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VAT rightly belongs to states, Chief Ladi Williams SAN backs Wike

Controversy is still raging over the rights of states to collect Value Added Tax, which has been an exclusive preserve of the Federal Inland Revenue Service (FIRS).

In this interview, a renowned legal expert, Chief Ladi Rotimi Williams (SAN), advised the Federal Government to concentrate on other sources of revenue in order to give the states a breathing space.

Rivers State government is seeking autonomy on the collection of Value Added Tax (VAT). What is the position of the law on this issue?

It is a complicated issue that I cannot give a straightforward answer to. It’s a complex matter because it involves the constitution. But the short answer to it is that Rivers State is right. We run a federal system of government in Nigeria. I don’t think that the Federal Government can be collecting taxes on Value Added Tax. The Federal authority can collect Company Income Tax, but Value Added Tax (VAT) should be collected by the states. For example, if you produce Coker Cola in Owerri, the tax on consumption of that Coker Cola should be collected by the Imo State government. So, it is not right for the Federal Government to be collecting VAT on products that are being consumed in the states.

According to Governor Wike, Rivers State generated N15.1 billion as VAT in the month of June and got N4.7, but Kano State generated N2.8 billion and received the same amount as VAT. Is there any section of the constitution that stipulates how tax should be shared between the states and the Federal Government?

We don’t understand the principle of federalism. The Federal Government has no right to collect VAT on manufactured goods in the first instance. So, it wrong for the Federal Government to give money generated from VAT to states that forbid the consumption of alcohol. Ordinarily, Company Income Tax goes to the Federal Government.

Lagos State House of Assembly has also commenced the process of passing a bill that would empower the state’s revenue agency to collect VAT.

(Cuts in)…They are perfectly right to do so.

If the trend continues, can it lead to restructuring?

That is one of the elements of restructuring because the Federal Government believes wrongly in my own humble view that VAT is theirs to collect, whereas that is not the case. In the constitution, we have an Exclusive Legislative List which is for the Federal Government alone. For instance, nobody can argue about the money being collected from the various ports in Nigeria because it is on the Exclusive List. It belongs to the Federal Government. I think the Federal Government should manage what they are getting from various other sources and leave VAT for the states; otherwise, states will remain poor forever. And that is why they run to Abuja every month end to collect money. The Federal Government collects their means of livelihood and then shares it among states that don’t even believe in the drinking of alcohol. On the basis of fairness, I don’t think it is right.

Federal High Court in Port Harcourt has ruled in favour of Rivers State. Do you see the state winning the case at the highest level of court in Nigeria?

We all know what is happening in our courts. I am not comfortable answering that question because I don’t understand our judiciary anymore. Only recently, the Chief Justice of Nigeria summoned three justices on conflicting court orders. And I agree with the CJN on the need to correct certain things. I can’t predict anything the way things are now. Our courts are no longer predictable.

On the moral side of the argument, you know that states depend largely on revenue sharing from the Federal Government and VAT constitutes a chunk of what is being shared by the three tiers of government. What will then be the fate of the states that do not have enough capacity to generate tax on their own?

What VAT is bringing is peanut, compared to what the Federal Government is making from oil. There is too much money at the disposal of the Federal Government which is why elections have become a do-or-die thing. They should leave VAT alone for the states.

The tenure of this administration is running out and agitation for restructuring is getting louder by the day. What should the Federal Government do to avoid rubbing shoulders with the states?

They should hire economists and tax experts to advise them. Adviser on the economy should not be based on the state you come from. It should be based on merit. They should use more experts.

The latest release by the National Bureau of Statistics says the economy recorded five per cent growth rate in the last quarter. Is this a true reflection of the economic situation giving the pervasive poverty in the country?

How can anybody say that economy in Nigeria is growing when people are getting poorer by the day? It is most unfortunate for anybody to say the economy is growing. We should stop deceiving ourselves. One of the problems in Nigeria is that we don’t tell ourselves the truth. How can the economy be growing when even Japan is complaining that the shutdown has affected them? People are suffering; the money we are earning now cannot sustain us. There is no business, everything is at a standstill.

What kind of reform would you recommend in the judicial sector for a better dispensation of justice in Nigeria?

There has to be a major reform. We need a department of judicial reform in the Ministry of Justice.

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