The new VAT combat is a protest – Part 3

In fairness some of the reforms projected by President have been implemented by the FIRS. To their credit, the past Chief Executive of FIRS, from Mr. Babatunde Fowler who served from August 2015 to December 9, 2019 and the present Chairman, Alhaji Muhammadu Mamman Nami appointed on December 9, 2019, have been forthcoming in their to revenue collection drive. Just like last year alone, the organization collected 4.95 trillion naira.

There have been arguments as to the type of revenue the FIRS could collect or not. There are those who still insist that the state governments are entitled to certain percentage of what the FIRS collect in their states. 

In the view of Mr. Olumide Fusika, SAN, 1. Section 162(10) of the Constitution defines public revenue. It is any income or returns accruing to or derived by the Goverment of the federation from any source (which, of course, would include taxes) 2.  Section 162(1) of the constitution provides that public revenue derived as income tax proceeds of military and police personnel, staff of foreign affairs ministry and residents of the FCT belongs exclusively to the FGN. All other public revenue must be paid into the Federation Account for sharing among the FGN, the States and the LGs. 3. Section 162(2) prescribed that sharing from the federation account pool shall be done using a formula prescribed by the RMAFC and approved by the National Assembly on the principles of population, equality of States, internal revenue generation, land mass, terrain, and population density. However, public revenue derived directly from any natural resources shall first apply the criteria of derivation of not less than 13% to the host state. 4. Outside public revenue directly derived from natural resources, the derivation principles is further prescribed in Section 163 of the Constitution. That section provides for application of derivation principle to the sharing of public revenue derived from taxes and duties listed in the exclusive legislative list.

By section 163(b) where such tax or duty is collected by the FGN or any federal authority, then there shall be paid to each state a sum equal to the proportion of the net proceeds of such tax or duty that are derived from that state. 5. The tax items under the exclusive jurisdiction of the Federal level of the Federation are Stamp duties and taxation of incomes, profits and capital gains (items 58 and 59 of the exclusive legislative list). 6. In the concurrent legislative list, item 7 provides that in the exercise of its powers to impose any of the said prescribed taxes, the National Assembly may provide that the collection or the administration shall be carried out by the Government of a state or other authority of a state.

Since the use of “May” in this section isn’t mandatory, the National Assembly chose to confer the authority to collect and administer them on the FIRS, which in turn remits what it collects to the federation account where the FGN distributes, obviously without strict observance of the constitutionally prescribed derivation principle of 100% of the net proceeds (that is, what remains after administrative costs of collection) to the states where the duty it tax are derived from.7. The judgment of the FHC, P/H Division, is simply that the taxing powers of the FGN are those listed in items 58 and 59 of the exclusive legislative list (apart from PAT from the category of personnel exclusively reserved to the FGN under section 162(1) of the 1999 constitution). VAT (that is, taxes on sales and consumption) is not one of them. 8. If for reasons of ease of collection and administration, the FGN (National Assembly), with the buy-in of the States, has made an Act to regulate the collection of VAT in order to prevent the confusion that leaving each state to make its own law on it that should ordinarily be all well and good. But going beyond that to appropriate or use what is collected whimsically without regard to constitutional order is the crux of the matter.

At the time the VAT decree was promulgated by General Babangida in 1993, there was little input from the state governors. There could not have been any input because at that time we were operating a rigid military administration, even appointments of governors at that time was a military posting. At that time military governors could not travel outside of their state capital without the approval of the office of the Chief of General Staff or else they will charge for treason. Even common allocation of plate numbers for governors was part of the schedule of the Chief of General Staff, Admiral August Akhabue Aikhomu (October 20 1939- 17 August 2011) from Irrua, Isan in Edo state. I remember while serving as Press Secretary to three military governors in Ondo state (Major General (rtd) Babakayode Ekundayo Opaleye, Commodore (rtd.) Olabode Ibiyinka George and Rear Admiral Sunday Abiodun Olukoya (1947-2021) between 1986 and 1992 which is now made up of Ondo and Ekiti states, the plate numbers of their cars at that time was GHQ22. 

When the National Assembly passed the FIRS Act, it did not provide or prescribe a new formula for the sharing of the proceeds. Apparently, this was in recognition of the fact that the Constitution already covered the field by the unambiguous stipulation of its under Section 163 (b) What the Assembly did in the Bill was to allow the Revenue Mobilisation Commission to work out the formula without disregarding the constitutional parameter. Unfortunately the Commission, oblivious of this constitutional prescription, relied on the existing formula promulgated by General Babangida’s decree. Albeit, the ball is in the court of the central government to resolve this issue through a dialogue. The issue could not have degenerated to this level if there had been enough dialogue between the central and the state government. Fortunately the constitution has provided where this issue and other issues could be resolved. There is a council called the National Council of State which the President could summon for a meeting at any time.

The Council of State consists of the following persons: President, who is the Chairman; Vice-President, who is the Deputy Chairman; All former Presidents of the Federation and all former Heads of the Government of the Federation; All former Chief Justices of Nigeria; President of the Senate; Speaker of the House of Representatives; All the Governors of the states of the Federation; and Attorney-General of the Federation. 

The council has the following responsibilities: Advise the President in the exercise of his powers with respect to the:-National population census and compilation, publication and keeping of records and other information concerning the same; Prerogative of mercy; Award of national honours; The Independent National Electoral Commission (including the appointment of members of that Commission);The National Judicial Council (including the appointment of the members, other than ex-officio members of that Council); The National Population Commission (including the appointment of members of that Commission); and advise the President whenever requested to do so on the maintenance of public order within the Federation or any part thereof and on such other matters as the President may direct.

The last schedule of the Council could deal with issues of the VAT and other contentious issues currently dividing the country.
Concluded.