and shortchanged by the federal government. They raised an alarm that the FG can’t be robbing and ripping them off in the guise of maintaining one Nigeria but the good news is that the VAT squabble will be an eye opener. It will open the eyes of Nigerians and the eyes of indigenes of the individual states to see and know the kind of persons they elected to occupy the highest political seats in the states or being more ‘unpolitically’ correct, to see the kind of person that rigged his way in and is occupying the highest political seat in the state.
Every sane and reasonable political leader who has the interest of masses at heart should back and support the push for the VAT collection by the states or the regional government as against the collection by the federal government as this will definitely lead to economic boast in individual states and pave way for the restructuring the country called Nigeria so much need at this moment.
Tekedia Mini-MBA edition 16 (Feb 10 – May 3, 2025) opens registrations; register today for early bird discounts.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
The background;
The Federal Inland Revenue Service (FIRS) has been collecting consumer tax in all states of the federation for the Federal Government since 1993. The Rivers State Government decided that it is enough and dragged the FIRS to court where the state challenged the FIRS of their power to collect VAT in states of the federation including the Rivers state. The Federal High court sitting in Portharcourt gave the judgment which was delivered by Justice Stephen Pam that the VAT should be collected by the state governments and not the federal government through the FIRS and that the FG lack the constitutional power to collect VAT whether by themselves or through their privies called FIRS. This judge should be highly commended for his courage and deep sense of reason for despite being a federal judge was not biased and maintained the canon of the impartiality of the judiciary unlike other judges for the fear of displeasing their pay masters and the employers which is the FG may be tempted to hold otherwise.
The FIRS was displeased with the decision of the Federal High court and went on appeal and appealed against this decision of the Federal High Court. The court of appeal ordered all parties in the suit to maintain status quo till finally decision is reached. This implies that the FG through FIRS should continue with the VAT collection till when the court arrives at the final judgment.
My argument;
This is a golden ticket for state governors and political stake holders of the state to develop their individual states’ economy but some political e-thugs who has turned to paupers of the FG thereby throwing away the sense of reason on a platter of food are criticizing the states that are fighting that the VAT should be collected by them. They have closed their minds to the fact that if states start collecting VAT they will come up with ideologies, policies, plans and initiative on how to increase the economic activities of the states thereby boasting the economy, creating jobs and leading to long term development so that they will have more VAT generated in the state.
The smart and proactive governors who are initiative will definitely embrace and support the states collection of VAT as against the collection by the FG as this will lead to the economic development at state/regional level thereby boasting the collective economy; investors will be attracted when there’s an enabling environment to invest, more industries will be established in states, more jobs will be created, policies that support small and medium scale enterprises will be initiated etc.
Despite the economic advantages of states collecting VATs thy we have averted our minds to, there are also other numerous political advantages which one of the resounding advantage is that this will definitely lead to the restructuring that Nigerians have been yearning for from time immemorial. This will pave way to the reality that the states/the region can stand and flourish on their own, with or without the interference of the central government.
Do you wish to have state/ regional security? This is time to go for it, through the VATs generated in your state you can be able to funds it.
Do you have policies and projects you wish to execute and haven’t been able to execute them due to the long wait for approvals and release of funds by the FG then support the VAT collection by the states.
Do you wish to have more money to loot in your state without unnecessary censorship from the FG then this is your time to shine.
These and many more are some of the political and economic advantages and reason why state governments should collect VATs instead of the federal government and for the political stake holders of the state who are selfish and are only occupying political offices for selfish interests; can’t you see that you will be able to loot and embezzle more funds without much scrutiny when VATs are collected by the state because you are the political overlord of the state and the rest are your minions who’d rather keep eating the crumbs you through at them than calling you out.
The truth is if you generate more VAT in the state you will definitely want to collect and control the VAT so generated in your state despite party affiliation because it is the sane and reasonable thing to do if you really want the good of your state. For instance, Lagos state is not an opposition party like the Rivers state but they are also pushing for the collection of VATs by the states, no wonder the state is economically ahead because the political stake holders of the state want the right thing to be done despite the political party affiliations.
My conclusion;
It is a pity that when you call for good governance and cry out for the right thing to be done in government you are either tagged opposition or it is said that you have been bought and sponsored by the enemies of the country that want to destabilize the government and hit up the polity.
Ask yourselves, would you rather keep begging for fish and keep waiting for the fish to be given to you when you can catch your own fishes by yourself and have control over what you want and can do with your fishes?
Some state political stakeholders will answer in affirmative but it won’t be surprising as they would rather be dummies and throw away sense of reason than displease their political god fathers or go against their political parties.
No wonder some state governors like Dave Umahi of Ebonyi state is championing for the FG that the VAT should be collected by the FG. If Dave Umahi is a governor of a state like Lagos or Rivers State will he still maintain the same position? I will leave that to him to think and answer.
His state is backwards economically and he should see this an opportunity develop economy of the state and boast more economic activities is the state in order to generate more VATs from the state for the state.
This is not a political witch-hunt neither is it a sponsored turfs by the opposition against the ruling party, rather it is a great opportunity for the development of the state/regional governments of Nigeria and thereby in turn, the economic development of the country Nigeria in general. Therefore, all and sundry must embrace this move initiated by some states who has been bold enough to embrace what’s right despite party affiliations.