
By Jude Atupulazi
One of the raging issues in the country today is the current proposed tax reforms initiated by the Federal Government of President Ahmed Bola Tinubu. On the surface, that seems good but while a section of Nigerians seem okay with it, many more are increasingly beginning to kick against it, pointing out that it would only empower some western states, especially Lagos.
But what intrigues me is that despite the alarming bells the proposed tax reforms are ringing, some people who will end up bearing the brunt seem not to be bothered. I’m talking about the state governors who stand to lose a large chunk of the revenue that would have come to them to Lagos.
But before I go on, the write up below will, no doubt, elucidate you on why some people are seeing a booby trap in the proposal.
TAX REFORM BILL: Attribution before Derivation
By Chris Okafor
I have been on this tax reform bill for some time but my worry is heightening by the day. One honourable member almost suggested that my worries are likely to be scaremongering. But the truth is, tax experts filled with Tinubu’s apologists and 90% Southwestern Ronus, worked on the bill and hid so much into the bill which will put Lagos and Ogun into economic advantage, slightly short of extortion from other states. And our Southeast governors and legislators have not set up a tax study group or even hire global tax experts even if they disdain Igbo experts.
Let us take VAT as example. VAT is the tax charged on consumption of goods and services. By the reform bills, 60% of the VAT will go to the state of collection. This sounds attractive right? But see where the problem is. I will use First bank, MTN and Chicken Republic as case studies.
First Bank: The registered address of First Bank in CAC or FIRS is 35 Marina Lagos. However, First Bank has 15 branches in Anambra. In the course of rendering bank services, First bank collects VAT from its branches. But the way it is right now, the VAT collected from the 15 branches of First Bank in Anambra is credited to Lagos because it is the registered office of First Bank. Thus, if First Bank collects N500m as VAT from Anambra, 60% of it under derivation will go to Lagos. And this is replicated in the other states in Nigeria.
MTN has its registered office in Lagos. But as at 2021, it had about 3m voice subscriptions in Anambra. MTN collects VAT from the telecom services rendered to about 3m subscribers in Anambra on daily basis. Let’s say it collects N700m monthly from Anambra subscribers, MTN credits this amount it collects to Lagos State. And by the Reform Bill, Lagos will collect 60% of it.
Now, apply the principle to all the banks, breweries and mineral water bottling companies. You should be able to understand what the Tax Reform Bill plans to do.
Any solution? Yes! The proper thing as it is done everywhere in the world and should be done in Nigeria is what we call tax attribution to the area of collection. It is after tax attribution, you now talk of derivation. Using the above scenarios of First Bank and MTN, the VAT collected by FIRS from the 15 branches of First Bank in Anambra will be credited to Anambra State account with FIRS.
That is Tax Attribution to area of consumption. Also, the VAT collected by MTN from the 3m subscribers in Anambra will be credited to the Anambra account with FIRS. And by the new bill, 60% of collections from MTN and First Bank in Anambra will now be given to Anambra by way of derivation. This principle should be applied in all the states of the federation.
This is what we mean by Tax Attribution to the area collected before derivation. The Tax Reform Bill must include proper attribution of tax to areas of collection before derivation or else, it will become extortion from the SE and SS. Sadly, with their propaganda, they will tell you how they generate revenue more than the 35 states of the federation and we run with it.
The publication of the dangers of this Tax Reform Bill has been on for days. This is the third publication on this and if this bill shortchanges the Southeast, I want this generation of Igbos to know that our legislators and Governors were given enough notice and they chose to ignore it.
I personally give my tax expertise free of charge here and it is with N200m in consultancy fees but I chose to forgo it but to alert our leaders what may turn out to be the heist of the century!
My take.
Now, one would expect that many governors would be kicking against this booby trap that will further weaken their revenue base. In Anambra, my state, we all know that this regime of Prof Chukwuma Soludo, invests almost everything on revenue collection. As such, I expected Soludo, as a money expert, to know this and lead the fight.
Ever since he came on board, he has been channelling all his energy on revenue generation to the detriment of vital sectors like security. It is now said that if he expends a third of the energy he does on IGR on security, the problem will be solved.
Yet, when ordinary citizens see this proposed tax reforms for what it is: a monumental heist that will rob the states or federating units, governors like Soludo who breathe, eat and live on taxation, don’t see the danger. Tomorrow, after this heist takes place, the masses will bear the brunt as the tax regime of states like Anambra will worsen.
Is it that some governors like Soludo are loath to confront the Federal Government on any serious issue for fear of “losing favour”? Is it all about getting re-elected as in the case of Anambra State? The belief is that if Soludo fights for his rights, ”they will rig” his re-election.
For those crying about massive taxation here, gird your loins for more is coming, unless the governors fight against what this Tax Reforms Bill will bring.
Beyond this, one can see how seriously elements from Northern Nigeria are resisting this. They are suddenly saying it would not be fair to some states. I actually saw one Northern senator pointing out how the Southeast and South-South states would suffer and I laughed. Imagine a Northern politician caring for Ndigbo. Isn’t it funny? Because it doesn’t favour them they are now pretending to care for us in order for us to join them in fighting with them.
But where were they during the Buhari Regime when they were coveting and cornering everything? Didn’t they know it wasn’t fair to others, especially the Southeast, that has always lost out? Where were they when the Southeast was excluded from the National Rail Project, despite being the commercial and industrial hub of the country? Rather, Buhari had included Daura, his village, in the project, despite the fact that it served no economic purpose.
I also remember some people from Western Nigeria castigating Buhari for playing the religious and nepotistic card, appointing his people and fellow Muslims into virtually all the sensitive positions. The politicians from the North didn’t see the unfairness of this, then.
Today, Tinubu is doing exactly all that Buhari did. Every major position has gone West and now he plots to turn other states outside the West to cash cows from which his beloved Lagos will prosper at their expense. The Yoruba are now observing good table manners which is not talking while eating. But the North which is no more eating has started to talk. The Southeast has become so dazed over the years that it just doesn’t care anymore.
What is playing out now once more, illustrates yet another poignant example of the hypocrisy of Nigerians. They complain when they lose out and keep mum when they are favoured. Nigeria we hail thee!