Opinion

Value Added Tax and a value subtracting government

The fuss over the Value Added Tax (VAT) by a Value Subtracting Government is the latest subplot in government which twists and turns resemble a Tom-and-Jerry cartoon film in fast forward mode. Like watching a cartoon film (and if you do not indulge, ask your kids or grandkids), you should not get too worked up about anything. Just settle down and hope that the deadly events around you will come and pass like a passing ambulance and that the ambulance will never come for you. You can say “Amen” to that if you are a man or woman of faith. The undisguised truth is that for the first time in Nigeria’s history whatever could go wrong in a democracy has gone wrong.

Before now, Nigerians used to bother about people stealing their money, now they bother about being “stolen” themselves (or their children being stolen) by hoodlums who would demand for ransom in order to release them. Before we used to complain that hospitals were not properly equipped, now doctors are on strike and even the poorly equipped hospitals are not working – we now need the equipment in its poor state.

Genocides by Fulani herdsmen have now been given the euphemism “Herders/Farmers Clashes” as a form of semantic shock therapy. Homicide has become so commonplace that a confessed serial rapist and murderer like Uduak Akpan, paraded before journalists in handcuffs, would look into television cameras and tell Nigerians: “Calm down, the Police Commissioner has assured you that justice shall be done and it will be done.” I do not know what justice Akpan meant, but this man they call “Wike” is shaping up to be a crusader for doing things right.

Just when we thought we had seen all that Aso-Rockwood Entertainment Industry has to offer, along comes the ‘Area Governor’ Nyesom Wike of Rivers State, and sues the value-reducing Federal Government over Value Added Tax. From the time that VAT wrote itself into the global economic lexicon and became domesticated in Nigeria, the Federal Inland Revenue Service (FIRS) had monopolized it and used it to bleed business in the country dry. But a court in Port Harcourt seems to agree that the Federal Government should stop collecting the VAT and leave the matter to states. Good thinking because a man cannot work in the Nigerian Ports Authority and gets paid by the Nigerian Aviation Handling Company PLC. But what is VAT? The simple truth is that value added tax is a consumer tax which is added to a product at all points in the supply chain.

It is intended to raise revenue for the government from the wealthy without additional taxes on the wealthy. That is the way it was intended to be, but that is not the way it is – like in all things in the world. In reality, the retail consumer bears the cost of the VAT by reimbursing the middlemen in the earlier stages of the production or supply loop. Breaking it down further, VAT is usually the percentage of the total cost of a product and the merchants share the VAT charge with the government – keeping part and remitting a part to the government (in Nigeria the Federal Government). Last month the Court determined the case and restrained the FIRS from collecting VAT and personal income tax (PIT) in Rivers State and directed that the Rivers State Government should take charge of the collection.

Wike sprinted into action like a sprinter signing the VAT Law No. 4 of 2021 on August 19. VAT is now flowing in the Rivers State Government vaults like rivers. The Federal Government is not happy with the development. For a long time, they had used VAT to collect money from the poor for the rich to steal. Whatever remains after the rich in government use the money to foot their medical trips abroad, would be paid to the states as Federal Allocation. And as you know, the Federal Government is like an ocean – whatever goes in there disappears unless it floats up. The VAT had not been a major issue because the Federal Government had always talked up oil as the economic mainstay of the country. But while we were focused on oil, VAT became a bleeding wound with vampires sucking it.

That appears on the verge of changing for now. The case has gone to a higher court on appeal – the Federal Government does not want to lose its pies. For one, I am on the side of the states. I have not always been Wike’s fan, but if he continues this way, one day he will make us proud (like Papilo). Good job, Wike.

 

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