Nasarawa State Governor, Abdullahi Sule, has said he is in support of President Bola Ahmed Tinubu’s tax reforms, but added that Northern governors are against the removal of Value Added Tax (VAT) from the federation allocation.
Sule made the remark during the launch of an innovative tax digital code initiated by the Nasarawa State Board of Internal Revenue Services on Thursday.
Sule explained that removing VAT from the federation allocation would disadvantage the Northern region, as it would lead to 60% of the revenue going to derivation.
His words: “Let me make it categorically clear, we are not against the tax reforms. There are so many good things about the tax reforms that Mr. President is putting forward. We just selected an item out of the tax reforms. It is the VAT that we are talking about, which would be taken out of the FAAC. That is why we are calling for a review of that position.
“The moment you take VAT out of FAAC, you are taking 60 percent of that to go to derivation. Other people are introducing consumption. For people like me, who was once a managing director of some of the biggest companies, I was the one paying VAT. I was the one paying taxes, and I knew how it was paid. I know where some of these goods are consumed. If you now turn around and say, it’s now at the point of consumption, then I can even educate somebody for a whole day about consumption. Because people don’t even understand the issue of consumption.
“A typical example I can give you from two industries that I have worked as CEO. As MD of African Petroleum, I had a customer from Maiduguri who would order 200 trucks, and he would pay me for 200 trucks. If you say you are going to go by consumption, you are going to charge the VAT of the 200 trucks to Maiduguri. But in reality, at the point of distribution, he would now tell me to bring only 10 trucks to Maiduguri. The rest of that, he is going to start distributing them from Ilorin all the way to Sokoto. This will make it difficult for you to understand consumption. If you say it is at the point of derivation, then all the corporate headquarters that collected for the 200 trucks are in Lagos. Which means I pay in Lagos. Whichever way you pick, you are going into default,” he stated.
Sule commended the Executive Chairman of the state’s internal revenue board, Ahmed Yakubu Mohammed, for introducing the USSD tax code to facilitate revenue collection from the informal sector.
“It is like that everywhere around the world. It is not just in Nigeria. And it is not just in Nasarawa State. Informal sector is very difficult, but it is also a sector that provides one of the biggest revenue sources. We must be able to utilize that,” he said.
The governor said economies are not grown through taxes but through productivity and manufacturing.
“I have always said that we do not grow economy through taxes. It is not by improving our taxes that will help us grow our economy. We grow the economy through productivity, manufacturing, and the rest of that. However, we must work very hard to ensure that we block some of the leakages. Some of these poor payers of this revenue in the informal sector do pay. It’s just that after paying, the resources do not get to where they are supposed to get.”
“By you coming out with a new code, we are definitely going to use the opportunity to plug the holes. I am urging everyone through the chairmen of various sources to ensure that we utilize the code. Nobody should go outside the code. We must be sure that we utilize the code to the benefit of every one of us,” he stated.
The National Economic Council, Nigeria’s highest economic advisory body, had requested that the tax reforms bill be withdrawn from the National Assembly for more consultations.
However, President Bola Tinubu, reacted, saying there would be no need to withdraw the tax reforms bill from the National Assembly.
He insisted that while the legislative process takes its course, inputs and changes can be made without withdrawing the bill from the NASS.
