Governor Inuwa Yahaya of Gombe State has warned Lagos Governor Babajide Sanwo-Olu and Rivers State Governor Nyesom Wike to back down from their demands for state administration of Value Added Tax (VAT) across the country, stating that such a policy will worsen the situation in his state.
Messrs. Wike and Sanwo- Olu issued the warning in response to their decision to begin collecting VAT in their respective states, thereby undermining the current system of exclusive federal VAT management.
“The VAT issue will have negative consequences not only for Gombe State but for virtually all the states of the federation,” Mr Yahaya warned on Wednesday at an event attended by Gombe finance commissioner Muhammad Magaji.
Mr Magaji also urged governments across the southern area to put “sentiments” aside and “be their brother’s keepers” as he opened a Technical Workshop on the formulation of the state’s Medium- Term Sector Strategy (MTSS).
Mr Magaji, who claimed to be a participant in a recent meeting of all finance commissioners across the country, complained that only Lagos, Rivers, and Delta would be able to subsist without help.
“We realized that without this VAT being administered centrally, only Lagos, Rivers, and maybe Delta states would be able to pull through,” he said.
He went on to say that the states should “put sentiments aside and work towards a federation that is one, by being our brothers’ caretakers and ensuring that what is pulled together at the center is distributed to balance resources across the country.”
“Don’t forget that oil- producing states only get a third of the revenue, so if you say every state will take whatever resources it has, that implies we’re on a very dangerous path that won’t bode well for the Nigerian federation,” the commissioner warned.
After Mr Wike’s administration filed a complaint accusing the federal government of defrauding the state and implementing an opaque and illegitimate tax policy, the Port Harcourt Division of the Federal High Court ruled in August that the state government should assume care of VAT.
Mr Wike also stated that states that limit beer consumption, which is a key source of VAT revenue, should not be permitted to profit from states that allow alcoholic beverages. The court noted that the Rivers administration, not the Federal Inland Revenue Service (FIRS), was authorized to collect VAT.
Mr Wike signed the bill on VAT collection into law a few days after the court verdict, a gesture that was applauded by Mr Sanwo- Olu in Lagos.
Meanwhile, Governor Aminu Masari announced that Katsina was challenging the court’s decision, claiming that it would impose a hardship on the people. The governor has the support of the Federal Investigation Service (FIRS), a federal institution run solely by President Muhammadu Buhari.
Despite the fact that the president has yet to comment on the VAT debate, critics claim he is behind a new proposal by the FIRS to amend existing rules and remove states of their authority to manage VAT in their jurisdictions.