Fashola Faults FG's Plan to Increase VAT ...

It's an option being considered says presidency

Lagos State Governor, Mr. Babatunde Fashola has decried President Goodluck Jonathan administration's plan to increase value added tax (VAT) in 2015 to cushion the effect of oil price slump, noting that the decision would make life more unbearable.

Reacting to Fashola's position on VAT, a source in the presidency that pleaded anonymity said," it is one of the measures we are considering and if it pulls through, states will get five per cent of the money: we dont know why he is making political capital out of it".

Fashola condemned the refusal of the apex government to release the audit report of the conflicting missing oil funds, which the Nigerian National Petroleum Corporation (NNPC) allegedly did not remit into national purse.

He made the disclosure during an interactive session with journalists at Lagos House, Ikeja where he said the missing funds raised fundamental questions on the federal government’s public accounting and accountability.

At the session, Fashola lamented the retrogressive concept of Excess Crude Account (ECA) and the Sovereign Wealth Fund (SWF), which he said, had sharply plummeted due to the devaluation of naira against dollars.

He thus said the federal government “is trimming off pennies and shillings and leave the real issues unaddressed. They are already saying they want to increase VAT. What it means is that you and I are going to pay more for their mismanagement.

“They are coming to taxes that the vice president was alleging that we are over-taxing. So, who is right? Who is wrong? Will we be affected? But we will survive. The reason is that we never based our economy on oil. Our economy was based on people that this is a commonwealth. But we will create jobs".

He argued that no country in the world could grow beyond the size of her infrastructure, which he said, could have been developed with the funds saved in the ECA and SWF, though claimed that the idea was then rejected.

The governor explained that it “is the infrastructure that measures the growth that happens. When we had crude oil selling at over $100 per barrel, what are we doing? We could not record how much we were making.

“We were fighting who had the accurate records. So, that is why I said it was self-inflicted pains. If they could not build roads and generate power at $100 per barrel, what magic can you expect when the price is $56 per barrel? Some challenging times are ahead. But it is a time for us to be imaginative and creative.

“Do they have that creative capacity? We saw these days coming. One interesting thing is that every dime we collected under Excess Crude Account went into infrastructure development. I documented it because this day was coming and because that is what will define how well we will grow our investment in infrastructure.”

On the missing oil funds, the governor beamed light on the management, explaining that the story about missing money “did not come from out the federal government. It came from within the federal government.

“One department of government said another department had not remitted what it was supposed to remit. This tells us how dysfunctional things may be. In the aftermath, we first had $49.8 billion. We later had $10.8 billion.

“The latest figure is $20 billion. The real issue should be: should one cent be missing if there is accountability and transparency? If they cannot agree, it raises issue of public trust and capacity. Already, an audit is being conducted. Normally, that is what should be done in the case of financial impropriety.

“Allegations are often made really and they need to be investigated to see if there is substance in it. But there is a loud silence about the outcome of the audit. We heard the report has been submitted. Just like you, I wait to hear what happened and it will be pleasing to know what the report of the audit is.”

He faulted a statement credited to Vice President Namadi Sambo that residents of the state “are leaving in droves due to heavy taxation,” noting that the vice president made the comment out of ignorance.

Disturbed by Sambo’s comment, Fashola said: “I sincerely want to believe that the vice president was misquoted. If it was true, it was a display of ignorance because how did he justify the perception that people are leaving Lagos.

“Is the VAT collected from Lagos being reduced compared to other states? Is the air traffic into Lagos reducing? Or have you seen a significant reduction in Lagos traffic? Has the water demand in Lagos reduced? Or has the demand for hospital services reduced? More hotels are being built in Lagos.

“Companies are licensing and operating in Lagos. Displaced persons from other parts of the federation are moving to Lagos.

It is very grave statement to make. That is why I hope he was misquoted because that is the Chairman of National Economic Council. If he misunderstands what is happening in the economic capital of the country, it may be a revealing index into their understanding of the country’s economy.

“It may confirm to you some things you heard from President Goodluck Jonathan that he received contradictory advice. Maybe, this is part of it. That is a very dangerous statement to make. It is either ignorant or diabolical.”

Consequently, the governor argued that either way, it was not good by any standard because it “tells you why our economy is not functioning if the Chairman of National Economic Council made such a statement.”

He lamented the impact of the country’s economic challenges on the state’s internally generated revenue (IGR), noting that the IGR “has dropped to N18 billion monthly and if you multiply that by 12, it will assume to N216 billion.

“If that is all we get from taxes really, maybe with N10 billion and N144 billion from FAAC. If we do not want to borrow, we just reduce the budget to N370 billion. If we expect a smaller budget, we must ask for a reduced service. But the Lagos State Government response to infrastructural need has never diminished.”