True federalism, restructuring beckon as low revenue forces FG to tax riot
A trend that will force the Federal Government to listen to the yearnings of Nigerian leaders’ of thought in true federalism and restructuring is underway.
This was the submission of leading development economists and finance experts who barred their minds in a vox-pop conducted by Business Hilights Intelligence Unit (BHIU) over the weekend across major states’ capitals.
Findings have shown that in the last couple of months, major policy decisions of the Federal Government had been either the introduction of form of tax or jerking up existing ones.
Analysts say such occurrences’ are associated with governments that have come to the realization that existing means of income are no more enough to drive targeted growth and official expenses.
Experts say the time is almost at hand when it would be done to the Federal Executive Council (FEC) that the weekly Wednesday’s meetings where contracts are shared may very soon become a mirage due to lack of funds to execute approved contracts.
Already, there are lots of federal contracts even approved since last year in several parts of the country but there had been no fund to mobilize contractors even as several ongoing contracts are hanging at various stages of deliveries.
To analysts, the era of clutching and funding every major development plan across the states on ‘handouts’ from the central coffers is becoming extinct due to the fact that whereas critical demands from states are rising, funds and federal income is shrinking.
On this ground, pundits are calling for true federalism and restructuring that will among other things, constitutionally empower states harness their natural recourses and only pay a certain amount of income as taxes to a generally weak and unattractive Abuja.
Key proponents of their grounds of argument for restructuring and return to true federalism where states are allowed to explore and develop natural resources in their domain derive from the fact that even though many states are enriched with several resources, they are weak and discouraged by the monthly federal allocations coming from Abuja.
According to their argument, unless states are truly allowed to develop at their own paces, sustainable development would remain a farce even in the faces of plenty.
To these experts, the trending idea of the Federal Government in smoking out all kinds of taxes to add up federal income cannot pass the test of time as the Nigerian taxable adults are getting exhausted and feeling being pushed to elastic limits by myriads of multiple taxation in the last couple of years.
Only last week, the Senate began a move that will impose tax on Communication Services in the country. The planned new tax introduction is targeted at replacing the proposed 2.2 per cent increase in Value Added Tax (VAT) which the Federal Government said will be coming in force from next year.
Otherwise, the Bill for an Act to establish the Communication Service Tax which was formally sponsored by Mohammed Ali Ndume was introduced on the floor of the Senate last week.
Addressing newsmen after the first reading of the Bill was taken by the Senate; Ndume said the imposition of tax on communication service is a better way of distributing wealth in such a way that would not affect the ordinary people.
He explained that increasing VAT would have very deadly effect on the economy as it could affect prices of goods and services and take them beyond the reach of the ordinary people. The Communication Service Tax Bill will be pegged at 9 per cent of the charge for the use of communication services.
The Bill reads in part: “There shall be “imposed, charged payable and collected a monthly Communication Service Tax to be levied on charges payable by a user of an Electronic Communication Service other than private Electronic Communication Services.”
Besides, an expert analogy of the VAT increase faulted the way and manner the tax is administered.
Analysts said before VAT will be increased, there is need to resolve certain anomalies especially on issues relating to the major vatable items so that allocations from VAT shall equally reflect generation geography in the country.
According to observers, it remains unfair considering that states that do not allow consumption of alcoholics are taking part in the allocation of VAT coming from what they have outlawed.
It is on record that several Sharia state in the north do not allow sale of alcoholic drinks in any part of their states, yet they have humongous shares in VAT allocation.
Figures from the National Bureau of Statistics (NBS) showed that VAT collections from alcoholic drinks make over 60 per cent of the total VAT income. They are therefore calling for a review of the VAT sharing template in a way and manner that will set aside, VAT collection from alcoholics and share same only amongst states that allow for sale of alcoholics for the interest of justice and equity.
It is important in this issue to understand that states get lion share in VAT to the tune of about 80 per cent and alcoholics make over 60 per cent to this 80 percent, yet it is shared evenly across all the states both those that allow sales and those that do not.
Apart from the mulled 9% Communication Service Tax and the controversial hike of 7.2% VAT, not too long ago, the cash-strapped Federal Government through the Central Bank of Nigeria (CBN) unilaterally introduced what it called 3% and 2% Cash Deposit/Withdrawal Taxes without wide consultations.
As if the above tax regimes are not enough, after last week’s FEC meeting, the Minister of Works and Housing, Babtunde Fashola opened up on fresh plans to re-introduce toll gates on federal roads very soon.
However, at the wake of all these show of economic crisis upon the humongous borrowing spree by the same Federal Government, experts are calling for not only true federalism that will allow every state to develop at its own pace, but a restructuring that will keep every state at its toes of development, thus making the centre, a mere meeting place instead of ATM for both hardworking and lazy states.
