Tax Reform Bills and devolution of powers

By Olisa Agbakona

The Tax reform bill strikes at the heart of devolution of powers in Nigeria. The implication of the bill is seen from the revenue side, but it does have wider significance. The resistance to the Bill is not just based on distribution of tax revenue. The hidden issues are more sensitive and political. The hidden issues strike at the nature of Federalism in Nigeria. This is a most opportune time to take up the debate. I do not understand that the Federal Government should act as a mere collecting agency to distribute revenue to the States!!  The Federal Government has far more important constitutional responsibilities to Nigerians.

VAT is simply a sales or consumption tax applicable at State level, certainly not Federal. Consumption and sales tax are generally not matters concerned with the Central Government. They are local and state Government revenue sources. The potential to generate tax at the base is underestimated. The stampede by states to lean on the Federal Government for revenue support and subsidy is based on overcentralization. This is simply not sustainable in the long term. It is time to free up the centralized tax system to allow creativity at local and state government level.

My recommendation is to abolish VAT and transfer to local and state Governments. Each state has its unique revenue resource. As a Jos boy, where I grew up, am very much aware of the massive potential of plateau state in mechanized Agriculture. The absolutely flat Savannah lands on the Plateau can grow every produce to feed Africa but this opportunity is lost to an overcentralized Federal Revenue Collection Process. We must not forget that Europe does not have oil resources at all. The United Kingdom is the only country in the European bloc with oil reserves in the North Sea. Spain, as the world’s largest producer of Olive Oil, makes billions from this produce.

The tax reform bill may be the key we need to unlock the vast revenue potential of Nigeria hidden in a centralized and inefficient collection process, by Political Devolution.

 Dr Olisa Agbakoba, SAN