FELIX NWANERI reports that Governor Nyesom Wike’s quest for his state to collect the Value Added Tax (VAT) has triggered a legal battle that will redefine Nigeria’s federal structure
If there is a member of the opposition Peoples Democratic Party (PDP), who has remained vocal when it comes to national issues and has been critical of the All Progressives Congress (APC)-led Federal Government, that individual is Governor Nyesom Wike of Rivers State.
Whereas Wike’s criticisms of the ruling party has endeared him many foes, especially among those in the corridors of power and their supporters, it has equally earned him commendations from others on the other side of the divide.
There is hardly any week that passes without the governor been in the news either for the right or wrong reasons depending on perception. But one thing stands him out among his peers: The conviviality Wike enjoy among his people is not in doubt.
Unlike some of his colleagues, Wike has jettisoned the chivalrous life of protocols, ceremonies and courtesies, which most public office holders.
As a leader of all men, he seems to appreciate the varieties of common humanity. He has also been able to strike a balance between idealism and pragmatism as great leaders are known to be high in ideas and lowly at heart.
There is no doubt that the Rivers State governor is the polished cosmopolitan man of the polite society as well as the rugged man of the local setting. Wike has been able to navigate the murky waters of politics, weathering the storm associated with the power game, and in most cases, emerged unscathed.
He had to pass through the Biblical eye of the needle before he became the governor of oil-rich Rivers State in 2015.
The battle for the coveted seat had to traverse the various levels of courts up to Supreme Court before it was resolved in favour of the Ikwere born lawyer turned politician even when he won the election with a landslide margin of 1,029,102 votes to defeat his closest rival, Dakuku Peterside of the APC, who polled 292, 878 votes.
The battle for his re-election in 2019 was not different. Perhaps, the series of political battles Wike has waged in his political career, explains his tough stance. Unlike some of his colleagues, who respond to issues diplomatically to avoid offending the powers that be; he is blunt to a fault.
This, possibly, explains the present standoff between the Rivers State government and the Federal Inland Revenue Services (FIRS) over collection of Value Added Tax (VAT) in the state.
VAT yields billions of naira as revenue for the government, and significantly so with the recent decline in oil revenue because of the effect of the COVID-19 pandemic.
About N651.77billion was generated as VAT in the first half of 2020, an 8.45 per cent increase when compared with half-year 2019. The Federal Government in February last year increased the VAT rate from five per cent to 7.5 per cent, having anticipated a deficit of N2.18 trillion for the 2020 budget.
However, the Rivers State Value Added Tax Law No. 4 of 2021, which was signed by Governor Wike on August 19 provides for the imposition and administration of VAT in the state at 7.5 per cent on the supply of taxable goods and services except those exempted under the Schedule to the Law.
The law empowers the Rivers State Internal Revenue Service (RSIRS) to administer, implement, assess, collect, and account for money collected.
The Rivers State House of Assembly had while passing the Value Added Tax bill, 2021, said it will not only shore up the revenue of the state, but will enhance the sharing formula of state and local governments, which is 70:30, respectively.
Governor Wike, at the signing of the bill into law, said the Federal Government had been perpetuating illegality through VAT collection by the FIRS, and that the various states in Nigeria have been “strangulated financially” and reduced to beggars.
His words: “States have been turned to beggars. Hardly will any day pass that you won’t see one state or the other going to Abuja to beg for one fund or the other,” the governor said, according to a statement from his media aide, Kelvin Ebiri.
“In Rivers State, we awarded contracts to companies and within the last month, we paid over N30 billion to the contractors and 7.5 per cent will now be deducted from that and be given to FIRS. If you look at 7.5 per cent of N30 billion of contracts we awarded to companies in Rivers State, you will be talking about almost N3 billion only from that source.
“But the Rivers State government has never received more than N2 billion from VAT at the end of the month. So, I have contributed more through the award of contracts and you are giving me less. What’s the justification for it?” Wike did not just stop at signing of the law.
The Rivers State government, in a follow-up, filed a case against the FIRS (first defendant) and the Attorney General of the Federation (second defendant) before a Federal High Court sitting in Port Harcourt over demands, threats and intimidation of residents in the states to pay PIT and VAT by the tax agency.
The state government sought 11 reliefs from the court among which is a declaration that the power of the Federal Government to delegate the collection of taxes can only be exercised by the state government or other authority of the state and no other person according to provisions in Part II (concurrent legislative list) of the Second Schedule of the 1999 constitution as amended.
The court, presided by Justice Stephen Pam, in its ruling on August 9, issued an order restraining the FIRS from collecting VAT and PIT) in Rivers State. It therefore directed the Rivers State government to take charge of the collection.
As expected, FIRS appealed the judgement, and the Court of Appeal sitting in Abuja, on Friday, ordered both Rivers and Lagos (which signed its law last week) to maintain status quo on the collection of VAT pending the determination of an appeal that was lodged before it by the FIRS.
The appellate court said the order was to preserve the ‘Res’ (subject matter) of the appeal before it. Specifically, it ordered all the parties that have subjected themselves before it to “refrain from taking any action to give effect to the judgement of the Federal High Court,” which gave Rivers State government the right to collect VAT revenue, instead of the FIRS.
A three-man panel of Justices of the appellate court led by Justice Haruna Tsammani made the order after it deferred hearing of an application Lagos State filed to be joined as an interested party in the matter, till September 16.
While it may be too early to draw conclu sion on where the pendulum would swing to by the time the Court of Appeal gives it verdict given that the legal battle is likely to get to Supreme Court, there is no doubt that the Governor Wike’s action has heightened the debate on Nigeria’s contentious federal system of government and agitations for the restructuring of the country.
The restructuring debate has continued to dominate the political space of late. The calls, no doubt, are predicated on the dangers of ethnicity, religious bigotry and economic deprivation, among other factors.
Advocates of restructuring are of the view that Nigeria is likely to disintegrate if urgent steps are not taken to address pertinent questions of autonomy for the states; fiscal federalism to pave the way for resource control by the states; equality of states and local governments among the six geo-political zones as well as state police given the growing discontentment in the polity.
It is argued that the present federal system has only succeeded in creating a powerful Federal Government at the expense of the states and local governments.
Others have queried whether Nigeria should continue to operate the presidential system of government, a full-time legislature, among others, in the face dwindling resources.
High cost of governance at the various levels – federal, states and local councils – it was noted, is partly responsible for the country’s stunted development despite abundant human and natural resources.
The argument is that after deduction of running cost by the various levels of government, little or nothing is left for capital projects even as there so many ministries and agencies of government with functions, most times duplicates.
There is another political school that advocates a return to regionalism as the present 36-state structure is no longer sustainable. Reference was made to India with a population of about 1.2 billion people, but has only 28 states, while Nigeria with a population of about 200 million has 36 states that are mostly unviable as evident from their inability to even pay salaries of workers.
There are also calls for a re-tooling of the Nigerian federalism by tinkering with items on the Exclusive and Concurrent Legislative lists as contained in the 1999 Constitution (as amended).
Those who hold this view insist that the powers of the Federal Government should be whittled down as it seems it is the only government in place given the 65 items it has powers on in the Exclusive Legislative List.
The argument of some stakeholders in this regard, is that the unitary constitution/ system of government presently in place under the guise of a federal system has failed to solve the country’s numerous problems, and therefore, the need for restructuring cannot be more urgent than now that its unity is under threat.