Revenue from VAT Belongs to States, Says Ijewere

Pat Stevens/

Chairman of the defunct Modified Value Added Tax Committee, Emmanuel Ijewere, has disclosed that the value added tax (VAT), as originally conceived, is meant to be collected by the states and not the federal government.

Ijewere, who is also a former member of the National Economic Council, said this in an interview on Channels TV’s Sunrise Daily today.

Ijewere blamed the military regime of General Ibrahim Babangida for the current crisis surrounding VAT collection in the country.

He said during the military regimes, state governments collected what was then known as ‘sales tax’ through their officials.

Sales tax, he said, metamorphosed into value added tax after his team of tax experts made a recommendation to the Babangida administration on how to improve sales tax by state governments.

He said his team made the recommendations to Babangida’s government because tax officials in the states saw their work as a routine job and not as a profession, thereby making their operations inefficient at the time.

After his team submitted its recommendations, Babangida’s government set up a 28-man committee, of which he (Ijewere) was chairman, to review tax collection among states. The Federal Government subsequently converted his team to the Modified Value Added Tax Committee.

His words, “A lot of states were not financially viable, but they could raise a lot of capital; a lot of tax from their own bases. We have noticed that some states, some very progressive states, Lagos state must be mentioned here, had already started sales tax. And with sales tax, they were trying to raise their internally generated revenue to improve their own income.

“But it was not very efficient and I’m going back to 1991/92 when the quality of people who were administering taxation at the state and federal level were just civil servants who saw it as a job, whereas taxation is a profession that should be taken very seriously. We then recommended therefore that Nigeria should replace sales tax with value added tax.

“We made this recommendation to President Babangida government and they now in turn set up a committee and asked us to be a working group to come and tell the government first and foremost whether value added tax could work in Nigeria. It was a 28-man committee and we were given six months to do this. But in four months we came up with the conclusion that value added tax is viable in Nigeria, but a number of things needed to be put in place.

“They now converted us into modified value added tax committee. Then we went to work, got examples of very many countries, especially developing countries, and we came up with a report we presented to the government. The salient points were these; first and foremost value added tax was a replacement of sales tax that was conceived by the states and therefore that revenue was meant for the states. The thinking was that you want to create competition between states so that they can do well and improve on their collection capacity.

“When we presented the report in 1992, we found out that the Supreme Military Council changed it that it could no longer be what we presented to them. That is, each state should collect its own tax. (They said) because their (states) system was not strong enough, they will have a commission that will act as agent for them, collect the money for them and at the end of every month, present a report to each state and say this is the amount we collected from your state. We will take out five percent of it to train your people and that within a period of four or five years, this commission will come to an end and the state government will have enough manpower to collect its own value added tax.”

Ijewere however urged the federal government and states to dialogue over the VAT sharing formula, saying that rulings by Court of Appeal and Supreme Court will not resolve conflicts surrounding the consumption tax. 

He said whatever decision the courts took would not end the stalemate caused by the matter.

“Whatever happens at the courts, value added tax will not be the same anymore. If the Supreme Court says the FIRS should collect the VAT, I assure you that there will be no end to it because what’s involved here is a huge amount of money.”

“And, states, which have political responsibility, will not allow it to stay there. So, the fighting will continue, the confusion will continue, and sabotage will come into it,” he said.

He added the electorate too would not allow their governors to rest if the judgment did not favour them because of the huge amount involved in the VAT.

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