The Tax Reform Bill strikes at the heart of devolution of powers in Nigeria. The implications of the Bill are evident from the revenue side, but it has wider significance. The resistance to the Bill is not just about the distribution of tax revenue. The underlying issues are more sensitive and political. These issues challenge the very nature of federalism in Nigeria. This is a most opportune time to take up the debate. I cannot understand why the Federal Government should act merely as a collecting agency to distribute revenue to the states! The Federal Government has far more important constitutional responsibilities to Nigerians.
VAT is simply a sales or consumption tax applicable at the state level, certainly not federal. Consumption and sales taxes are generally not concerns of the Central Government. They are local and state government revenue sources. The potential to generate tax revenue at the base level is underestimated. The scramble by states to rely on the Federal Government for revenue support and subsidies is rooted in over-centralisation. This is simply unsustainable in the long term. It is time to free up the centralised tax system to allow for creativity at the local and state government levels.
My recommendation is to abolish VAT and transfer it to local and state governments. Each state has its unique revenue resources. As a Jos boy, where I grew up, I am very much aware of the massive potential of Plateau State in mechanised agriculture. The absolutely flat savannah lands on the Plateau can grow every type of produce needed to feed Africa, but this opportunity is lost to an over-centralised Federal Revenue Collection process. We must not forget that Europe does not have oil resources at all. The United Kingdom is the only country in the European bloc with oil reserves in the North Sea. Spain, as the world’s largest producer of olive oil, makes billions from this single product.
The Tax Reform Bill may be the key we need to unlock the vast revenue potential of Nigeria, hidden in a centralised and inefficient collection process, through political devolution.
*Dr Agbakoba, SAN, is a human rights activist and former NBA President. This article was taken from his post on X.
