Consulting Firm Proposes Workable Tax System

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• Amidst VAT crisis ALTERKONSULT Proffers Viable Solutions

Against the backdrop of the current imbroglio between States and Federal Government over which body should collect the value Added Tax, a Kaduna based financial consulting firm, ALTERKONSULT has proposed a workable model that would be beneficial to all the tiers of the government as well as add value to the common man .

In a press release made available to our correspondent and jointly signed by the Chairman, Dahiru Mohammed Umar and the Secretary, Emmanuel Daniel Ochi, ALTERKONSULT explained that the disagreement between the Federal and State Governments is a Pandora Box that is capable of stimulating tax wars between the Federal Government and state Governments on one hand and between state governments which may eventually lead to a North/ South conflagration and disunity.

It added that as such, states would be forced to levy different form taxes on firms and individuals with their states leading to double taxation.

“The current conflict over VAT between Rivers, Lagos, potentially, other states of the federation on one end and the federal government through FIRS on the other end have long existed; this is a Pandora’s Box.

The conflict has long existed within the entire tax system of Nigeria not just VAT. This is evidenced by the continuous systemic corruption, difficulty in doing business, increased agitations to restructure, increasing social, political and economic crises bedevilling the country.

The increasing call for improvement in internally generated revenue (IGR) by states and local governments will reveal more of this kind of conflicts inherent within our tax system. Nigeria is a country on a defined geographical location with federal, states and local governments operating with little or no synergy within them. Where will the states and local governments generate revenue different from that of the federal government? Of course it has to be from the same business entities, the same business activities and the same economy.

“The states and local governments will only resort to creative taxation in form of levies to improve IGR which only makes business more difficult. Also, a system where tax generated or paid by individuals in one part of the country becomes credited to another part of the country where the head office is located will be considered unfair by the part of the country where the tax was generated. Or where parts of the country receive tax revenue without any corresponding input in generating that tax will be considered unfair by the parts of the country where the revenue is generated.

The statement further explained that due to the diverse nature of the country, the Federal inlandy Revenue Service, State Inland Revenue Service and the Local Government Inland Revenue Service would have to adopt systematic solution via dialogue which would then provide an acceptable model in the mode of that presented by ALTERKONSULT

“The problems are compounded due to the ethno-religious diversity of Nigeria and enterprising nature of Nigerians.

“This has undermined and exacerbated the problems of ethnic balance and national integration; consequently our uniqueness and strength as a nation with diversity in the groupings has posed increasing challenges which at present threatens the fabric of our national unity. The solution to this problem cannot come from the current steps being taken by both states and federal government via FIRS but rather a holistic systemic solution to this systemic problem which should take into cognizance the political, economic and cultural variables of Nigeria.

ALTERKONSULT further added that instituting court cases would not solve the issues as it is mainly a constitutional matter and there requires the attention of the National Assembly as well as State House of Representatives.

” Irrespective of whoever wins in the courts will not solve the existing problem rather a solution which promotes national policy thrust that focuses on national unity while preserving our diversity. Also, the need for economic synergy amongst various elements within the national economy as indices for successful performance of the economy should be identified. Most importantly is a resource, revenue allocation formula as spelt out from the interplay of the concepts of taxation, unity in diversity, synergy, democracy, comparative advantage and protectionism with specific references to the economic structure of government. This is the solution we therefore proffer!

“The model, a workable solution as presented by Alter-Konsult proposes that Value Added Tax (VAT) should be modified to be similar to Sales Tax and positioned to serve as an index for economic activities in all parts of the country: this should also serve as the base for revenue distribution. VAT collection and administration should be a joint effort between Federal (FIRS), States (SIRS) and Local Government (LIRS) so as to create unified tax system, avoid multiple taxes and increase tax base.

“Doing this will enable government at all levels function synergistically and focus on the provisions of fiscal variables necessary for economic growth within their levels while eliminating inefficiencies. The fiscal variables—taxes, the quality and quantity of services (infrastructure) provided by government—are what policymakers can control and they will be able to know what effect these variables have on economic growth and firm location.

“The impact of taxes on firms will be easy to measure because accurate measurement relies in part on the incidence of the tax. We also propose the adoption of a mixed economic structure that will enable the local and state governments concentrate on the economic activities that is indigenous.

For the harmonious working of the model, we recommend a new revenue sharing formula where all revenue generated is distributed equitably, as captured by the incidence of VAT modified.

Our nation has got to the point where, more than ever, the needed wisdom and understanding, stemming from a rare compact knowledge of a workable probability has to be researched, well-articulated, appraised objectively and authentically utilized in order to come out of our doldrums.

” This is what the solution proffered by Alter-Konsult based on the book titled “Political Economy and Taxation – A Practical Systemic Platform for Good Governance” has tried to achieve and, if well embraced, it will help the nation out of this quagmire. “Where there’s a will, there’s a way” – Eliza Cook.

“The condition of a society, good or bad, is the outflow of communal character and as such no nation ever grows, develops and stabilizes without shared values that can bring about these needs. If the reality of a viable communal character is firmly believed in by most and is established in the polity, governance at all levels will be seamless, effective and economic growth will be recorded at all levels and parts of the country. We have lingered too long on the blame-game and non-working ideologies.

” Let us revisit our system with a purview to review, discard unhelpful content and work with new concepts that will surely bring about different and better results. This call should be within a defined time that will allow for careful review and accepted by all stakeholders.

“The model being presented which will surely help in the amicable resolution of the conflict and salvage the nation from the social, economic and political precipice we have been sitting on and ultimately restore the dignity of Nigerians. Alter-Kosult is very much willing to make this presentation when called upon by all stakeholders.

ALTERKONSULT had long before the VAT war foreseen that conflicts of such nature would occurs and therefore had at several fora advocated for new tax system which is more pragmatic and would be acceptable to all tiers of Governments

A demonstration of this model was presented at:

  1. Nigeria Union of Journalist Kaduna chapter;
  2. Kaduna Polytechnic, Kaduna;
  3. Alter-Konsult office in Kaduna to Journalists.

The model has also been submitted to:

  1. National House of Representative Committee on the Review of the Constitution;
  2. The Joint Tax Board of the FIRS;
  3. The Revenue Mobilization and Fiscal Commission;
    Thank you.