Contest Over VAT: A Wake Up Call To True Fiscal Federalism - THE DAILY CRUCIBLE



Saturday, September 11, 2021

Contest Over VAT: A Wake Up Call To True Fiscal Federalism

By Kunle Alaye

It is a sacrosanct fact anywhere in the world, including the United States which most Federal countries model its structure of Federalism, that one of the cardinal features of Federalism is "Fiscal Federalism". This hitherto includes the supremacy of the individual states of the federation, to take charge and control all forms of revenue within the shores of their respective states in such a given Federal System.

Sequel to the above justification, it is distinctly incontrovertible that the collection of the Value Added Tax (VAT) by the Federal Government of Nigeria, is not only illegal but an encroachment to the constitutional functions of states of the federation.

Prior to the recent face-off between Nyesom Wike of Rivers State and the Federal Government cum Babajide Sanwo Olu of Lagos State, it appears the Federal Government has been shortchanging states in Nigeria, on this very controversial trend. Until, state governors apparently became concious of the "imperial lacuna"

The game until the recent development, was that Federal Inland Revenue Service (FIRS) has been in charge of the VAT collection then shared among the Federal, State and the Local Governments. 

However, the argument here is that has states who are mojorly responsible for the VAT collected enjoyed the basic infrastructures or witnessed any laudable developments from the Federal Government? 

A very good example of Ogun State, which is among other major states responsible for VAT that goes into the Federal Government, through FIRS. However, you can hardly point at any serious Federal Government projects or development in the state. The same thing with so many other major states and their counterparts who are responsible for the VAT collected. 

The Federal Government, to a very large extent is just playing to the gallery and should stop such overlapping to the constitutional duties of the states. Though, the tradition has it that Federal Government has been in control of the VAT before now. However, is that what the constitution of the Federal Republic of Nigeria says? 

We can not continue to glorify "quasi or pseudo federalism" as representation of true federalism in disguise. A Federal State with a pluralist nature like Nigeria, must reflect the template of a true federalism which "Fiscal Federalism" is a germane factor.

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