By Nathaniel Zacchaeus, Abuja
Yesterday, the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Mr. Taiwo Oyedele, said the proposed tax reform bills specified how funds generated from the Valued Added Tax (VAT) could be spent.
He said the proposed tax reform bills before the National Assembly specified how states and local governments could spend VAT proceeds.
He also clarified that the Revenue Mobilization Allocation and Fiscal Commission (RMAFC) has no role in VAT because it is not part of revenues captured in the nation’s Constitution.
Oyedele stated this yesterday at a one-day roundtable on the tax reform bills organised by the National Institute for Legislative and Democratic Studies (NILDS) in Abuja.
He said that since the bills contain a framework for generating and spending taxes, no governor or local council authority in the country would devote VAT on white elephant projects.
Oyedele said, “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 the expenditure? For example, more than 15 airports in Nigeria today are built by different states that should not have been built because they were unnecessary.
“We have states with flyovers where they have no traffic. The last time they had a traffic jam in those places was before the states were created. We have states with malls that people don’t go to, but they have built them even though they have no primary schools with roofs and books.
“They have no health centres. They need a road from the farm to the market. This needs to be a better priority. We know the priorities of our people. They are in multidimensional poverty. The four dimensions of poverty are 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 make naira investments?
“Should you borrow and spend it on overhead? Or should it be only infrastructure? What qualifies as infrastructure? What should you subsidise? Why are we subsidising the train? Today, more than the money we make from running train services is needed to pay the interest on the loan.
“What will happen is predictable because you will soon suffer budgetary allocations, funding, and infrastructure being abandoned.
“Even though we borrowed hundreds of millions of dollars. This framework is also part of our fiscal policy, including conditional cash transfers as a 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? How should you do a conditional cash transfer? It’s there.”
Oyedele said those who say the committee did not carry RMAFC along did not study the Constitution very well.
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, which speaks to the role of the RMFAC as advisory, focuses on federation revenues. So, this VAT is state revenue. And that’s why when the military decreed it in 1993, it replaced the sales tax that states were collecting.
“That is why VAT does not go to the regular federation accounts. It goes to a special pool account; then, we share it with states and local governments.
“The federal government keeps a small portion for administering needs and recognizes that if we collect VAT by state level, the federal government will be entitled to Import VAT, International VAT, and interstate VAT.
“If we start collecting VAT at the state level, you know the biggest winner will be the federal government. The federal government will keep over half of the VAT we collect today.”
In some quarters, Oyedele also described false claims that the Federal Inland Revenue Service planned to import the Alpha Beta Company from Lagos to serve as tax consultants to the FIRS.
He specifically said the proposed bills banned the FIRS from engaging tax consultants, unlike if the states can collect VAT.
He said, “If the states collect VAT, the following winners will be tax consultants. Some companies file 36 returns every day with complications. As consultants, we make more money. Some people said, you guys are planning to use consultants; you may want to bring Alphabeta to the centre.
“I just laughed and said, how do people develop these ideas? You would only have thought about them once somebody made 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.”
Senate President Godswill Akpabio said the Tax Reform Bills before the National Assembly represent a critical step forward in modernizing the country’s tax system and ensuring a more equitable distribution of the tax burden among all Nigerians.
He said the bills aim to enhance efficiency, improve revenue generation, and ultimately, build a stronger, more prosperous Nigeria for all.
He said, “Regrettably, the introduction of these bills has been met with some misunderstanding and even politicization by specific segments of our society. Don’t see this as a setback but as a testament to the growing democratic maturity of our nation.
“As people’s representatives, we want to assure our compatriots that the members of the National Assembly have heard your voices. We stand here, not as adversaries, but as partners in the quest to build the Nigeria of our dreams.
“We know that we have the unwavering trust of the Nigerian people, and we will never betray that sacred trust in performing our duties.”
The Director-General of NILDS, Prof Abubakar Sulaiman, said that contrary to the fears expressed by many, the bills are designed to reduce the government’s tax burden on all people.
He said it would make the tax system more progressive and less regressive and simplify it by making it more accountable and understandable.
He said, “While the tax reform bills have garnered unprecedented public scrutiny, the controversies surrounding the bill underscore the Nigerian people’s realization that there is a need for a fair and balanced tax system that mirrors the specificities of Nigerian society.”
