Financial Confidential Stands by Report on RMAFC’s Opposition to Tinubu’s Tax Reform Payments, Publishes Full Memorandum

The Financial Confidential has reaffirmed the accuracy of its report detailing the Income Mobilisation Allocation and Fiscal Fee’s (RMAFC) opposition to facets of President Bola Tinubu’s Tax Reform Payments. The report, based mostly on a nine-page memorandum from the RMAFC, highlighted issues in regards to the payments’ potential to infringe on the fee’s constitutional powers.

In response to the memorandum, the RMAFC asserted its unique mandate to develop formulation for sharing revenues, together with Worth Added Tax (VAT). It warned that any deviation from this course of could be “inappropriate and probably unconstitutional.”

The Financial Confidential‘s report prompted a press convention by RMAFC Chairman Mohammed Shehu, who denied opposing the tax reform payments and accused the media of misrepresentation. Nevertheless, Financial Confidential stands by its story, asserting that the memorandum unequivocally outlined the fee’s constitutional objections to the payments.

Abdulrahman Abdulraheem, Managing Editor of Financial Confidential, defended the publication’s integrity, stating, “The memorandum was totally vetted and deemed genuine. It was professionally structured, included statistical knowledge and historic context, and adhered to the formal traits of RMAFC’s official communications. Our reporting is correct and displays the info as offered within the doc.”

He added: “On this digital age, transparency and accountability are paramount. Makes an attempt to deflect scrutiny by blaming the media are outdated. We stay steadfast in our dedication to fact-based reporting.”

Key Highlights of the Memorandum

The memorandum, which has now been made public, raised issues over a number of provisions within the Tax Reform Payments. It referenced Part 162(2) of the 1999 Structure, which grants the RMAFC unique authority to find out revenue-sharing formulation amongst Nigeria’s three tiers of presidency.

The doc started by commending President Tinubu’s intention to reform Nigeria’s tax system, however subsequently flagged authorized issues, stating:

“Solely the RMAFC has the mandate to supply formulation for sharing revenues, together with VAT. Any deviation from this constitutionally backed course of is each inappropriate and probably unconstitutional.”

The memorandum additionally emphasised that the Structure is supreme and doesn’t allow any Act of Parliament, together with the VAT Act, to usurp the RMAFC’s authority. It said:

“Part 162(2) of the 1999 Structure empowers the RMAFC to find out the formulation for the equitable sharing of income among the many three tiers of presidency. The supreme Structure doesn’t envisage that some other Act of Parliament, such because the VAT Act, may assume this duty. Any such try would contravene the Structure.”

RMAFC’s Public Denial

Regardless of the detailed issues expressed within the memorandum, Chairman Mohammed Shehu distanced the fee from its contents throughout a subsequent press convention. He accused media shops, together with Financial Confidential, of misrepresenting the fee’s place and deceptive the general public.

Broader Implications

The controversy surrounding the RMAFC’s stance on the Tax Reform Payments highlights vital governance, transparency, and constitutional adherence points in Nigeria’s public sector. As stakeholders await additional developments, the incident underscores the significance of a strong media that holds establishments accountable whereas fostering knowledgeable public discourse.

Financial Confidential stays dedicated to delivering factual and unbiased reporting within the curiosity of transparency and accountability.

Learn the Full Textual content of the Memorandum Beneath

MEMORANDUM ON THE POSITION OF THE REVENUE MOBILISATION ALLOCATION AND FISCAL COMMISSION ON FOUR (4) BILLS IN RESPECT OF THE TAX REFORM AND FISCAL POLICY BILL AT THE NATIONAL ASSEMBLY FOR DELIBERATION

1.0 Introduction
1.1 The Income Mobilisation Allocation and Fiscal Fee (RMAFC) acknowledges and appreciates the imaginative and prescient of His Excellency, Ahmed Bola Tinubu, GCFR, the President, Federal Republic of Nigeria in his transformational efforts below the Renewed Hope Agenda, significantly in advancing tax reforms to deal with Nigeria’s fiscal challenges.
1.2 The Fee commends His Excellency for his modern concepts and steadfast dedication to repositioning the income base of the nation. The Fee because the income mobiliser for the three tiers of presidency, appreciates the submission of the 4 proposed payments, which mirror the President’s visionary management in enhancing the nation’s fiscal stability.
1.3 The proposed payments will considerably bolster the Fee’s efforts and the nation’s capability for home income mobilization. They may assist combine untapped income sources, together with contributions from the casual sector, into the tax web. Moreover, these reforms will improve Nigeria’s revenue-to-GDP ratio, positioning the nation extra favourably amongst nations with excessive fiscal efficiency.
1.4 The Fee due to this fact expresses its full assist for the proposed laws and is assured they are going to function a pivotal step towards elevating Nigeria’s income era and financing sustainable growth.
1.5 Nevertheless, the lingering debate over derivation in Worth Added Tax (VAT) allocation has raised vital issues, sparking heated arguments amongst stakeholders. This memorandum outlines the Fee’s place, emphasizing its constitutional mandate to make sure that VAT allocation adheres to the rules of equity, justice, and fairness, and highlighting why any arbitrary apportionment could also be inappropriate and unconstitutional.

2.0 Background of Worth Added Tax (VAT) in Nigeria
2.1 The historical past of Worth Added Tax (VAT) in Nigeria started with its introduction in 1993, following the promulgation of the Worth Added Tax Act No. 102 of 1993, which got here into impact on January 1, 1994. It changed the Gross sales Tax system that had been in place since 1986 below the Federal Authorities’s Decree No. 7 of 1986. The VAT was launched to broaden the tax base, improve authorities income, and modernize Nigeria’s tax system.

2.2 It was structured as a consumption tax on the worth added at each stage of manufacturing and distribution, with the burden finally borne by the ultimate shopper. The Federal Inland Income Service (FIRS) was empowered to manage VAT whereas the consumption tax is throughout the jurisdiction of the state to gather and likewise the Federal Authorities.
2.3 The VAT charge was set at 5% when it was first launched. The tax coated items and companies, apart from sure exempted objects equivalent to primary meals objects, medical companies, and academic supplies.

3.0 Amendments and Developments (1994-2018)
3.1 Over time, amendments have been made to the VAT Act to enhance compliance and administration. Efforts to deal with challenges equivalent to tax evasion, poor enforcement, and a number of taxation have been launched by means of capacity-building programmes and automation of VAT processes.
3.2 Improve in VAT Fee (2020)
3.3 In January 2020, the Federal Authorities elevated the VAT charge from 5% to 7.5%, following the enactment of the Finance Act 2019. This marked the primary improve in VAT since its inception and was aimed toward boosting non-oil income amid dwindling oil receipts.

4.0 Income Distribution and Controversies
4.1 VAT income is shared among the many three tiers of presidency with 15% for the Federal Authorities, 50% for the States, and 35% for Native Governments. Disputes arose concerning the gathering and administration of VAT, significantly between the Federal Authorities and a few States, equivalent to Rivers and Lagos, which advocated for States to manage VAT inside their jurisdictions.
4.2 This latest controversies and judicial interventions by Rivers and Lagos States have reignited debates over whether or not the Worth Added Tax (VAT) formulation ought to comply with the derivation precept or stay a centrally administered consumption tax. These disputes, rooted in disagreements between federal and state governments, have sparked broader discussions on fiscal federalism, fairness, and constitutional governance in Nigeria. Proponents of the derivation precept contend that VAT revenues ought to primarily profit the states the place taxable items and companies are consumed, whereas critics emphasize the significance of equitable redistribution to assist weaker state economies and promote nationwide cohesion.
4.3 This ongoing debate has introduced the position of the Income Mobilisation Allocation and Fiscal Fee (RMAFC) into the highlight. RMAFC performs an important position in Nigeria’s fiscal framework, making certain an equitable revenue-sharing formulation among the many three tiers of presidency. Its constitutional mandate is significant for sustaining stability and equity within the allocation of the nation’s assets.
4.4 Worth Added Tax (VAT), launched in 1993 to modernize Nigeria’s tax system, has change into a big income. Initially established to exchange the gross sales tax, VAT was designed to broaden the tax base and improve non-oil income. Since its inception at a charge of 5%, the VAT charge was elevated to 7.5% by means of the Finance Act of 2020. Nevertheless, over time, its administration and allocation have encountered varied challenges, together with inefficiencies in assortment, tax evasion, and disputes over the centralization of VAT revenues.
4.5 Judicial Rulings (2021-2022)
4.6 In 2021, the Rivers State Authorities challenged the federal administration of VAT and handed a regulation to gather VAT domestically. The Federal Excessive Court docket in Port Harcourt dominated in favour of Rivers State, however the Court docket of Attraction granted a keep of execution, pending a choice by the Supreme Court docket.
4.7 Present Developments
4.8 Discussions on VAT reforms proceed, with debates on central versus state administration and the implications for companies and inter-state commerce in addition to VAT derivation precept. The continuing arguments stem from differing interpretations of VAT’s allocation framework. Some states argue that VAT ought to primarily profit the states the place the taxable items or companies are produced or consumed, invoking rules of derivation whereas others emphasize that VAT, as a nationwide consumption tax, needs to be shared equitably to assist weaker economies and promote nationwide cohesion. These divergent views threaten to undermine the spirit of equity and cooperation enshrined in Nigeria’s fiscal framework.
4.9 VAT stays a vital supply of non-oil income, contributing considerably to Nigeria’s fiscal sustainability. The controversies have prompted the Fee to make clear points concerning to allocation of income as stipulated by the structure of the Federal Republic of Nigeria. All these debates are rooted from the fiscal federalism and derivation. The Fee as empire arbiter intends to attract its place from the theoretical framework and idea of derivation vis –a-vis VAT derivation precept.

5.0 Fiscal Federalism Concept
The speculation of fiscal federalism proponent by Musgrave, R. (1952) & Wallace E, O. (1972) advocates for a balanced strategy to useful resource distribution, making certain that every one ranges of presidency have satisfactory assets to fulfil their obligations. By emphasizing fairness and collaboration, fiscal federalism seeks to advertise financial growth whereas safeguarding nationwide cohesion. Making use of this framework, VAT allocation should strike a steadiness between recognizing consumption patterns and supporting much less economically developed states.

6.0 Idea of Derivation
Derivation in fiscal federalism refers back to the precept the place income generated from a particular useful resource or exercise is allotted to the jurisdiction (state or area) the place it originated. In Nigeria, this precept is constitutionally acknowledged, notably within the allocation of oil revenues the place 13% of income derived from oil is returned to oil-producing states, although totally different from the VAT derivation. It goals to make sure equity and financial fairness by compensating resource-originating areas for his or her contributions to the nationwide purse.
6.1 Nevertheless, complexities come up in making use of derivation rules to value-added taxes (VAT) as a result of nature of VAT, which is consumption-based somewhat than origin-based.
6.2 Complexity in Ascertaining Taxpayer Residence for VAT
VAT is a tax levied on the consumption of products and companies. The ultimate tax burden falls on the patron, and the tax is remitted by companies (brokers of VAT assortment) to the tax authorities. The complexity in figuring out the taxpayer’s “residence” for derivation functions arises when:
a. Items are bought in a single location and consumed in one other.
b. The vendor and purchaser function throughout state boundaries.
c. VAT reporting programs don’t monitor the end-use location successfully.
The above points are offered within the state of affairs beneath:
Situation: A Man from Kano Buys a Gasoline Pump in Lagos for utilization in kano state.
Situation Define:
• A enterprise in Lagos sells a gasoline pump to a buyer from Kano.
• The Lagos enterprise acts as a VAT assortment agent, charging VAT on the sale.
• The client transports the gasoline pump to Kano for private or enterprise use.
6.3 Points in Derivation:
1. Level of Assortment vs. Level of Consumption:
• The VAT is collected in Lagos, because the enterprise promoting the pump is registered there.
• Nevertheless, the pump is utilized in Kano, the place the patron resides, making Kano the purpose of consumption.
6.4 Allocation of VAT Income:
• Beneath Nigeria’s VAT system, collected VAT is pooled nationally and distributed based mostly on a formulation (50% derivation, 35% inhabitants, 15% equality).
• Lagos, as the purpose of assortment, may argue for derivation rights.
• Kano, as the patron’s residence and level of use, may additionally declare derivation rights as a result of it’s a consumption tax which is borne by the ultimate shopper.

6.5 Administrative and Authorized Challenges:
VAT legal guidelines in Nigeria don’t present a transparent mechanism to trace items post-sale to the end-use location. With out sturdy programs for monitoring consumption patterns, the allocation of VAT based mostly on derivation turns into contentious.

7.0 Broader Implications
Systemic Points:
* The prevailing VAT system prioritizes income pooling and formula-based distribution over strict derivation rules.
* Lack of digital infrastructure to hint items and companies from sale to consumption complicates correct attribution.

8.0 Significance of VAT Income
VAT is a vital income for the three tiers of presidency in Nigeria, contributing considerably to the VAT pool Account. Not like different taxes, VAT is a consumption tax the place the burden is borne by the ultimate shopper on the level of buy. VAT is a centralized tax collected for redistribution throughout the Federation, making it essential to allocate revenues equitably to all tiers of presidency.
8.2 The distinctive nature of VAT implies that its allocation should mirror rules of equity, justice, and fairness to make sure the harmonious functioning of the federation.

9.0 Nature of VAT and Challenges of Arbitrary Apportionment of VAT
Any try and apportion VAT revenues arbitrarily, whether or not vertically or horizontally, dangers undermining the rules of fairness for the next causes:

i. Consumption vs Manufacturing Dichotomy
VAT is levied on the level of consumption, not manufacturing. An organization could produce items in a single state however promote them in one other. This consumption-driven nature means VAT revenues have to be shared in a means that displays this dynamic to stop inequities amongst states and native governments.

ii. Unity and Fairness in Useful resource Sharing
iii. Arbitrary percentages could alienate sure tiers of presidency or areas, creating divisions and eroding belief within the revenue-sharing course of.
iv. Authorized and Constitutional Validity
Solely the RMAFC has the mandate to supply formulae for sharing revenues, together with VAT. Any deviation from this constitutionally backed course of is each inappropriate and probably unconstitutional.

9.1 Dynamic in VAT Income Allocation
Given the dynamics, arbitrary apportioning of percentages for VAT allocation, whether or not vertically among the many tiers of presidency or horizontally amongst states and native governments, is each impractical and unconstitutional. There is likely to be Public notion of skewing the regulation to favour states with increased manufacturing or company presence, no matter the place consumption happens. Ignoring the necessity to assist much less economically developed states and areas and undermining nationwide unity and fairness in revenue-sharing.

10.0 Constitutional Mandate of RMAFC
10.1 Part 162 (2) of the 1999 Structure of the Federal Republic of Nigeria (as amended) empowers the Income Mobilisation Allocation and Fiscal Fee to find out the formulation for the equitable sharing of income among the many three tiers of presidency. Be certain that such formulation displays the rules of equity and justice. The Structure due to this fact made RMAFC the empire arbiter in issues of income allocation for the three tiers of presidency.
10.2 The Structure, being supreme, doesn’t envisage that some other Act of Parliament such because the VAT Act may assume this duty. Any such try would contravene the Structure. Due to this fact, the RMAFC stays the only arbiter in producing allocation formulae which can be honest, simply, and equitable for the three tiers of Authorities. Any deviation from a formulation crafted by the RMAFC dangers violating constitutional provisions and undermining the Fee’s position because the neutral arbiter of income allocation in Nigeria.

10.3 RMAFC’s System: The Honest, Simply, and Equitable Resolution
Contemplating the constitutional mandates of the Fee to make sure, honest, simply, and equitable allocation of income for the three tiers of presidency and to place the VAT derivation debate to relaxation, the Fee needs to suggest that:
i. VAT Allocation and Derivation: VAT allocation and derivation shall be based mostly on a formulation developed by the RMAFC, which considers VAT’s distinctive nature as a consumption tax and ensures equitable distribution.
ii. Avoidance of Arbitrary Percentages: Any arbitrary vertical or horizontal apportionment of VAT income would fail to deal with the nuances of VAT assortment and consumption.
iii. Honest Distribution Mechanism: The RMAFC’s formulation would guarantee recognition of consumption patterns, not simply manufacturing or firm headquarters. Help for states with weaker economies to advertise nationwide cohesion and equitable advantages for all tiers of presidency with out bias or favouritism.

10.4 Suggestions
1. Empower RMAFC to finalize a VAT allocation formulation in keeping with its constitutional mandate, making certain an equitable strategy for all stakeholders.
2. Constitutional Adherence: Reinforce that VAT allocation is topic to the RMAFC’s framework and never arbitrary determinations as stipulated within the VAT Act or the proposed invoice which is threatening the unity of the nation.
3. Stakeholder Engagement: Foster dialogue among the many federal, state, and native governments to safe consensus on the RMAFC’s proposed formulation, lowering tensions and making certain broad acceptance.
4. Keep away from Legislative Overreach: Reinforce the constitutional mandate of the RMAFC and discourage any legislative or government measures that undermine its authority.
5. Undertake digital monitoring programs: Implement a system that tags VAT collections to end-user areas, utilizing instruments like digital invoicing and transaction monitoring.
6. Evaluate VAT legal guidelines: Amend laws to make clear derivation guidelines for interstate transactions.

11.0 Conclusion
Distinguished Sir, VAT stays a vital income stream for all tiers of presidency, and its allocation should adhere to constitutional provisions to stop inequities and nationwide discord. By affirming the RMAFC’s position in figuring out the VAT revenue-sharing formulation, the legislators would have demonstrated dedication to constitutional governance and equitable fiscal administration.
VAT is one in all Nigeria’s main income sources, very important to the fiscal stability of all tiers of presidency. Resolving the derivation concern by means of a constitutionally grounded and equitable formulation will improve nationwide unity, promote equity, and reinforce belief within the revenue-sharing system.
12. Please, settle for the assurances of our highest regard, Sir.

M. B. Shehu, OFR, Ph.D
Chairman