After tempestuous agitations from Northern Nigeria, which appears to be more concerned with the sharing of revenue from Value Added Tax, the House of Representatives suspended deliberations on President Bola Tinubu’s four tax bills.

Nigeria’s tax administrators, who do not seem to recognise that Value Added Tax is different from Sales Tax, are confusing everyone, including the media (and the legislators, who may not have read the tax documents).

Just gauge the decibel of cacophony that legislators are making over the allocation of VAT proceeds without corresponding light! They don’t even realise that Value Added Tax is not charged on foodstuffs, pharmaceuticals, and educational materials.

The explanations about the sharing of Value Added Tax proceeds between the three tiers of government and among the states, by Taiwo Oyedele, Chairman of the Presidential Tax Reform Committee, are disingenuous, to say the least.

Surprisingly, neither the Institute of Chartered Accountants of Nigeria nor the Chartered Institute of Taxation of Nigeria tries to clarify the position, so that Nigerians do not suffer another round of ill-conceived public policy.

The current Value Added Tax Act allocates 15, 50, and 35 per cent of collection to the federal, state, and local governments, respectively. And 20 per cent of the 50 per cent allocated to all states goes to where the Value Added Tax is generated, 30 per cent is shared according to population, and the balance of 50 per cent is distributed equally among the states.

Northern Nigeria is worried that the new tax bills allocate 10, 55, and 35 per cent to the federal, state, and local governments, respectively. It also raises the allocation of states where the revenue is generated from 20 to 60 per cent—with the argument that more should accrue to states where wealth is created or income is earned.

The state where production takes place absorbs environmental costs of air and water pollution, stress on its roads, educational and health facilities, and infrastructure and should therefore be compensated accordingly.

As expected, Northern Nigeria, led by the Northern Governors’ Forum, swiftly rejected the new proposals and used their majority in the National Economic Council to demand a review from the president, who, however, rejected their request.

Senator Ali Ndume, obviously smarting from his removal as Chief Whip of the Senate, introduced his usual histrionics and theatrics, threatening to leave the All Progressives Congress over this Value Added Tax matter. It should be the private affair of himself and the APC whether he remains or vacates the All Progressives Congress.

When he begins to ask whether Nigerians who earn less than N800,000 per annum will be exempted from paying Personal Income Tax, one begins to wonder if he knows the difference between Personal Income Tax and Value Added Tax! No one knows what he meant by, “giving somebody something with the right hand and taking it back with the left hand.”

It will be a matter for regret if Senator Ndume is just finding out that the poor Nigerian consumers have been indirectly paying Value Added Tax from its inception in 1994. He appears to be prepared to muddy the waters just to advance petty regional interests.

By the way, if those professionals that he suggests are the teachers of the current tax czars of Nigeria gave him the wrong argument that he is bandying about, it would amount to what the Yoruba describe as “a monkey carrying a monkey atop a palm tree!” They must be suspect professionals.

Former Kano State Governor, Rabiu Kwankwaso, added his voice with a subtle blackmail: “We are aware that the Lagos young men are working so hard to impose taxes and take away our taxes from Kano and this part of the country to Lagos. Today, as we have seen, even the telephones that we… register here in Kano, efforts are there to take all the taxes to Lagos.”

Mr. Oyedele should find the time to explain to Governor Kwankwaso that Value Added Tax accrued from sales invoices issued for fabrics manufactured and sold in the sundry textile factories based in Kano will not be attributed to Lagos, even if they were sold to Lagos, for instance.

Section 145(1) of the new tax bill provides: “For the purpose of… this Act, a taxable supply should be deemed to have taken place at the time an invoice or receipt is issued by the supplier… or payment is due to, or received by the supplier in respect of the supply…”

The Northern political establishment should stop the emotional blackmail that has yielded neither Northern Nigeria, its poor citizens, nor the Nigerian economy any good. The North must come to terms with reality and allow Nigeria to move forward.

The matter has really come to a head when likeable Governor Babagana Zulum of Borno State begins to argue that when Nigerians who earn less than N800,000 annually Personal Income Tax states revenue will reduce. He omitted the increase to the tax rate of high-net-worth taxpayers.

Why is Mr. Oyedele failing to explain to the legislators and governors that while Value Added Tax, paid throughout the supply chain, is paid by distributors to manufacturers, who then remit to the tax collection agencies, and that Sales Tax is paid by consumers at the point of sale to retailers, who remit to the tax collection agencies?

The textile retailer in Lagos pays Value Added Tax to the textile distributor, who remits the Value Added Tax to the Kano-based manufacturer, Da Viva Textile Mills, or the importer, who forwards the same to the Federal Inland Revenue Service as a Kano State sale.

By this logic, the Value Added Tax will be recognised as revenue derived from Kano State for the purpose of remittance to the Federation Account. For emphasis, the Value Added Tax  that is paid in Lagos State travels through the supply chain to FIRS in Kano State as a tax-deductible payment, with its separate ledger, of course.

But unlike Value Added Tax, Sales Tax, paid by the consumer to the retailer in Lagos, does not travel through the supply chain. It is remitted directly to Lagos Inland Revenue Service or a Local Government Authority. For instance, customers are required to pay some kind of Sales Tax to Ijebu-Ode Local Government for ram bought at Imowo Market in Ijebu-Ode.

Maybe the conversation should be that Value Added Tax should still be collected by the Federal Government and distributed according to an agreed allocation regime, while states charge and retain 100 per cent of Sales Tax. This should motivate states to rev up their economies.

Dr. Sani Abdullahi Shinkafi, who thinks that Northern Governors are whining “because how the money will be shared is based on performance and your contribution,” suggests that “most of these states (governors) are lazy; most of them (he says) are not ready to develop their states to (be able to) generate (internal) revenue,” and insists that “that is why they are complaining.”

Senator Seriake Dickson, representing Bayelsa State West Senatorial District, recalls that when the Petroleum Industry Act ignored the 10 per cent preferred by petroleum-producing communities and granted them only three per cent the heavens did not fall.

Northern Nigerian leaders, like Governor Zulum and Senators Aminu Tambuwal and Abdul Ningi, should stop issuing threats whenever there are plans to straighten things out for everyone. As former Head of State, General Yakubu Gowon says, “The North must ensure that its actions are in the best interest of Nigeria.”