The proposed tax reform bill currently undergoing consideration by the National Assembly could threaten the country’s national unity and constitutional harmony, the Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC) has warned.
In a comprehensive nine-page memorandum to the National Assembly, the Commission called for dialogue to build a cinsensus among the three tiers of government, namely federal, state, and local governments, on a revenue formula it has proposed to ensure an equity, fairness and justice.
In the memo signed by its Chairman, Mohammed Bello Shehu, RMAFC outlined a number of legal, technical and constitutional objections to the proposed tax law, .
Emphasized the provisions of Section 162(2) of the 1999 Constitution (as amended), which grants the Commission the powers to determine the formula for equitable revenue sharing among the three tiers of government, Shehu said the preferred RMAFC formula, if adopted, could ease tension and ensure acceptance.
“The Constitution designates RMAFC as the final authority on matters of revenue allocation,” the memorandum noted. “As such, no Act of Parliament, including the VAT Act, can infringe upon this constitutional responsibility. Any such attempt would constitute a violation of the Constitution.”
Highlighting its role as the exclusive arbiter in developing fair and equitable revenue allocation formula for the country, RMAFC stressed the need to respect this constitutional role.
“Any deviation from its constitutional duties”, the Commission pointed out, “could undermine the integrity of the Commission and compromise the principles of justice in revenue sharing.”
The Commission called for an approach to Value Added Tax (VAT) allocation that accounts for the unique nature of VAT as a consumption, rather than a production tax.
Shehu said the formuka proposed by RMAFC would ensure equitable distribution among federal, state, and local governments.
Details of the formula in the memo highlighted the need to ensure an equitable allocation of VAT proceeds and derivation based on a formula developed by RMAFC.
The formula, the Commission said, would consider VAT’s consumption-based nature, ensuring fairness in distribution; recognition of the consumption patterns, by factoring in consumption rather than merely production, or the location of company headquarters, and ensuring balanced benefits.
Also, the proposed formula supports weaker economies, by giving special consideration to states with weaker economies, promoting national cohesion and fairness across all tiers of government.
Besides, the memo made several recommendations urging he federal government to empower the Commission to finalize a VAT allocation formula in line with its constitutional mandate, ro ensure that VAT allocation strictly follows RMAFC’s framework, not arbitrary provisions in the VAT Act or the proposed reform bill.
While urging the legislative and executive arms of the government to exercise caution and avoid measures that undermine RMAFC’s authority, Shehu called for implementing systems like electronic invoicing to tag VAT collections to end-user locations, enhancing transparency and accuracy.
The Commission expressed confidence that its proposed fornuka can provide an equitable solution to revenue allocation disputes, while safeguarding the principles of fairness and justice.
The ongoing debate on the tax reform billed has been tainted by political considerations, as different sections of the political divide have been pushing for positions that favour their selfish interest.
While some representatives have been arguing in favour VAT as a consumption tax applicable at the point of sales, apparently because certain products that attract VAT are not consmed in certain locations, others are rooting VAT charges to applicable on all products irrespective of location.
