The Nigerian tax dispute has reignited the debate over federalism.

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The Nigerian tax dispute has reignited the debate over federalism.

As politicians fight for position ahead of the 2023 elections, a court struggle between Nigeria’s government and states over sales tax is generating passionate discussion about federalism in Africa’s most populous country.

The battle over whether the federal or state governments have the authority to collect value-added tax (VAT) could be about money, with billions at stake.

However, the squabble highlights long-standing concerns about Nigeria’s governance and income distribution in the continent’s largest oil producer.

Analysts suggest that depending on how the disagreement is resolved, wealthier southern areas may be able to exercise more state autonomy on topics ranging from oil resources to security police to cow grazing rights.

In August, a court in southern Rivers State, Nigeria’s petroleum heartland, declared that states, not the Federal Inland Revenue Service, should be in charge of collecting VAT.

Governor Ezenwo Nyesom Wike of Rivers State, a stalwart of the opposition Peoples Democratic Party, pushed through a law for local VAT collection, warning FIRS against “sabotage.”

Southern Lagos State, which includes the nation’s commercial hub Lagos, rapidly followed suit with its own VAT collection statute.

Following a federal government appeal, the case has become entangled in opposing demands, with Abuja considering taking the matter to the Supreme Court.

Only the national assembly, according to Attorney General Abubakar Malami, can legislate on how VAT is imposed.

“The federal government is considering all alternatives available to it, including the potential of involving Supreme Court authority,” he said.

In Nigeria, the Federal Inland Revenue Service (FIRS) collects VAT centrally and distributes the funds to the federal, state, and local governments.

VAT collections were 1.5 trillion naira ($3.6 billion) in 2020. The federal government currently receives 15% of the total, with the remainder shared between states and municipal governments.

However, wealthy southern states such as Lagos and Rivers, which produce almost half of Nigeria’s VAT, have long complained that they are forced to pay for the poorer states, especially in the agricultural north but sometimes in the south.

They want more “fiscal federalism,” which means a larger share of the VAT they collect and more autonomy in how they run their businesses.

Setonji David, a Lagos assembly lawmaker, said Channels TV, “What we are after is to ensure that this money is utilised for the people of Lagos State, and that is exactly what we have achieved.”

In Nigeria, which became a unified entity under, the “restructuring” question frequently resurfaces during election seasons. The Washington Newsday Brief News is a daily newspaper published in Washington, D.C.

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