 The Nigerian Bar Association warns FIRS over the amendment of VAT laws, while court has ordered Lagos and Riverstays to maintain status quo, plus National Security Advisor General Baba Ganamongono warns IPAP to stay clear of a number of elections and we also are going to be examining the sit-at-home order. This is PlusPolitik and I am Mary Annacolm. The Nigerian Bar Association and prominent senior lawyers have warned the Federal Government and the Federal Inland Revenue Service the National Assembly against any illegality in the agreed to amend the value-added tax law in the country. Also, the Lagos State House of Assembly passes the State's Value-Added Tax Bill into law. The Court of Appeal has ordered both Rivers and Lagos States to maintain status quo on the collection of value-added tax. Now, this all sounds like a lot, but joining us to discuss and break this down is Barista Jire O'Logan and Economist and Co-Founder of Awaba Nigeria, Tunji Andrews. Thank you very much, gentlemen, for joining us. Thank you for having me. Great. So I'm going to start with you, Tunji, because this sounds like a lot. A lot of people are wondering why, you know, Rivers State, then Lagos States and other states are at some form of a loggerhead with the Federal Government over VAT. A lot of people are paying VAT, but they really do not understand what it is. So help us break down this conversation, especially why it has gotten to this point, where states are asking the Federal Government to refund. So let's start with the conversation around the fact that this is VAT-Valuated Tax and it's a tax that is paid on activity, business activity, basically, buying and selling of certain items. The general problem and the reason why we're here is because of the laws. They are meant to be laws that speak directly to VAT in Nigeria that should have been enacted or put into the Constitution of the country. But it doesn't seem to mention it. The Constitution goes very silent on what VAT is or who should collect it or in what circumstances should it be collected. So what we are seeing is a situation whereby the states have gone to the courts to determine the fact that since it is not in the recurrent list or the concurrent list, it is being viewed as a reschedule. And that means, or at least in the eyes of the court, it means that the states should collect it. The thing I do see, and for me I think it's a big assumption by most of the states, there is the thought that if we collect the VAT in our domain, it means a lot more money for us. And especially because so the major states pushing it seem to have a lot of economic activity within their domains and specifically river states and Lagos states. But they must also remember that the fact that, let me say MTN for instance is headquartered in Lagos doesn't generally mean that all the activities of MTN across the 36 states of the country plus the FCT happen in Lagos. So it means that if this law is to go through and all the states are to pass on their own VAT laws, that means MTN would have to split his VAT into 37 bits and then pay each state its due as at what it gets from each domain. Also the federal government would have to look at it from the perspective that if the states are deciding to keep their VAT, then the federal government too should keep its VAT, which it collects of issues like importation and the rest, which of course is a major part to what is being shared. So for me, I think we need to either go to the constitution and properly create a law. Of course, this is what you're speaking about with the lawyers are saying the federal government should not do it back channel situation. I think we should have more engagement, but I think the bigger part is I would rather prefer everybody stay and let the full matter be decided. Instead of going ahead to say, okay, now start paying VAT to us as a state because this raises confusion for companies. If a company decides that, okay, the state says stop paying me VAT and the company starts paying VAT to the state and then it is determined in three months time that you should pay to the federal government. That means what the company paid in VAT to the state, it's not the double payment. So it's a big issue. I think we should let it be fully defined by the courts or the National Assembly via the constitution of the federal public of Nigeria. Barso Logo, I mean, he's talking about the courts here. Now according to the law passed by the Lagos Assembly on Thursday, the value added tax would be administered by the Lagos State Internal Revenue Service as we know the LIRS at the rate of 6%. Now do you think that this rate of course is delivered judging by the FRIS 7.5% because he's saying that the courts need to decide this. Is it something that you think is within the jurisdiction of the courts? I believe it's like an incentive to quickly generate a lot of revenue through the value added tax. Now that's a coconut weekend, it's raising the trick of challenging the federal framework around it. But let's leave the foundation to why we are here. If you look at the statistics that came out of the National Bureau of Statistics, Nigeria generated a total of 1.53 trillion Naira revenue from value added tax 2020 and up by 29.3% when you compare it to the 1.18 trillion Naira recorded in 2019. And of course, that was also an improvement on the 1.11 trillion Naira generated in 2018. And the position of Government K before we went to call this back, okay, if in my state, I rule out contracts of about 200 billion Naira and you expect that contractors with value added tax of the federal government from this contract, what about states that are not willing to have contracts? So where do I, if I have to pay that chance to the federal government, where do I find money to develop my state, knowing that I'm involved in a lot of projects there? And the argument also, legal states tap into either time. If we are contributing so much to the federal government and we get a policy, hence we go and begin to challenge this type of school. And don't forget that we came from the angle of the limit. We are going to look at the law because he has found a lacuna. What we call a lacuna in law is a gap in the law. So let's go back to the history of value added tax. Countries introduced value added tax when they attacked regime. It's all satisfactory. And in the case of Nigeria, it was introduced in 1993 by the military government then. And sales tax was on adjudication of the states before then, but only administered. And that law has been amended several times. And then what people are saying generally is that we feel the impact of these enormous tax that we generate in the society. And here we are now. You need to also cast your mind back to what happened recently in the country when NMP came out to tell the world that the federation account will be expecting zero remittance. And it is from that federation account that money is distributed to the states. So the states found themselves being confronted with this, you know, an impending stagnancy and serious crisis. So they began now to look around for how to remain viable. And as of today, I think about three states in Nigeria have gotten the clean slate, the clean certificate of being viable in operational performance. So where do you go from there? We're going to start the state. And the states are now saying let's begin to restructure this country, perhaps starting from the tax structures that we have. And that if you now get interested in mobilizing tax in the environment, then you encourage industrialization. Don't forget the internal state, for example, according to the law, which tends to work Islamic adoption. That's set of alcohol. Oh, come on. You're going to make that case that Governor Mikkei made, really? Exactly. You know, so if I bring in tax from the consumption of alcohol in my state and you want to collect it and you don't allow it, and you want to share this 22% tax on alcohol. But when the sharing formula is done, Mr. Logo, I mean, they don't say, oh, this is bear tax. This is BFVAT. So we'll share BFVAT. It doesn't work that way. I mean, he was only just trying to, you know, botch us a point. But I don't think that that's how these monies are being shared. But just hold that thought. Let me go back to Tunji. Tunji, let's put back that graphics on the screen. We see that in all of the monies that is being taken by the federal government and states, states are taking 50% of V-18. Local governments earn 35%. And then 15% goes to the federal government. So the states still seem to have more in terms of the sharing formula. Or maybe I'm just looking at it from a layman's perspective. Absolutely, you are right. And it's the conversation I had earlier to the impression of most states about what they are pushing. So for instance, the federal government actually contributes more to that kitty than the states. So it is a case where the federal government puts in about 40% to 50%, but only takes out 15%. Think about it. So if the federal government believes the states want to keep their own part of it, then the federal government too should keep its own. Now, also, there is the conversation around who owns what V-18 in what territory. That is very critical. Because if, for instance, the River State Governor is speaking about the V-18, it must be clear that the V-18 will only apply to economic activity that happens within his state. Now, we must also remember that the headquarters of most of the economic activity that happens within his state do not actually reside within his state. So I don't think we've thought this true properly. I don't think as states we've looked at how it is. Now, I must be honest about one thing. It is unfair for a River State, for instance, to be generating a lot and share almost equally with a state somewhere in the country that isn't generating quite as much. I agree with that. And those are conversations that need to be had. And I honestly believe that we should restructure the way V-18 is being collected. But in this conversation of what we do in our state is our own and let everybody just go and face theirs, it will bring up more than we thought about. It will definitely bring up more than we thought about. In fact, as a part of the fact, all the headquarters of the businesses that are situated in River State are in Lagos. I'm not sure he's actually thought about that. And the economic activity actually happens in Lagos. So the question is, who will they pay the V-18 to? So for me, I think it's a question of let's look at it in a proper perspective. And let's also look at it from the perspective of passing a proper law that is fair and equitable, as against, I guess, of course, in the way that if one entity has gone in the very extreme of the opposite, the first thing you do to bring them back to the table is to go to the other extreme. But I think where we need to come to is that middle point where we all agree that, first of all, the law, for instance, what we're working with in this context is actually a decree from, I think, 1993, which was a military decree. So we need to create one under our democratic dispensation, which is equitable, which is fair, and which works for not just the federal government and the states, but also works for the local governments. Interesting. And you see, in all of this was, in all of this, the conversation that we're having, local governments haven't really said anything. It's just the state governors who seem to be, you know, making most of the noise. But let me come back to you, Mr. O'Logan. We're still looking at the law here. In Lagos State, section 16, subsection two of the law here requires that an importer of taxable goods pay the tax on the goods to the LIRS on the tax on goods. So before clearing these goods, you have to pay that tax. So how do you think this is going to be implemented? Plus the fact that we're having this in Broglieu between the federal government and the state governments when we already have that law? As of now, you know, let's look at what happened in Riba State. In the case of Atangera, or Riba State, plus those federal inland revenue studies and the Atangera of the Federation. The concept that taxis, such as value added tax, holding tax, tertiary education tax, and the national information, the cost development agency left amongst others that are not listed on that item 58 and 59 are outside the jurisdiction of the federal government of Nigeria. So there is a gap in the operational law already. And the court further noted that if you look at the provisions of item seven, A and B, or part two of the second share of the position of Nigeria, you know. It does not extend the legislative contents of the National Assembly beyond capital gains. So these things are there. So right now, it's like trying to correct a Laguna. And what the federal government is doing, talking about FIRAs, is to proceed to the court of appeal. As we speak now, the judgements in Riba State stands. And Riba State that has power to make laws within her jurisdiction has come up with laws. And whether they are able to implement it or not is a different ball game. I can let you know that with the experience that state government have encountered with the federal government that is threatening them that they may need to look elsewhere for revenue. Don't forget that the oil sector contributes over 80% of revenue to this continent. So if an entity is threatening that we are not going to be making contributions to the federal account, where will the money come from? We still have the Zanfara gold over there. Okay, don't also forget that recently the Petroleum Industry Act came to the front burner. And under the same act, we have 3% prescribed for host communities. While 30% is prescribed for frontier states. States that do not currently have oil, but we have to search for oil. So I think where we are right now is testing the provision of section 17 of the Nigerian position that talks about the social order of the country. And it says that freedom, equity, and justice shall be our platform of coexistence. And the big question now is that on the tax regime, this tax factor that we have, can we plan to have justice? Can we plan to have equity? So it's beyond just the figures right now. And I think that is where I agree with the city that we need to come to the table now and dialogue. And that again, is if dialogue has any relevance in this country. And don't forget that we are talking about the video value added tax now. What about the law, the other laws like the anti-open grazing laws that are coming up. And of course, these states have the power to make laws. For example, recently in the Northern part of the country, Canada specifically, we read about laws that forbid boutique owners to use money queen to display goods. So I think states are now trying to emphasize what's the value in their environment. So the federal government can now invite all the states. Beyond this value added tax, the 36 states of the federation, they have gone to court. They have sued the federal government on some duties. So the batches are on right now. And it is all about, can we have the common wealth of this station for the common good of the people? So logo, does this mean that, I mean, because many have also argued, I was listening to the radio today and someone actually said that this is more political than in the best interest of the states and local governments. But from the conversation that we're having tonight, it seems more like we're testing the waters for restructuring with testing the waters of viability of states. And just as Tunji said, if it comes down to it, will the states really be comfortable with it if we all decide that, you know, to your tent or Israel? You know, the wise plan said that necessity is a model of invention. There we have what we call cost and effect. Obviously now, except those who pretend that they are not monitoring the trend. The federal government has been making statements in the states to find their level in the area of security, even some governors are telling their citizens to find ways of protecting themselves. So, and these states do not want to go bankrupt. They do not want to fizzle into irrelevance. So they also begin to look at the laws and identify gas. Whether we like it or not, until the call of appeal for analysis otherwise, a gap has been discovered in the value added tax regime. And like Mr. Tunji said, you can come together, call all the states, have a dialogue, have a conversation and see how we can proceed. And the only way out is to bring justice and equity to the farm owner. You don't look at the interests of the nation, interests of the state. We are talking about tax now. What about managing insecurity? When the power to manage security, it's domiciled under in the exclusive legislative list. You need to wait for an instant area of police that is controlled by the federal government for you to effectively manage security in your state. When people have been clamoring for state policing. So these are the issues. So right now, whether you like it or not, whether you pay attention to it or not, I think Nigeria is right for restructuring. Talking about these laws that are coming or apply this value added tax, Gombe State is begging some of the states that are now going to call that it should be their bonus keepers. And the response from the courts is that if you want to, if the value you have to add to Nigeria is to be propagating banditry around the country, then maybe the Atongera, the federation should identify those who are who he claims they have identified as sponsors of Boku Haram. Get that money from them. So put into whatever they want to put. So we are talking about resources now and the engagement of resources. We have not even dealt in the region of how much Nigeria is going. As of today, the federation is going to be about $32.11 trillion Naira as against $10.12 trillion Naira in 2015. So economically, we are in shambles right now. And I believe that whether we are testing the waters or testing the mountains, some activities must begin to come on stage now to ensure that we secure the future of this country. And we get those to listen and engage, to listen and engage. And that is where someone like me we support what we are having right now in the country. And don't forget, we are going through the judicial processes and the legislative processes. Nobody's bringing out guns or arrows now to negotiate. And I think that should compel the federal government if they know that your gas can work against you and begin to do the needful. Okay. Come on, well, come on, go. Okay. Back to you, Tunji. This is a fling from what we're talking about, but let's just go there. Revenue sharing formula. If we're now talking about how to share VAT or asking that stamp duty monies be refunded to states, do you see anything happening in that area of our revenue sharing formula, especially for states that think that they're the ones who are responsible for the Commonwealth of the nation? Oh, definitely. There is going to be an issue there. I already see it. There is a lot of assumption. So it's state like Auguste, for instance. Auguste's house is a lot of industrial activity that happens within the region of Lagos, Ogu, or you and the rest. They house quite a large number of industries. But you see most of those industries are domiciled in Lagos. The question starts to come up for a lot of those states who has what VAT, what VAT is mine, what VAT belongs to the other state. And it starts to create a lot of confusion. If it is not very clear, if it is not very clear, because we need to also be able to identify what is economic activity within your domain. Because this is why the law is the law. What the law does is that it not only defines the issue, it also then interprets the issue to explain how the law should be implemented. So for instance, it would describe that on such items as ABC, you can collect VAT on this. Now on such items that are ABC, DCE, whether it is in your domain or not, it should go to the companies, whatever, whatever. So it takes a lot of explanation and interpretation. With those interpretations missing, what we are opening the door for is chaos. And we already see it happening. The people that will suffer the chaos are the businesses. And I feel sorry for every single business in river states right now, because you are scared of the FIRS. You know that if the law eventually gets to the side of the FIRS, you know that you're going to be in serious liability, you're going to pay a lot of fines. If for some reason, because the state is there and you don't pay those VAT charges to the state, the states will lock up your operational facilities and you can't work. So the businesses are the ones that will be in the middle of it right now. And I really feel sorry for them. As concerns sharing, we don't even know how we're going to share it. And I know that the state have not really thought about it through. It's a case of let's just go to court, let's have the conversations first and we'll decide all of that later. Because you can't just say every VAT that happens within my domain belongs to me. Because I mean, the domicile conversation might not even belong to you. So at this point, it's unclear, it's unclear. But I do know that if this goes through, the federal government will keep its import tax. Every single import tax that comes to the federal government. For instance, one of the things you said about the legal state talking about importation, the anything that is imported VAT on it, that will still keep at the hands of the federal government. I don't think they will let that go. That is probably one of the federal government's main sources of income. Why would they let it go to legal state? I mean, it doesn't make any sense for them. Legal state will have to fight. But it is somewhat of a right for legal state. So why wouldn't they want to let it go? Well, you can look at it that way. You can look at it that way. But the port was not built by legal state. Let's remember that. The port is a functioning federal government entity. It might have been situated in Lagos, but it's a functioning federal government entity. So in the longest, let me look at it this way. Imagine this being the fact that a big company is situated in legal state. It's operating out of legal state. But because its major factory is situated in Abel Kuta, then the state government there says all the VAT that happens in this company should go to that state, as against legal state where the headquarters is. It's not going to happen. Legal state is not going to allow it. So you see the confusion. It's already started. So it's a problem. But I don't think this is the reason why I keep saying, let's let this thing be fully interpreted before we start implementing it. Because if we don't, it only costs a lot of problems for businesses, and businesses will not want to be caught in the middle. So they'll just have to pay the fees that are due. Well, Jiddo Lagoon is a lawyer. And of course, Tunji Andrews is an economist. Thank you very much, gentlemen, for helping us to understand everything that's been said under this particular argument. Thank you so much for being here. Thank you very much for having me. All right. Nigeria. Well, we'll take a short break. And when we return, we'll be talking about what's happening in the South East and the Cititom Order, who's in charge here. Stay with us.