Are states and LGs now above the law?


We live in interesting times in Nigeria. Public discourse issues never cease to amaze us in this country. When you think you have seen and heard it all, something laughable would arise like a clap of thunder to add to the dramatic turn of events unfolding all around us. The Federation’s 36 State Attorneys General (BOAG) from its recent conference in Lagos State issued a statement in which it falsely claims that the Federal Inland Revenue Service (FIRS ) “does not have the power to impose sanctions on the States”. The penalty in question is imposed in the event of default resulting from the failure to deduct the statutory levies and to remit them to the federal government within the time limits allowed by the statutes in vigor.

In order to nullify the FIRS’ power to impose sanctions, the BOAG decided to send a delegation to the National Assembly to nip in the bud the stamp duty bill which it described as harmful. to the states. It will be useful to point out that not all stamp duties are collected by the FIRS on behalf of the federal government. The FIRS only monitors federal government stamp duties through MDAs and corporations. It is relevant to recall that all levies and penalties collected by the FIRS are paid into the consolidated revenue account to be shared by the three levels of government. Therefore, the notion of paralyzed by the FIRS that the BOAG seems to canvass is not true. On the surface, this statement is laughable as it appears BOAG is unwittingly helping its states shoot themselves in the foot. Its output is just filled with simple sound and fury, meaning nothing.

However, despite the vacuity of the statement, there is something concerning about it that needs to be pointed out if only to educate BOAG and the general public. First, it should be mentioned for the enlightenment of the BOAG and the general public that the actions of the FIRS are not arbitrary.

The FIRS derives its powers to assess, enforce, collect and account for taxes to the federation from the existing laws provided for in Section 8 (1) (a), (b) and (c) of the Act on the Establishment of the Federal Inland Revenue Service (FIRSEA) 2007. As such, the FIRS has the legal right to enforce the collection of taxes, including in the event of non-payment, as is currently the case with states and local governments. It is therefore strange that the BOAG can assert that the FIRS does not have the power to impose any sanction on the States.

It should be noted that as designated agents for the collection of value added tax and withholding tax, the States are supposed to transfer the revenue thus collected to the account of the federation and not keep them and, or use afterwards. The FIRS (a federal government agency) which acts as the collector of these revenues does not use or access said revenues either. Instead, it is pooled in the federation account from which it is shared among the three levels of government. An often overlooked fact is that FIRS have a greater revenue collection capacity than states. This is due to its wider reach and the sophistication of its ICT network which gives it a leverage effect particularly in the collection of income from banking operations. Because of this, greater revenues are collected, which is far greater than what the states could collect. This is what States must think about instead of resorting to demagoguery.

Instead of going to the media, BOAG should have at least sought engagement with the tax agency to find ways to resolve objections to enable effective revenue collection. By doing so, a better understanding of the gray areas would be achieved. This would promote better tax compliance and congruence of objectives of tax collecting agents such as MDAs and LLCs. It would be more fruitful than their incendiary press release which could cause taxpayers to lose confidence in the tax administration. This would have a negative impact on government revenues, thus worsening the current state of the economy which the FIRS is doing everything possible to consolidate.

State and local governments are subject to the laws of the federation. If BOAG continues to promote state sovereignty as it tends to do, what are they saying to some states like Kaduna who have been very diligent in consistently and promptly remitting VAT and WHT to the appropriate quarters?

There has come a time when the FIRS should begin to engage all tax administration actors to render ineffective any trends that may sabotage revenue generation. At a time when the country needs money to finance its commitments, efforts must be made to increase revenue generation and reduce its debt burden. We cannot go on like this, as if we were a lawless country whose citizens are devoid of patriotism. It is time for us to pull ourselves together and take matters of national importance such as the payment and collection of taxes seriously.

Okri is the President of the Global Economic Policy Initiative (GEPIN)

Opinions expressed by contributors are strictly personal and do not belong to TheCable.

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