In recent times our media space has been inundated with various arguments on taxation and I love the conversations because it would deepen the public space. A lot of people have cited India and Canada in their arguments saying they have a federal VAT system but I am quick to see holes in that argument. How does the tax system in Canada work?
· Generally, the federal goods and services tax (GST) applies to taxable goods and services supplied in Canada. The harmonized sales tax (HST) is a blended federal/provincial sales tax that includes a 5 percent federal component and a provincial component of 8 percent or 10 percent. HST applies in the provinces of Ontario, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador. The province of Québec applies its own value added tax, the Québec sales tax (QST). The provinces of British Columbia, Saskatchewan and Manitoba levy provincial sales taxes (PST), also known as retail sales taxes, in their respective jurisdictions. So I am taken aback when people made the strong argument that there is a single VAT in Canada, but they forget the harmonized system that still largely favours the provinces for their upkeep. I believe federalism should be about empowerment of the states and that has always been the case in Nigeria. Each region should use its own resources. The 1963 Constitution clearly spells out how much percentage each region will give the federal government and they had access to their resources and developed at their own pace. We had the groundnut pyramid in the North and cocoa in the south. I wonder if the federal government collected VAT on cocoa in the western region. I really beg to ask what is the federal government afraid of? I believe this will help states develop. I have always argued that states like Borno can make billions from Gum Arabic and other products. It is incumbent on everyone to look inward and see it as a blessing. Even when some analysts make the argument of input and output taxes across state lines I respond by saying we already had those multiple taxation regimes already in Lagos for instance despite the fact that VAT is 7.5% .I pay 12.5% on every restaurant visit because of Lagos’ 5% consumption tax. So why not harmonize the system and have the states collect 7.5% and stop over-burdening the businesses? The problems of input and output can be solved with calibrated iterations and really the system of inward and output works in a society that has a robust tax credit system and I doubt that in Nigeria. Please correct me if I am wrong. By my analysis the federal government collects over N700 billion through VAT from the ports and through contracts due the rest from the states. The federal government can set up a fund that reinvest that into key beneficial national projects or use it to bail out states that are trapped. For us to grow we must innovate and sometimes the weak must suffer what they must. When Malaysia pulled the plug on Singapore it only made Singapore think deeper and today they have become economic miracles and for those that support the GST taxation model in India to support the case for FIRS in Nigeria. There are many reports to read on the failure of the GST and how it has increased tax evasion. I believe the states can manage the collection of taxes effectively and the states should be given a chance. What if the states increase the revenue threshold and collect better than the FIRS? But I ask: what is the federal government really afraid of?
Rufai Oseni, rufaioseni@gmail.com
