GOVERANCE

Ex-Minister Advocates Fiscal Restructuring

 

A former Health Minister, Prof Isaac Adewole, has advocated fiscal federalism where states get funds commensurate to what they bring into the federation account.

Adewole, a former Vice Chancellor of the University of Ibadan, said this on Channels TV on Friday.

He urged governors to allow the local government areas to function as an independent tier of government.

The former Minister backed the persistent call for restructuring and resource control by sub-nationals.

“I am an apostle of fiscal and physical federalism,” he said.

He added that though it was late for a return to regionalism, states should be allowed to grow on their own and based on the resources within their domains.

Specifically, the former minister said states that prohibit the sale of alcoholic drinks should not get out of the Value Added Tax (VAT) on beer through the federation account.

He said, “We need to look at how we share the resources of this country. If you have a law that prevents you from selling alcohol, that law should also prevent you from sharing money from alcohol. We should be honest with ourselves. States that prohibit the sale of alcohol should not share out of VAT from alcohol. Straight forward.

“Then we should also ask each state what they are bringing to the table. A situation where states only share money from oil is absurd and that is why we are where we are today because the other states are not bringing anything to the table.

“What is happening to our gold, bitumen, lithium? The resources from all of these, where are they? The only thing we know is oil money.”

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Meanwhile, many of the 19 northern states where Sharia law is practised forbid the sale of alcohol in their domains. In some of the states, sub-nationals established religious police known as Hisbah to enforce the ban on alcoholic drinks.

Back in 2021, talks about 7.5% VAT collection on goods including alcohol by state governments made the headlines for months with Rivers and Lagos states being at the forefront of the move.

A Federal High Court in Port Harcourt, the Rivers State capital, had ruled that states, and not the Federal Inland Revenue Service (FIRS), should collect VAT and Personal Income Tax.

Some northern state governments had preferred the Federal Government to continue VAT collection and the FIRS had challenged the ruling of the high court in the oil-rich South-South state.

An appellate court would later order Lagos and Rivers governments to maintain status quo on the matter and the move entered a stalemate.

The VAT collected by the FIRS contributes significantly to the total revenue generated by the Federal Government. The total sum collected monthly is distributed among the three tiers of government, with the Federal Government getting 15% of the VAT revenue, while states and local governments get 50% and 35%, respectively.

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