Oyedele: : Tax Reforms Will Prevent Mismanagement of VAT Proceeds by State Governments

The Chairman, Presidential Committee on Fiscal Policy and Tax Reforms, Mr. TaiwoOyedele, on Wednesday allayed fears by Nigerians that funds generated from the Valued Added Tax (VAT) would be mismanaged by governments at the sub-national levels.

Rather he said the proposed tax reforms bills currently before the National Assembly had made specific provisions for what the VAT proceeds should be spent on.

He also clarified that the roles of the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) did not have anything to do with VAT because it was not part of revenues captured in the nation’s constitution.

Oyedele spoke yesterday at one-day roundtable on the tax reform bills organised by the National Institute for Legislative and Democratic Studies in Abuja.

He said since the bills contain a framework on how to generate taxes and how to spend it, no governor or local council authority in the country would spend 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 spending?  

“For example, there are more than 15 airports in Nigeria today built by different states that should not have been built because they were not necessary.

“We have States with flyovers where they have no traffic. They’ve never had a traffic jam in those places since the States were created. 

“We have States with malls where people don’t go there, but they have built those malls, even though they have no primary schools with roof and  books.

“They have no health centers. They have no road from the farm to the market. This is a misplaced priority.

“We know the priorities of our people. They are in multi-dimensional poverty. The four dimensions of poverty are education, health, living standard, insecurity, and unemployment.”

Speaking further, he said: “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 do 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 is it that it’s the train that we are subsidising? To the extent that today the money we make from running train services is not enough to pay the interest on the loan.” 

Oyedele said those who are saying that 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, that speaks to the role of the RMFAC as advisory, is focusing on federation revenues. So this VAT is actually state revenue. And that’s why when the military decreed it in 1993, it replaced the sales tax that states were collecting.

“That is the reason why VAT does not go to the regular federation accounts. It goes to a special pool accounts, then we share it to states and their local governments.

“The federal government keeps a small portion for administering needs and also recognising that if we were to collect VAT by state level, the federal government will be entitled to Import VAT, International VAT, and interstate VAT.”

Oyedele also described as false, claims in some quarters that the Federal Inland Revenue Service (FIRS) planned to use 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 are allowed to be collecting VAT.

He said, “If the states are collecting VAT, the next winner will be tax consultants. Some companies will file 36 returns every day with complications. As consultants, we make more money.

“Some people said, you guys are planning to use consultant, maybe you want to bring Alphabeta to the centre.

“I just laughed and said, how do people come up with these ideas? Because you would never have thought about them until somebody makes up the story. 

“The FIRS has no need whatsoever for consultants to be able to collect VAT.”

Senate President, Godswill Akpabio, said the Tax Reform Bills before the National Assembly represent a critical step forward in modernising 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 explained, “Regrettably, the introduction of these bills has been met with some misunderstanding and even politicisation by certain segments of our society. 

“Don’t see this as a setback, but rather 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, ever, betray that sacred trust in the performance of our duties.”

The Director General of NILDS, Prof. Abubakar Sulaiman, said contrary to the fears expressed by many, the bills were designed to reduce the burden of taxation of all people by the government.

He said it would make the tax system more progressive and less regressive and simplify the tax system, by making it more accountable and understandable. 

Sunday Aborisade

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