*Says in the First Republic where the regions were transferring 30 percent of what they made from their resources to a distribution account, which was in turn distributed in accordance with poverty.

A prominent Senior Advocate of Nigeria and Chairman of the Presidential Advisory Committee Against Corruption (PACAC), Prof. Itsejuwa Esanjumi Sagay, has aired his opinion on the lingering conflict between some states and the Federal Inland Revenue Service (FIRS) over the collection of Value Added Tax (VAT).

The Federal High Court in Port Harcourt, Rivers State capital, had in a judgement declared that the Federal Inland Revenue Service (FIRS) had no constitutional backing to collect VAT in the state, thereby clothing the Rivers government with the power to do so. Consequent to the judgement, Rivers and Lagos Governments enacted VAT Laws.

However, the federal revenue agency was dissatisfied with the trial court’s verdict, and subsequently approached the Court of Appeal to stay execution of the decision.

A three-member panel of the appellate court, ruling on the application, ordered the parties to “maintain status quo ante bellum.”

Haruna Tsanami, the judge who delivered the lead ruling of the panel, held that since parties had submitted themselves to the jurisdiction of the court for adjudication on the issue, they must not do anything that will destroy the subject matter of the appeal.

Sagay, in an interview with the INDEPENDENT Newspaper, backed the aggrieved states. He described himself as a ‘federalist’ and would therefore not take any arrangement that looks unfair to one part of the country.

According to him, the manner the VAT issue has been handled appears unfair to some states which have high VAT turnover. What the aggrieved states get in return for what they produce is too small. So, there is justification for their displeasure on this matter.

Sagay further explained that the VAT is not in the exclusive list. That is why, according to him, the states are able to go to court to argue their own rights on the VAT issue.

He said, “I’m a very strong federalist. Anything that seems to take away from the capacity of the federating units, that is the states, always disturbs me. Any arrangement that looks unfair to one part of the country also disturbs me too. The way the VAT issue has been dealt seems unfair to some states which have high VAT turnover. What they get in return from what they produce is too small. So, there is justification for their displeasure on this matter. Luckily for them, there is no provision in the constitution that places VAT in the jurisdictional exclusivity of the federal government. That is why they are able to go to court to argue their own rights on the VAT issue. So, I appreciate the pain that made them do so, particularly Lagos State for whom I have been complaining for a long time, including Rivers state and a few others.”

Sagay advised that two options be explored in the circumstances. That either the states should collect VAT and keep or collect and send some portion to a distribution account as obtained in the First Republic where the regions were transferring 30 percent of what they made from their resources to a distribution account, which was in turn distributed in accordance with poverty.

“To me, it is either of two things. It is either states should collect their VAT and keep it and then the Federal VAT that people are now talking about could then be shared under the usual provisions of the federation account. States should collect what they keep as VAT and perhaps, where the quantity of collection is very high. Let me add that the size of collection is always related to punishment and cost the states suffer which include the size of the population, construction of roads, building hospitals and various other facilities as a result of the high population that is producing your VAT. But I still feel that such states that have high VAT could still transfer a portion of it to an account that can be distributed round those states that have difficulty, not as high as it is now but clearly stated as it was in the First Republic where the regions were transferring 30 percent of what they made from their resources to a distribution account, which was in turn distributed in accordance with poverty. In other words, the poorer states who are facing more hardship got more.

We can do so now but in doing so, that recognises that this is what you are transferring to the distribution account and therefore contributing to the welfare of your brothers and sisters in the less endowed areas. That was acknowledged. So, in essence, what I am saying is that this should be recognised or, if the federal government is going to collect it out of convenience, then it should be done in a manner that recognises in a much larger way, the entitlements of those on whose territories the highest number of VAT is collected.” the learned Prof. said.

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