John Bunyan’s allegory “Pilgrim’s Progress” teaches a practical lesson on the hypocrisy of being “a saint abroad, and a devil at home.” I see in this context the 19 northern state governors’s quarrel over President Bola Tinubu’s tax reform bills (four of them), particularly the one that seeks to share VAT revenue on the basis of “derivation”. In other words, the states that make more from value added tax returns will get a heftier share.
The northern state governors don’t accept it and they are asking parliamentarians not to pass the draft legislation. VAT is the money the federal government levies companies on goods and services they produce and sell. The funds are then pooled to share between the states on, more or less, an equal basis. But if derivation becomes the mode of sharing the northern states will lose out because the majority of the firms that produce the goods and services that draw VAT are located in parts of the country other than the north. This is the source of the region’s discomfort.
The ‘position’ of the region was articulated by its governors during a meeting last Monday in Kaduna. 19 of them and some influential traditional rulers, called up to give their voice weight, deliberated the issue and later gave out a communique which the chairman of the Northern Governors Forum, Inuwa Yahaya of Gombe state read. “This is because companies remit VAT based on the location of their headquarters and tax office, rather than where the services and goods are consumed. In view of the foregoing, the forum unanimously rejects the proposed Tax Amendments and calls on members of the National Assembly to oppose any bill that could jeopardise the well-being of our people.” He said the forum demanded “equity and fairness.”
This concern over the method of sharing VAT receipts is shared by Mr. Taiwo Oyedele, the architect of the tax reform. In a post on X, Tuesday, he acknowledged the northern governors’ worry, stating that the committee he headed was troubled by the sharing principle in the existing law. According to him, the proposal in the bill aims to create a fairer system that respects the “individual differences” between states. “We share the sentiment expressed by the Northern governors regarding the inequity inherent in the current model of derivation as a basis for distributing VAT revenue. This issue affects many states across all geopolitical zones because the current derivation is mainly determined based on where VAT is remitted, rather than where goods or services are supplied or consumed. Our proposal aims to create a fairer system by devising a different form of derivation which considers the place of supply or consumption for relevant goods and services, whether they are zero-rated, exempt, or taxable at the standard rate.”
Mr. Oyedele, you are great in trying to understand the northern governors. However, honestly, I don’t believe they deserve to be understood in this matter of VAT. In the first place, most the states, in the frenzy of the great sharia debate in the 1990s, legislated against production and consumption of alcoholic drinks, which account for a vast chunk of the VAT levy and the accruing revenue. You cannot reject the goose but expect to partake in the eating of its egg! This will amount to economics of hypocrisy. If you believe in the course of your action, then you should be man enough to accept its consequences. Principle requires that you do. I’m, by no means, suggesting that the states that have banned the production and consumption of alcoholic beverages are wrong to have done so. They say their faith bans it. Good, but that same faith says you mustn’t eat of its forbidden fruit.
Secondly, it’s their laziness that pushed VAT collection into the hands of the federal government. The law originally mandates the states to collect the tax but they simply haven’t been able to do it. So, let me say they are paying the penalty for shirking their responsibility. They shouldn’t now cry for having their fingers badly burned. Thirdly, the north is paying the price of its being overly complacent with the easy petro-dollar that came along with flourishing crude oil finds. The north, in particular, allowed its bountiful agro potential to go rusty. The thriving agro allied industries that the late Sardaunan Sokoto and Premier of the old North established to set the region on an industrialization course, shrivelled in the heat of neglect. This is continuing even now and it is responsible for the region’s crippling burden of poverty and insecurity, this latter, regrettably, is what the North is ‘exporting’ to other parts of the country. My advice is let’s stop playing the Bunyan hypocrite of “a saint abroad, and a devil at home.” If we sincerely love the North, as the Sardauna did, let’s get the region working again.
