Friday Adakole Elijah: VAT saga - The battle for federalism

  The raging battle between the Governor of River State, Nyesom Wike and the Federal Inland Revenue Service (FIRS) today is a manifestation ...

 

The raging battle between the Governor of River State, Nyesom Wike and the Federal Inland Revenue Service (FIRS) today is a manifestation of a well planted time bomb awaiting explosion as a prelude to implementation of what some scholars depicted as “True Federalism”. At the moment, Nigeria is operating the corrupt version of federalism. The Nigerian brand of federalism is antithetical to the true concept of federalism popularly known as “ Frederickan model of federalism”.

Federalism as depicted by Wikipedia is a mixed or compound mode of government that combines a general government (the central or “federal” government) with regional governments (provincial, state, cantonal, territorial or other sub-unit governments) in a single political system. It can thus be defined as a form of government in which powers are divided between two levels of government of equal status.

Examples of the federation or federal state include the United States, India, Brazil, Malaysia, Mexico, Russia, Germany, Canada, Switzerland, Bosnia & Herzegovina, Belgium, Argentina, Nigeria, Pakistan, and Australia. Some characterize the European Union as the pioneering example of federalism in a multi-state setting, in a concept termed the federal union of states.

In our journey to nationhood, Nigeria as a country has experimented with different types of political systems and constitutions as well as economic philosophies. Currently, we are practicing what could be described as the inverted pyramid or jaundiced form of federalism which is a complete negation of the tenet of true federalism.

This is because the 1979 constitution that we borrowed from the United State of America (USA) consolidated the Ironsi Decree number 34 of May, 24, 1966. Under these laws, virtually all items were listed under exclusive chapters. And that was the beginning of the quagmires that we found ourselves today. Federalism in the country was implemented topsy-turvy.

Hitherto before this period, Nigeria was thriving with the system of regionalism. Regions were deliberately growing their economies via taxes, agriculture etc. That was why we heard of the famous ground nut pyramid in Kano, Rice, Millets, Sorghums, Yams. There was also the boost of Cocoas, Rubber plantation, Cola nuts in the West, Palm trees and Palm oil in the East.

Regional governments could generate revenue for its sustainability and then had diplomatic ties with foreign Nations. The North had robust relationship with Sudan. Ditto, the West had diplomatic relationship with the State of Israel. It was this relationship that culminated into the establishment of the University of Ife. The East had its fantastic relationship with Tanzania. There was healthy competition amongst the State. They were also cooperating and collaborating with themselves. They comprehensively placed their destinies in their own hands as there was nothing like “state destitution”.

But because Nigeria as a country via the instrumentality of the Military opted for centralized federalism, people are today clamoring for fiscal federalism with the hope that it has the capability of triggering development.

According to Olabanji Olukayode Ewetan (2012), Fiscal decentralization has become fashionable regardless of levels of development and civilization of societies. Nations are turning to devolution to improve the performance of their public sectors. Fiscal federalism is essentially about the allocation of government resources and spending to the various tiers of government.

In general, the scholar cited Aigbokhan, 1999; Oates, 1972; Tanzi, 1995 and Chete, 1998 as positing that, the intensification of clamor for greater decentralization is informed by a combination of people desiring to get more involved in government, and the inability of the central government to deliver quality services.

He explained further that, Decentralized systems of government give rise to a set of fiscal exigencies referred to as fiscal federalism also known as fiscal decentralization. According to the scholar, It refers to the scope and structure of the tiers of governmental responsibilities and functions, and the allocation of resources among the tiers of government to cope with respective functions.

In Nigeria, the scholar opined that the dismal performance of the public sector since the first half of the 1980s has brought to the front burner the issue of fiscal federalism which has remained dominant and most contentious in Nigeria’s polity (Arowolo 2011).

Federalism according to Arowole, Akindele and Olaopa as cited by Ewetan (2012), is a political concept in which the power to govern is shared between national, states and local governments, creating what is often called a federation (Arowolo, 2011, Akindele and Olaopa, 2002). Arowolo (2011,) postulated further that “It is a political theory that is divergent in concept, varied in ecology and dynamic in practice”. On his part, Vincent (2001), elucidated that, the concept of federalism implies that each tier of government is coordinate and independent in its delimited sphere of authority and should also have appropriate taxing powers to exploit its independent sources of revenue.

Fiscal federalism in the estimation of Vincent therefore demands that each level of government should have adequate resources to perform its functions without appealing to the other level of government for financial assistance (Wheare, 1963).

Fiscal federalism the scholar maintained is characterized by fiscal relations between central and lower levels of government. The fiscal relationships between and among the constituents of the federation is explained in terms of three main theories, namely, the theory of fiscal relation which concerns the functions expected to be performed by each level of government in the fiscal allocation; the theory of inter – jurisdictional cooperation which refers to areas of shared responsibility by the national, state and local governments, and the theory of multijurisdictional community (Tella, 1999).
Each tier of government is seen as seeking to maximize the social welfare of the citizens within its jurisdiction.

From the above discussions, the role assignment which flows from the basic theory of fiscal federalism is summarized as follows: The central government is expected to ensure equitable distribution of income, maintain macroeconomic stability and provide public goods that are national in character. Decentralized levels of government on the other hand are expected to concentrate on the provision of local public good with the central government providing targeted grants in cases where there are jurisdictional spill-overs associated with local public goods. Once the assignment of roles had been carried out, the next step in the theoretical framework is to determine the appropriate taxing framework. In addressing this tax assignment problem, attention is paid to the need to avoid distortions resulting from decentralized taxation of mobile tax bases.

Vincent cited Gordon (1983) emphasising that the extensive application of non-benefit taxes on mobile factors at decentralized levels of government could result in distortions in the location of economic activity.

It was this dislocation as highlighted above that the governments of Rivers and Lagos States seek to cure with the current VAT brouhaha. If implemented it is capable of extricating the states and country in general from the clutches of “feeding bottle federalism”. It will also confer on State Governors more responsibilities in the management of scarce resources. What that means is that state must begin to think outside the box for revenue strategies. And when that is done, Nigeria would have no doubt entrenched the American model of federalism in her clime. It is not proper for all the states to be looking forward to Abuja for financial succor. They should develop their means of livelihood.

Nothing stop Benue State for instance to develop her oil well in Okwiji, Apa Local Government Area or avalanche of solid minerals available in many locations in the State so as to enhance and solidify her revenue base.

It was obviously in preparation for a day like this, that Kogi State strenuously worked and ensured that oil is discovered in the state. Happily for them, Kogi has been listed as one of the oil producing states in the country. And they will begin to enjoy the fruits of their labour when real exploitation commences.

Zamfara State is currently exploiting their gold and even said they were going to pay royalty to the Federal Government against the spirit of the constitution of the FRN.

Wike’s posture, no doubt is in tandem with the expectations of Nigerians about true or Fiscal federalism. States should not continue to depend on the centre for funding.

Dr. Elijah writes from Otada – Otukpo.

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