Value-added trouble? – The Nation

The clamour is to fairly collect and share value-added tax (VAT).  But it might well all end in value-added trouble (VAT).  Pray, which of the two VATs are you pushing?

Already, from the South West end, there are talks of a common regional stand on VAT. In other words, the imperative of an Amotekun equivalent of VAT.  As Amotekun was sold (as a South West-exclusive plank) instead of a commonsense tool (a security initiative intimate with its locale, so a win-win nationwide) VAT, in the emotion of the moment, appears going that same direction.

But after all the flurry, how’s the Amotekun doing today?  It does its best, to be sure.  But it’s definitely very far from the starry-eyed heights of its idealists and ideologues.

By the way, it was rather nice seeing the Amotekun and federal security agencies partner to spring nine victims, travelling to Lagos in a public bus, from kidnappers’ den, in the Akoko area of Ondo State.  The moral?  VAT or Amotekun, you’ll still need parallel partnerships, for either to succeed.

That brings the matter to the technical part of VAT.  Beyond the simplistic, all-size-fits-all, emotive din of “true federalism”, “fiscal federalism”, et al, some experts are insisting .

VAT is best collected by the centre, so that it doesn’t result in the other VAT — value-added trouble — in multiple taxation; since the VAT concept is both paying tax on goods you buy and charging tax on goods you sell.

Since Nigeria is a vast market, they argue, every state collecting VAT could subject businesses to multiple VAT, as goods move from state to state.  That alone could drive up inflation.  Also, that upward spiral could be worsened by multiple VAT administrative costs, now enjoying an economy of scale in a central basket — value-added trouble!

Then, the legality of it all.  What profits a state to rush out a VAT law, only for such to be shot down by the apex court?  Lesson?  Wait for a definitive verdict from the Supreme Court, before rushing out law that may eventually prove futile.

That possibility appears not lost on Ondo Governor, Rotimi Akeredolu, SAN, (by the way, an unfazed Amotekun champion), who has opted to wait for the Supreme Court’s verdict on the matter before taking any further action.

The popular press, in tribute to the giant strides of the late Gani Fawehinmi the Great, inimitable senior advocate of the masses (SAM), would roar: “Gani wins round 1!”, even if it was just an ex parte order!  But between round 1 and round 12 in a boxing bout, is quite a travel — and so it is in a judicial process.

Let’s fight the perceived injustice and inequities in value-added tax administration and sharing.  But it wouldn’t be worth anyone’s while if the ultimate gain were to be value-added trouble.

That’s why South West legislatures’ open grandstanding of a common VAT regional approach should freeze.  Law-making is too serious and too costly a process to become banalized as tool of hurried advocacy, for a fuzzy goal.

One comment

  1. The following statement from The Nations editorial is purely an opinion and has no practical import:

    “VAT is best collected by the centre, so that it doesn’t result in the other VAT — value-added trouble — in multiple taxation; since the VAT concept is both paying tax on goods you buy and charging tax on goods you sell.”

    1. First, the Concurrent Legislative List of Nigeria’s 1999 Constitution should not have denied any tier of government the right to levy any form of tax, including personal and corporate income tax, sales tax, etc. Only excise tax collected on imported goods should be exclusive to the FG.
    2. If the FG, States, and LGs wish to levy VAT these can be harmonized, levied on all sales occurring within the LG, and then shared according the tax rate that’s legislatively approved by voters in the LG, State and the NASS. This will generate revenues for all tiers of government.

    Basically, there is absolutely no need for a bureaucracy within the FIRS to be charged with collecting VAT, which can best be done locally where sales transaction occur. The important thing is to work out efficient mechanisms to collect and disburse the harmonized VAT among tiers of government.

    In many cases, businesses operating within the LG will be mandated to add the harmonized VAT to every goods sold, and remit same to a consolidated government VAT account. For businesses that use POS, these can be automatically configured to add the harmonized VAT. For sales that pass through the payments system, the appropriate tax rate can be automatically withdrawn and remitted to the consolidated government VAT account from which they’re disbursed to the appropriate LG, State or FG VAT accounts, etc.

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