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Tax War: Presidency faults Wike, says his pronouncement on vat collection ‘sabre-rattling’

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The Presidency has described the position of Governor Nyesom Wike of River State on the collection of value-added tax (VAT) as ‘sabre-rattling, saying the governor’s posturing was a ploy to make him relevant in the next general elections.

The President’s Special Assistance on Public Affairs, Ajuri Ngelale said this on Monday while appearing on Channels Tv Sunrise Programme.

According to him, the highest percentage of VAT comes from Port, which is owned by the federal government, irrespective of the fact that they are located in the Southern part of Nigeria.

He also argued that the federal government’s contracts awarded by Ministries, Departments and Agencies (MDAs)  in Abuja yield the second-largest volume of VAT.

 Ngelale said, “I do disagree on the notion that states are by themselves generating VAT en masse and the Federal Government is trying to hijack (it).

“In 2020, the nation generated about N1.5trn in VAT. We have about 60 per cent of VAT coming from imports at the ports. As we know, ports infrastructure in the country is not controlled by the state governments, so they cannot say that it is their revenue; it is controlled by the Federal Government, it is federal revenue.

“Aside from the fact that we have a book coming from imports, we also have that second to Lagos is Abuja with about N202 billion collected and the reason why is because Abuja is the site of federal ministries, departments and agencies and a huge bulk of that collection in the country was coming from VAT collected on contracts.

“So, when we create the impression that states collect these VATs and the Federal Government is hijacking it and trying to share it when in fact, it only (belongs to) Lagos or Rivers, I think it is a gross over-simplification.”

For him, the collection of VAT by the FIRS should be encouraged because it is perfecting the union of Nigeria.

“Anything that will perfect our union should be embraced. Any conversation, any serious-minded discussion around how resources are managed is healthy for the country.’’

The President’s aide, who said the VAT issue has been “heavily politicised”, also complained about “some of the utterances, unfortunately, that have come from my state along ethnic lines etc and political posturing ahead of the next election”.

Continuing, he said, “I really don’t want to repeat some of the stuff we’ve heard from the Rivers State Governor that we want to take Niger-Delta money to the north and all this ethnic sabre-rattling. That is what I am talking about when I say politics.”

He further berated Wike, who he said confirmed in January 2021 that the Federal Government had refunded to the state government, the N78 billion it spent on federal projects, even though he was not sure the projects were constructed by Wike.

“There are those who despite collecting tens of billions of naira from this administration in form of refund for federal roads that they did not even construct in their states and you still have these claims coming out trying to abuse the Federal Government because of political reasons,” Ngelale alleged.

Ngelale acknowledged further that ‘‘there are grey areas in the collection of VAT in the country and warned that such move by Wike could amount to double taxation.

He, however,  called for better clarification on who should collect taxes between the central and sub-national governments.

The President’s aide said the issue may not be clearly stated in the constitution but on the other hand, it would be wrong to say that because we have a VAT Act that was enacted by the National Assembly.

‘‘I am optimistic that now that the matter is in court, the judiciary would serve justice on the case. Fortunately for us, it is now in a judicial process and we are very much expectant that the outcome of the law will reflect the law that we have which until now, states have no business abiding in… I believe our court system will do justice to the matter,” Ngelale said.

Recall that the Rivers State Governor had lamented the injustice in the distribution of federal revenue, saying that Rivers money is not for Abuja people and took the FIRS to court and won the rights to VAT collection within its territory. The Governor went a step further to sign the state’s VAT bill into law last month after it was passed by the Rivers State House of Assembly.

In the same vein,  the Lagos State Governor, Babajide Sanwo-Olu, a week later followed suit by signing the State VAT Bill into law a day after it was passed by the Lagos State House of Assembly.

Also last week, the Lagos Government requested that it be joined as a respondent alongside Rivers State in the appeal filed by the FIRS, challenging the judgment of the Federal High Court, Port Harcourt which ruled that Rivers should commence VAT collection.

But Justice Haruna Tsammani of the Appeal Court ruled that all parties should “maintain status quo” and adjourned to September 16 to hear the application by Lagos.

It is a known fact that Lagos and Rivers generate the bulk of the total monthly VAT in the country but get about 20 per cent of the money made through federal allocation.

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