Governor Nyesom Wike has been in the news recently over his strong stance against the remittance of Value Added Tax (VAT) to the central government. According to a report by People’s Gazette, the Rivers State Government has already approached a federal high court in Port Harcourt, seeking to take over control of the VAT structure in the state.
According to the National Bureau of Statistics, Rivers State emerged second in terms of total Internally Generated Revenue (IGR) in 2020. Based on this, Wike argued that states like Rivers State with high tax remittances should not be saddled with the responsibility of providing revenue for some Northern states with ethnically restrictive policies.
What are these ETHNICALLY RESTRICTIVE POLICIES?
Some Northern States have laws that forbid the consumption of alcohol in public places. In many occasions, local security operatives in these states confiscated and burnt down beers and alcoholic drinks to enforce the no-alcohol law in their region.
Now, these alcoholic drinks are a considerable source of VAT revenue for states. Most states that make up the top ten in terms of Internally Generated Revenue (IGR), do not have laws that restrict the consumption of alcohol in their states.
The question now is: Why do some northern states that banned alcohol, receive revenue from the tax generated by the same alcohol they banned?
The answer is that, Nigeria operates a federal system of sharing revenue. When the Federal Inland Revenue Service (FIRS) successfully generates revenue for the Federal Government through taxes, the FG shares the revenue according to a formula to the states. That is why some Northern States that have banned alcohol still receive revenue generated by alcohol in other states.
Now that this has been established, is Governor Wike right to insist that state governments should be controlling VATs?
From the angle of a neutral person, I think it would be wrong for VAT to be controlled by states. In as much as it seems like the right thing to do, we should understand that Nigeria is not just a committee of states; it is a Federation, and all states should be their brother’s keeper.
If we ignore the Northern States, there are still some states in the South that would not be able to survive if they are to depend on their own IGR. That is why the Federal Government insists that all revenue should be directed to the center so that it can be shared accordingly to the states. Of what use would the prosperity of a state be, when it is to the detriment of another?