The move for state governments to collect Value Added Tax (VAT) has been a subject of legal tussle between the states and the federal government.
Governor Nyesom Wike of Rivers State initiated the move for states to collect VAT. He also signed a law to back it up. That move was backed by Governor Babajide Sanwo-Olu of Lagos State who also signed the law. Lagos went ahead to join as a party in the suit by the federal government against the state governments which is pending before the Court of Appeal. More States such as Benue led by Governor Samuel Ortom, Akwa Ibom led by Governor Udom Emmanuel and others are considering adopting Wike’s idea on VAT.
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But, the states can use this opportunity to make a smart demand against the federal government led by President Muhammadu Buhari. This is because the federal government through the Federal Inland Revenue Service (FIRS) is greatly opposing states on the issue of VAT collection. Already, the Court of Appeal had ruled in favour of the federal government by stopping both Wike and Sanwo-Olu from collecting VAT until the main suit has been decided. That shows that the federal government is determined to have its way on the issue.
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What is the smart demand states can make against FG?
States can use the opportunity of this VAT tussle to demand for true federalism through restructuring. There is no better time to achieve this than now. Now is the time when state Governors are more determined than ever to collect and control the revenues their states generate instead of allowing the federal government to wield that monopoly.
VAT is just a fraction of what states can get. The bigger picture is true federalism which will automatically grant states the full rights to exploit their resources, collect their taxes including VAT and control all that they have including crude oil and others. The only thing is that states will pay a percentage to the federal government. This is a better deal that Governors should push at a time like this when they are joining forces to make a demand that will favour their states irrespective of the party differences.
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Now is the better time for states to demand for true federalism with Governors like Wike, Sanwo-Olu and Ortom still in power and ready to act. With the energy Wike and Sanwo-Olu are using to push the VAT, they can push the demand for true federalism better especially if other Governors join the move. Going by the speed Wike and Sanwo-Olu used to pass and sign the bill into law, they and other Governors can mobilize the members of House of Representatives and Senators from their various states to initiate, support and pass the bill for true federalism which will favour states more.
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If Wike, Sanwo-Olu and other Governors make this demand now, they would hold the federal government in a painful spot. This is because all of them including the federal government know that states will benefit from true federalism more than the VAT which is just a tip of the iceberg. Now is the time to cross this bridge. States should demand for true federalism which will bring about the much desired restructuring.