By Barr. Emeka Nwode
There is a need to take a closer and deeper interest in the current Value Added Tax (VAT) collection imbroglio generated by a Rivers State High Court judgment which confers on the State the right to collect VAT on transactions carried out within Rivers State.
The said judgment was delivered in a case instituted by the Rivers State Government against the Federal Inland Revenue Services (FIRS) on the propriety or otherwise of the FIRS collecting VAT payments for transactions carried out within the State to the exclusion of the State Government.
For the purpose of clarity, VAT is one of the sources of the revenue paid into the Federation Account which is, in turn, distributed between the Federal, States and Local Governments in Nigeria.
The judgment, as it stands, affects every other State of the Federation. Lagos State Government has already commenced steps to apply the ratio decidendi of the judgment in the State.
By necessary implication, granting VAT collection rights to States has the immediate consequence of a drastic reduction in the revenue available for distribution amongst the three tiers of Government in Nigeria. This, therefore, will affect the inflow of funds from the Federation Account to the various tiers of Governments.
The utmost interest here is how this will affect the income and expenditure profile of the various States, particularly Ebonyi State; and how the relevance of the fiscal discipline which His Excellency Engr. (Chief) David Nweze Umahi, FNSE, FNATE, has been trying to inculcate in the official and corporate activities within Ebonyi State has become unavoidable and, or, indispensable in policy making and execution.
In a lecture he delivered as part of the programmes for the convocation ceremony of the University Nigeria Nsukka about three years ago, Governor Umahi holistically dissected the implications of the dwindling oil sector revenue on the Nigerian economy. The gloomy situation he identified and proferred credible solutions to has become even more dire with the reality of Rivers and Lagos States collecting and appropriating about eighty percent of all VAT income in Nigeria; if the court judgement is not set aside on appeal.
While some persons have hailed the judgment as a compass to the fiscal restructuring of Nigeria, the hard truth is that most States are not yet ready for such fiscal weaning.
The ambitious infrastructural transformation of Ebonyi State by Governor Umahi is a productive step towards preparing Ebonyi State for a zero oil, and now a zero VAT, economy. But until the the target returns start flowing in, this is definitely a time that the income generation creativity of the State is put to an utmost stretch.
The excellent road network, the airport, the ringroad, the international market, the international shopping mall, the pulverization plant, the industrial clusters, the King David University of Medical Sciences, the agro-allied industries, the water reticulation project, the conducive new building materials market, the ease of doing business policies in the extractive industry sector, as they concern the State, and the crisis and conflict free environment that the Governor has made painstaking efforts to provide for Ebonyi people are, unarguably, verifiable catalysts for massive corporate and allied services
development in the State.
For those that genuinely believe in the growth of Ebonyi State, this is the time to further appreciate the foresightedness of Governor Umahi in diversifying the economic base and aspirations of the State, the indigenes, residents and prospective investors.
For those that are still engrossed in rabid politics, this is the time to wake up to the reality that there is no longer free money from politics. The future of a fiscal drought which we wished to still push afar has suddenly dawned on us.
For the other States that are still reeling in the confusion of how to survive the harsh reality of an empty Federation Account, a Nostradamus from Ebonyi State saw this future and has laid a solid foundation for a viable zero oil and zero VAT economy for the State. This Nostradamus is ready to share his ingenious ideas.
To the Federal Republic of Nigeria, it is not an entirely hopeless situation, afterall. Whatever issues or questions that may arise from the current economic quagmire, be assured that, moving forward, ‘UMAHI IS THE ANSWER’!