States banning alcohol shouldn’t get VAT on beer – Ex Minister

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Prof Isaac Adewole, a former Health Minister, has promoted fiscal federalism, in which states receive monies in proportion to what they contribute to the federation account.

Adewole, a former Vice Chancellor of the University of Ibadan, appeared on Inside Sources with Laolu Akande, a sociopolitical programme that aired on Channels Television on Friday.

Adewole advised governors to allow local governments to function independently.

He supported the long-standing call for subnational reorganisation and resource control. “I am an apostle of fiscal and physical federalism,” he stated.

He added that though it was late for a return to regionalism, states should be allowed to grow on their own and based on the resources within their domains.

Specifically, the former minister said states that prohibit the sale of alcoholic drinks should not get out of the Value Added Tax (VAT) on beer through the federation account.

He said, “We need to look at how we share the resources of this country. If you have a law that prevents you from selling alcohol, that law should also prevent you from sharing money from alcohol. We should be honest with ourselves. States that prohibit the sale of alcohol should not share out of VAT from alcohol. Straight forward.

“Then we should also ask each state what they are bringing to the table. A situation where states only share money from oil is absurd and that is why we are where we are today because the other states are not bringing anything to the table.

“What is happening to our gold, bitumen, lithium? The resources from all of these, where are they? The only thing we know is oil money.”

Back Story

At the moment, many of the 19 northern states where Sharia law is practised forbid the sale of alcohol in their domains. In some of the states, sub-nationals established religious police known as Hisbah to enforce the ban on alcoholic drinks.

Back in 2021, talks about 7.5% VAT collection on goods including alcohol by state governments made the headlines for months with Rivers and Lagos states being at the forefront of the move.

A Federal High Court in Port Harcourt, the Rivers State capital, had ruled that states, and not the Federal Inland Revenue Service (FIRS), should collect VAT and Personal Income Tax.

Some northern state governments had preferred the Federal Government to continue VAT collection and the FIRS had challenged the ruling of the high court in the oil-rich South-South state.

An appellate court would later order Lagos and Rivers governments to maintain status quo on the matter and the move entered a stalemate.

The VAT collected by the FIRS contributes significantly to the total revenue generated by the Federal Government. The total sum collected monthly is distributed among the three tiers of government, with the Federal Government getting 15% of the VAT revenue, while states and local governments get 50% and 35%, respectively.