Emmanuel Ijewere

By Ademola Adegbamigbe

The Federal Government and some of its constituent units are at daggers drawn over who should own Value Added Tax (VAT), money made from sales of goods and services. A man who can authoritatively  throw light into the matter did so recently. He is Emmanuel Ijewere who was appointed by former military President, Ibrahim Babangida, as Chairman of the defunct Modified Value Added Tax Committee that berthed VAT Nigeria. He knows the original concept that sales tax belongs to states but along the line, the Federal Government arms twisted the second tier of government and appropriated it, a situation that states are trying to reverse.

Leading the cavalry charge against the Federal Government are Governors Nyesom Wike and Babajide Sanwo-Olu of Rivers and Lagos States, in that order. The two signed a bill into law in respect of their states’ VAT ownership and against open grazing.

While the Nigerian government does not want to yield an inch of ground, the states have stuck to their gun.
However, the two groups of tax gladiators should go to the original concept of sales tax and the problem will be solved. They can benefit from the revelation by Ijewere.

He revealed that Nigeria must go back to “how Babangida government set up my committee.” Ijewere revealed that what happened then was there was sales tax in a number of states. There was no particular rule as per the rate of sales tax they were charging. There was no uniformity. It was a thing that created confusion.

The Federal Government said, therefore, let us standardise it. “One thing we were told was that whatever money was collected in a state belongs to that state. And the Value Added Tax Commission would retain 5 per cent for administrative purposes on behalf of that state. But somewhere along the line, the Federal Government took it over, pushed the states aside and took a big chunk for itself. That defeated the whole thing. It now turned out that the states that are generating a lot more VAT, are not getting a commensurate amount of money for their own economic activities. That’s the unfair part of it. That’s the big regret I had. Sales tax was a state tax. VAT belongs to the states. That is the more VAT a state pays, the more money should come to it.”

*Watch the interview video HERE

Below is the full interview with Ijewere by Modele S Yusuf on Channels

Is the time ripe for an increase in Value Added Tax?

“I believe any time is a good time to do so as long as it is done with the original motive. The most efficient system of taxation is Value Added Tax. Your income is taxed by the rule of the thumb. Government sits down and says this is the percentage. You have no say in it.
But in VAT, you have a say in the tax you pay. If you earn your income and you eat at buka or restaurant; you go and sit down there all year round. You will pay no Value Added Tax. You have a choice. However, you go and eat in a hotel, you pay because there is VAT, according to the law.
On top of that is when you pay VAT it is from your own activity. It is not a penalty, because the more you earn, in terms of Pay As You Earn (PAYE) the more you pay. To some people, they will say it is punitive- if I work harder, I earn more, I pay more. For social reasons, the more you earn the more you pay, inn terms of PAYE.
But in Value Added Tax, the good thing about it is that, you should try and make sure tht any time you raise VAT, you reduce the PAYE. In other words, the thinking is that there is a quantum of money you earn. That quantum of money, to you, is to decide how you spend it. The more government is taking from that money of yours, the less your PAYE should be. That was the thinking originally.
We must also go back to how Babangida government set up my committee. What happened then was that there was sales tax in a number of states. There was no particular rule as per the rate of sales tax they were charging. There was no uniformity. It was a thing that created confusion.
The government said, therefore, let us standardise it. One thing we were told was that whatever money was collected in a state belongs to that state. And the Value Added Tax Commission would retain 5 per cent for administrative purposes on behalf of that state. But somewhere along the line, the Federal Government took it over, push the states aside and took a big chunk for itself. That defeated the whole thing. It now turned out that the states that are generating a lot more VAT, are not getting a commensurate amount of money for their own economic activities. That’s the unfair part of it. That’s the big regret I had. Sales tax was a state tax. VAT belongs to the states. That is the more VAT a state pays, the more money should come to it.