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Fiscal Federalism in Focus As VAT War Rages

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The case instituted by the Rivers State government and on which a Federal High court pronounced powers of states to collect Value Added Tax (VAT) appears to now be the trigger for a larger Constitution debate. For years, Nigerians have asked the question – how can the country implement the operation of federalism? Military rule built up a unitary system of government that is now being questioned by several Nigerians and some states of the Federation, who are now demanding greater autonomy for the states. Agitations continue to mount leading even to the extreme. Proponents of secession hinge their campaign of separatism on what they call skewed federalism. They complain of a behemoth central government with weak state appendages. They also complain of resource misallocation where states that generate very little funds are allocated huge sums of money by the centre to the detriment of richer states under a questionable revenue allocation formular. Apart from revenue generation and sharing, other federalism questions such as exercise and use of powers are in contention. Dominant issues include: central versus state police, exclusive legislative list versus concurrent legislative list, etc.

The VAT war therefore appears to be a metaphor for a larger war for power and control of resources. No doubt, the matter will go all the way to the Supreme Court. Whichever way the Supreme Court rules on the matter, one thing is sure – the battle is on and Nigeria will need to answer the restructuring question.