Emboldened by a recent judgement of the Federal High Court, Port Harcourt, the Governor of Rivers State, Nyesom Wike, on Thursday, signed into law a bill which authorises the Rivers State Government to henceforth collect Value Added Tax (VAT) in the state.
Besides VAT, the court had ruled that Rivers State Government, and not the agent of the Federal Government – the Federal Inland Revenue Service (FIRS) – was authorised by the Nigerian Constitution to collect personal income tax in the state.
It may be too early to draw conclusion on the implications of this development, as FIRS has appealed the judgement.
But clearly the move by the Rivers State Government would heighten the debate on Nigeria’s contentious federal system of government and the agitations for the restructuring of the federation.
VAT yields billions of naira as revenue for the government, and significantly so with the recent decline in oil revenue because of the effect of the COVID-19 pandemic.
About N651.77billion, for instance, was generated as VAT in the first half of 2020, an 8.45 per cent increase when compared with half-year 2019.
The Nigerian government in February 2020 increased the VAT rate from 5 per cent to 7.5 per cent, while it had anticipated a deficit of N2.18trillion ($6 billion) for the 2020 budget.
Governor Wike at the signing of the bill into law said the federal government had been perpetuating illegality through VAT collection by FIRS, and that the various states in Nigeria have been “strangulated financially” and reduced to “beggars”.
“States have been turned to beggars. Hardly will any day pass that you won’t see one state or the other going to Abuja to beg for one fund or the other,” the governor said, according to a statement from his media aide, Kelvin Ebiri.
“In this (Rivers) state, we awarded contracts to companies and within the last month we paid over N30 billion to the contractors and 7.5% will now be deducted from that and to be given to FIRS.
“Now, look at 7.5% of N30 billion of contracts we awarded to companies in Rivers State, you will be talking about almost N3 billion only from that source. Now, at the end of the month, (the) Rivers State government has never received more than N2 billion from VAT.
“So, I have contributed more through the award of contract and you are giving me less. What’s the justification for it?”
Mr Wike said with the Petroleum Industry Bill that has just been signed into law by President Muhammadu Buhari, the Nigeria National Petroleum Corporation would now be unbundled and that means less remittance to the Federation Account and states having to look inwards on how to survive.
The governor also signed into law a bill prohibiting open grazing of cattle in the state.
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