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AKOR SYLVESTER, Abuja
The Former President of the Nigeria Labour Congress (NLC), Ayuba Wabba, has urged labour unions to oppose the government’s proposed annual increase in Value Added Tax (VAT) cautioning that it will have severe consequences for the working class.
Wabba who spoke at the inauguration of the newly elected State Council Chairmen of the Medical and Health Workers Union of Nigeria (MHWUN) in Abuja Wednesday, said the proposal, when allowed to see the light of the day, will be harmful to workers’ welfare and the economy at large.
He expressed dissatisfaction over the government’s plan to gradually increase VAT from 7.5% to 15%, maintaining that such a decision would lead to higher costs of goods and services, and increase the economic burden on ordinary Nigerians.
Wabba noted that while many countries, including Ghana, are reducing VAT to ease the cost of living, Nigeria is moving in the opposite direction, which he described as “regressive.” He warned that such an increase would erode the purchasing power of workers and affect wages, including the minimum wage, which would be insufficient to cover the rising costs of essential goods.
NLC former president urged unions to challenge the policy and ensure that workers’ voices are heard in the ongoing discussions.
He also advocated for a fairer tax system, suggesting that the wealthy should bear a larger share of the tax burden while providing subsidies for the poor. “We must tax the rich and subsidize the poor,” he said.
Wabba used the occasion to congratulate the newly elected MHWUN state chairmen on their victory, charging them to uphold the legacy of integrity and progressive trade unionism.
He stated that the union’s strength lies in its commitment to accountability and transparency, urging the new leaders to avoid corruption and ensure that union funds are used responsibly.
The labour leader highlighted the critical role of integrity in union leadership, stating that those who misuse union resources will not be tolerated. “And so, therefore, none of you should be found wanting. You must make sure that you are able to represent our members in your various states effectively. And also try to make sure that you are able to reflect the good image of the union,” he noted.
Speaking, Kabiru Ado Sani, the National President of MHWUN, outlined the vision for his administration, noting that accountability, transparency, and discipline are key pillars of the union’s operations.
Sani congratulated the new chairmen, recognizing that many were stepping into leadership for the first time.
He urged them to familiarize themselves with the union’s constitution, policies, and the public service rules in order to better serve their members.
He also demanded of the union’s commitment to building a prosperous and progressive MHWUN, one that future generations of workers would be proud to belong to.
“As you are aware, my predecessors had sacrificed a lot to bring this union to the top and it is our responsibility to guard this jealously and sustain that enviable
height. The current administration would deal decisively with any Chairman that may try to pull the Union down or tarnish the hard-earned image of the Union,” he maintained.
There were protests on Saturday at Umuezenta, Umuomaunta Mbawsi Nsulu, by people who identified themselves as landowners from the eight communities where the Abia State government has proposed to build an airport.
The protesters, comprised of youths and elderly persons, said they opposed the state government using their ancestral lands for the airport project.
According to them, the proposed project will lead to the destruction of their farmlands, adding that successive administrations in the state treated them unfairly.
Speaking during the protest, the village head of Umuezenta, Mr Ukaumunna Echezolam, said that the Abia State government did not meet the right persons before taking the decision to site the airport on their land.
He said that the project, if built, would make his people lose their lands, which are their sources of livelihood.
According to him, youths whose fathers are still alive cannot decide for their communities, adding that his people still lack basic amenities.
On whether the community will reverse its decision if the right persons from the community are met by the Abia State government concerning the airport project, Echezolam reiterated that there will be no compromise.
Echezolam also stated that Nsulu communities had in the past given lands to the Abia State Government, citing the Nsulu Games Village and Ntigha Inland Dry Port (IDP) project in Isiala-Ngwa North Local Government Area, among others, which took a large chunk of their lands.
The Abia State government has yet to react to the protest as of the time of the report.
Two sets of tax bills supposedly drafted by the Presidential Committee on Fiscal Policy and Tax Reforms, which could significantly alter the distribution of Value Added Tax revenues among Nigeria’s federal, state, and local governments, have been made public.
Under current law, VAT is allocated in a 15 percent, 50 percent, and 35 percent split to the Federal Government, State Governments (including the Federal Capital Territory), and Local Governments, respectively. For the portion attributable to states (and perhaps LGAs), states retain 20 percent of the VAT revenue collected within their borders. 30 percent of the VAT is distributed based on the population of the states, while the remaining 50 percent is shared equally among all states. However, this formula lacks consideration for the principle of derivation, leading to perceived inequities where regions contributing more to VAT might not receive proportional benefits.
Under the new proposal, the distribution would shift to 10 percent, 55 percent, and 35 percent for the same respective tiers, with a critical twist; 60 percent of the VAT revenue would be distributed based on derivation. This means that where VAT is collected becomes as crucial as the amount collected, potentially favouring regions where consumption activities are concentrated.
The introduction of the derivation principle seems aimed at dissuading states that contribute more to the VAT pool from pushing for the administration of VAT to be handled by State Governments. A few years ago, Rivers State and Lagos State took legal action regarding this matter, which appears to have been temporarily settled through political means.
For businesses, this principle introduces a new layer of complexity. This shift will compel businesses to trace their VAT collections to specific states and local government areas, necessitating upgrades to enterprise resource planning systems for accurate data collection. Federal Inland Revenue Service, possibly soon renamed Nigeria Revenue Service, will require a sophisticated electronic system to manage this complex VAT administration.
A transitional period, possibly two years, might be necessary to allow businesses and tax authorities to adjust to these changes. Immediate implementation could lead to administrative failures and financial burdens on businesses, which might need to invest in technology and additional staff for compliance.
Determining the source of VAT could become a conundrum. For instance, VAT on Imports; Imagine a scenario where a manufacturer imports raw materials through Lagos, but sells finished products across Nigeria. The VAT initially collected in Lagos for imports, plus differential VAT on sales, must now be attributed to where the final consumption occurs, not where the import was cleared. There is also a bias towards port locations; for example, if a resident of Kogi State imports a car through Lagos for personal use, the import VAT would be remitted at Lagos port, while the actual point of final consumption or use is Kogi.
The issue of the service-based VAT could also become a challenge. Consider a bank, headquartered in Abuja, which pays a cybersecurity firm for services protecting its network nationwide. Here, the VAT paid cannot simply be allocated to Abuja, it needs to reflect where the cybersecurity service benefits, which might be all over Nigeria.
Also, VAT on aspects of Telecommunications could also be problematic. With subscribers moving across states, how does a telecom company determine which state’s VAT pool a call or data usage contributes to?
These examples highlight the need for detailed administrative guidelines to simplify what could otherwise become an administrative quagmire. Even with the introduction of guidelines,one might intuitively anticipate that compliance with and administration of VAT will become more challenging than ever before under the proposed system.
The implementation of such a system demands a thoughtful transition. Suggesting a two-year adjustment period would allow businesses time to budget for the additional compliance cost, and adapt their systems and for the FIRS/NRS to develop the necessary infrastructure for accurate VAT distribution. Moreover, extending VAT return periods from monthly to quarterly could provide businesses with the breathing room needed to comply with these new and extensive requirements. This proposal implies that VAT revenue would be collected only four times a year instead of twelve, which might make this option less appealing to the government.
Without clear repercussions for non-compliance, there’s a risk that both the FIRS/NRS, and businesses might not prioritise the precise allocation of VAT to specific states or LGAs.
Therefore, I hope that the new legislation or any subsequent rules will include punitive measures for non-compliance, alongside incentives for those who adhere strictly to the eventual VAT distribution guidelines.
Moreover, state and local governments might harbour skepticism regarding the commitment of FIRS/NRS to accurately distribute VAT according to the derivation principle. To address this,
establishing a transparent mechanism, possibly facilitated by the Federal Accounts Allocation Committee, could provide assurance that VAT revenues are indeed distributed in alignment with the derivation principle. However, this might not completely eliminate skepticism, but it would provide a central administrative body to address concerns from state and local governments. Additionally, there is a need to create a mechanism for swift dispute resolution regarding VAT allocation issues. Will we then burden our already overstretched courts with these matters?
Resistance to the derivation principle in VAT distribution has surfaced from several quarters. A primary concern is the “headquarters effect,” where VAT collected might unfairly favour states with a concentration of corporate headquarters. This could skew benefits towards these states, even if the actual consumption of goods or services occurs elsewhere. However, the proposed administrative framework seeks to address this by ensuring VAT is attributed to the point of consumption, not just where headoffice of the VAT collector is located.
Another key issue worthy of note is the potential neglect of states or LGAs that produce goods for national or international markets, especially if those goods are VAT-exempt or VAT is paid at a point distant from production. Critics argue that this principle might not adequately recognise the economic contributions of these areas. I personally do not believe compensating the economic contributions of these areas, through VAT, is a priority.
To illustrate this point, consider a scenario where an individual in Nigeria imports a luxury car, like a Rolls Royce, from the UK. The UK does not impose VAT on this export, but Nigeria levies VAT upon import.Should Nigeria then compensate the UK for its role in manufacturing the car merely because it was produced there? Similarly, when cattle from Borno are sold and eventually consumed as beef in restaurants in Calabar, where VAT is collected, Borno should not receive compensation simply because the cattle originated there. The derivation principle focuses on rewarding where VAT is effectively paid, not where goods are produced.
While derivation does not directly compensate the ‘producing’ states and LGAs for their economic contributions, other yet-to-be-defined parameters determine the distribution of the remaining 40% of the VAT revenue allocated to state and local governments. I suspect this remaining 40% might be distributed akin to the pre-derivation formula (e.g., 20% shared equally and 20% based on population). This approach ensures that even regions less engaged in VAT- generating activities are not completely sidelined in the revenue-sharing formula.
In conclusion, the introduction of the derivation principle in VAT distribution is a bold step towards fiscal equity, but comes with its share of challenges. As Nigeria moves forward with these tax reforms, balancing administrative feasibility with the intent of fair distribution will be key. This reform could not only transform how revenue is shared but also how businesses operate within the country, making transparency and adaptability more crucial than ever.
- Yusuf writes from the United Kingdom
RAMAT HASHARON, Israel — Egypt’s president announced Sunday his country has proposed a two-day cease-fire between Israel and Hamas during which four hostages held in Gaza would be freed.
President Abdel-Fattah el-Sissi, speaking in Cairo, said the proposal also includes the release of some Palestinian prisoners and the delivery of humanitarian aid to the besieged Gaza Strip.
Egypt has been a key mediator along with Qatar and the United States. This is the first time Egypt’s president has publicly proposed such a plan. There was no immediate response from Israel or Hamas.
El-Sissi said the proposal aims to “move the situation forward,” adding that once the two-day cease-fire goes into effect, negotiations would continue to make it permanent.
There hasn’t been a cease-fire in 11 months, since November’s weeklong pause in fighting in which 105 hostages were released in exchange for 240 Palestinian prisoners.
Meanwhile, Israel’s Mossad chief was traveling to Doha on Sunday for talks with the prime minister of Qatar and the CIA chief.
During a government memorial Sunday for the Hebrew anniversary of the Oct. 7 attack, Israeli Defense Minister Yoav Gallant said that “not every goal can be achieved through military operations.” He added that “painful compromises will be required” to return the hostages.
Egypt’s proposal came a day after Israeli strikes on Iran in response to Iran’s ballistic missile attack earlier this month. Iran’s supreme leader said the attack “should not be exaggerated nor downplayed,” while stopping short of calling for retaliation. It was Israel’s first open attack on its archenemy.
That exchange of fire has raised fears of an all-out regional war pitting Israel and the United States against Iran and its militant proxies, which include Hamas and the Hezbollah militant group in Lebanon, where Israel launched a ground invasion earlier this month after nearly a year of lower-level conflict sparked by the war in Gaza.
Meanwhile, Israeli strikes on northern Gaza killed at least 33 people, mostly women and children, Palestinian officials said Sunday, as Israel’s offensive in the hard-hit and isolated area entered a third week and the U.N. secretary-general called the plight of Palestinians there “unbearable.” Israel said it targeted militants.
Two Israeli strikes killed eight people in Sidon city in southern Lebanon, with 25 wounded, according to Lebanon’s health ministry. One strike hit a residential building, according to footage taken by an Associated Press reporter.
The Israeli military said four soldiers, including a military rabbi, were killed in fighting in southern Lebanon, without providing details. It said five other personnel were severely wounded. An explosive drone and a projectile fired from Lebanon wounded five people in Israel, authorities said.
Netanyahu says strikes on Iran achieved Israel’s goals
Israeli Prime Minister Benjamin Netanyahu in his first public comments on the strikes said “we severely harmed Iran’s defense capabilities and its ability to produce missiles that are aimed toward us.”
Satellite images showed damage to two secretive Iranian military bases, one linked to work on nuclear weapons that Western intelligence agencies and nuclear inspectors say was discontinued in 2003, and another linked to Iran’s ballistic missile program. Iran on Sunday said a civilian had been killed, with no details. It earlier said four people with the military air defense were killed.
Ayatollah Ali Khamenei, Iran’s 85-year-old supreme leader, said “it is up to the authorities to determine how to convey the power and will of the Iranian people to the Israeli regime.” Khamenei would make any final decision on how Iran responds.
Later Sunday, protesters disrupted a speech by Netanyahu at a nationally broadcast ceremony for victims of Hamas’ attack on southern Israel last year that sparked the war in Gaza. People shouted “Shame on you” and forced Netanyahu to stop his speech. Many Israelis blame Netanyahu for the failures that led to the’ attack and hold him responsible for not yet bringing home remaining hostages.
Truck ramming in Israel wounds dozens
In a separate development, a truck rammed into a bus stop near Tel Aviv, killing one person and wounding more than 30. Israeli police said the attacker was an Arab citizen of Israel. The ramming occurred outside a military base and near the headquarters of Israel’s Mossad spy agency.
The truck slammed into a bus in Ramat Hasharon as Israelis were returning to work after a holiday, leaving some people stuck under vehicles.
Israel’s Magen David Adom rescue service said six of the wounded were in serious condition. The Ichilov Medical Center reported that one person had died.
Asi Aharoni, a police spokesperson, told reporters the attacker had been “neutralized,” without saying if the assailant was dead.
Hamas and the smaller Islamic Jihad militant group praised the attack but did not claim it.
Palestinians have carried out scores of stabbings, shootings and car-ramming attacks over the years. Tensions have soared since the war in Gaza began. Israel has carried out regular military raids into the occupied West Bank that have left hundreds dead. Most appear to have been militants killed during shootouts with Israeli forces, but Palestinians taking part in violent protests and civilian bystanders have also been killed.
‘Horrific circumstances’ in northern Gaza
The Gaza Health Ministry’s emergency service said 11 women and two children were among the 22 killed in strikes late Saturday on several homes and buildings in the northern Gaza town of Beit Lahiya. It said another 15 were wounded. The Israeli military said it carried out a strike on militants.
A Health Ministry official, Hussein Mohesin, said 11 people were killed in an Israeli strike on a school-turned-shelter in the Shati refugee camp in northern Gaza. The Israeli army did not immediately comment. Israel has struck a number of such shelters, often killing women and children, saying it targets militants hiding among civilians.
Israel has waged a massive air and ground offensive in northern Gaza since early October, saying Hamas militants have regrouped there. Hundreds of people have been killed and tens of thousands of Palestinians have fled to Gaza City in the latest wave of displacement.
Aid groups have warned of a catastrophic situation in northern Gaza, which has suffered the heaviest destruction of the war. Israel has severely limited the entry of basic humanitarian aid in recent weeks, and the three remaining hospitals in the north — one raided over the weekend — say they have been overwhelmed by waves of wounded.
The U.N. secretary-general in a statement by his spokesperson noted “harrowing levels of death.” The International Committee of the Red Cross on Saturday described the civilian population in “horrific circumstances.”
The war began when Hamas-led militants blew holes in Israel’s border wall and stormed into southern Israel in a surprise attack on Oct. 7, 2023. They killed around 1,200 people, mostly civilians, and abducted around 250. Some 100 hostages are still inside Gaza, around a third of whom are believed to be dead.
Israel’s retaliatory offensive has killed more than 42,000 Palestinians, according to Gaza’s Health Ministry. The ministry does not distinguish between civilians and combatants but says more than half of those killed were women and children. Israel says it has killed over 17,000 militants, without providing evidence.
The offensive has devastated much of Gaza and displaced around 90% of its population of 2.3 million, often multiple times. Hundreds of thousands of people have crowded into squalid tent camps, and aid groups say hunger is rampant.
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The Anambra State chapter of Labour Party (LP) has rejected the proposed local government election in the state, scheduled for September 28.
The state working committee of the party at a press conference during the weekend, told journalists that it will head to court to contest what it called the hurried amendment of the state electoral laws by the House of Assembly on the prompting of the state Governor, Prof Chukwuma Soludo.
The party said: “The trending matter of the moment as we all know is the proposed forthcoming Anambra State Local Government elections.
“As much as the State House of Assembly did not make any budgetary provisions for the proposed Council Election, we are shocked and at a loss as to the speed of amendments upon amendment of the State Electoral Law even extending into the wee hours of night.
“The governor is under intense pressure to conduct the LGA election before October, 2024 or loose the monthly Local Government Fund Allocations to a holding account as ruled by the Supreme Court of Nigeria.”
The party said after a careful study of the amended Electoral Law they have resolved to go to court.
“We will approach the court to challenge some of the obnoxious clauses in the
hastily amended laws. We as a party are getting prepared to participate in the election once the right and lawful things are done, and without prejudice to the outcome of the judicial proceedings pending before the court.”
A governorship aspirant of the Labour Party for next year’s election in Anambra State, John Nwosu, has rejected the proposed local government election by the state independent electoral commission.
Nwosu, in a press release he signed and sent out, described the process as being hasty and purposefully intended to aid the state governor, Prof. Chukwuma Soludo, to capture the grassroots for next year’s election.
He said: “The unbelievably contrived and hurried local government election purportedly scheduled for 28th September 2024 is stranger than fiction.
“The governor is convinced that he can capture the Anambra State judiciary and use them to rubber stamp the election heist he is planning against the wishes of Ndi Anambra, who are ready and willing to participate massively in the local government election.
“We cannot condemn the 2023 general elections in Nigeria as lacking the minimum standards expected of a democratic election and sit by watching the Anambra State local government election head with speed to a worse outcome.
“The planning so far lacks natural justice, equity and good conscience, and if executed as planned, the consequences are likely to make an already volatile security situation in Anambra State worse.
“Accordingly, I, Mr John Nwosu, on behalf of the John Nwosu Campaign Organisation, reject the hurried and spurious amendments to the Anambra State Local Government Election Law crassly done in favour of the incumbent government of Anambra State.”
He noted that the Local Government Election Law, which is guiding the election, has been hurriedly amended twice to achieve a set purpose.
“The two amendments lack content and diligence in legal drafting. Their impact is to meet a set goal known to Ndi Anambra – win via subterfuge all chairmanship and councillorship seats for the incumbent governor of Anambra State, even if the heavens fall.
“This obvious attack on the democratic process by an elected governor who swore to protect and defend the Constitution of the Federal Republic of Nigeria is based on the jaundiced legal advice that litigation on local government elections begins and ends with the State High Court system, whose welfare depends on the goodwill of the governor.
“The John Nwosu Campaign Organisation wholly and entirely rejects this jackboot mentality to the Anambra State local government election fixed without thorough and comprehensive consultations for the 28th day of September 2024.
“I urge caution on the planners and intended participants to work out a process and modus operandi that will promote trust and unity in Ndi Anambra instead of chaos and further security challenges in our dear state,” he said.
Stakeholders from the banking and insurance sectors are expressing differing views and concerns regarding a bill aimed at amending the Nigeria Deposit Insurance Corporation (NDIC) Act No. 63, 2023. The objective of the bill is to enhance the effectiveness, independence, and autonomy of the Corporation.
The bill, sponsored by Mukhail Abiru, Chairman of the Senate Committee on Banking, Insurance, and other Financial Institutions, has passed the second reading in the Senate.
One of the most contentious proposed amendments is the removal of the “Concurrence”
role for the Central Bank of Nigeria (CBN) and its substitution with a more “collaborative”
role. This change is intended to grant the NDIC greater independence in decision-making regarding its policy objectives.
During a public hearing on the bill at the Senate, the Central Bank of Nigeria expressed its opposition to this amendment. However, the bankers, directors, and other stakeholders endorsed the change.
The bill proposes amendments to sections 2, 3, and 4 of the principal Act, replacing the word “concurrence” with the word “collaboration.”John Onoja, acting director of the financial policy and regulation department of the CBN, explained that “collaboration“ means that the NDIC makes decisions and collaborates with the CBN.
On the other hand, Mustafa Chike-Obi, Chairman of the Bank Directors Association of Nigeria, applauded the removal of the CBN concurrence requirement in Section 32. He stated that this change aligns with the NDIC‘s mandate to independently regulate insured deposit liabilities.
The Financial Services Regulation Coordinating Committee (FSRCC), in its memoranda to the Senate Committee, also protested against the amendment to section 16. This amendment aims to increase the capital base of the NDIC from 50 billion to 500 billion, which will be subscribed and held only by the federal government.
The FSRCC argued that increasing the authorized share capital to 500 billion, fully owned by the federal government, renders the additional capital redundant as it would not yield the required return on investment. They suggested that the existing share capital structure should be maintained between the Ministry of Finance and CBN, as stated in the principal Act.
Furthermore, Nestok Ikeagu, director of legal at the Securities and Exchange Commission (SEC), objected to the amendment that removes the SEC Director-General from the NDIC board. He emphasized that the SEC‘s role in investor protection justifies its position on the board, and removing it would hinder interagency collaboration.
Meanwhile, the NDIC boss voiced his support for the bill, stating that it will strengthen the NDIC.
Ronke Sokefun, the former chairman of the NDIC board, also spoke in favor of the bill. She expressed concerns about the NDIC losing its independence as a liquidator to the CBN. She appreciated the bill for considering the traditional role of the corporation as the liquidator in the event of a bank‘s winding up. She emphasized that the NDIC should not be subject to the whims and caprices of the CBN, which could decide to appoint another liquidator.
Chairman Abiru assured that the Senate will carefully consider all the objections raised by stakeholders.