On the Spot with Eric Teniola

September 15, 2020

The states are dying (4)

The states are dying (4)

By Eric Teniola

This is the concluding part of this piece which was first published three weeks ago. The third part published last week focused on the Raisman Commission set up to examine issues pertaining to taxation and revenue allocation in Nigeria.

THIS includes all forms of revenue going to each government besides and including the distributable pool; suggest new revenue sources both for the federal and the state governments. The recommendation were far-reaching in style and substance.

The Committee renamed the Distributable Pool Account into “States Joint Account,” established a special grants account, recommended a permanent Planning and Fiscal Commission to administer the special grants account and to undertake a continuous study and review of revenue allocation problems and schemes, and reduced the weight given to derivation, etc.

For the shares to the states, the principles considered were: basic needs, minimum national standards, balanced development and derivation. Royalties from on-shore mining, were paid out to the states of origin, 10 per cent, the Federal Government, 15 per cent, the states Joint Account, 70 per cent, and the Special Grants Account, five per cent. Rents from on-shore operations were to continue to be paid in full to the States of origin.

The Special Grants Account would be disbursed to states on their application to the Commission. The principles to be applied from disbursement were tax effort, balanced development and national interest.

The Report was rejected by the Military Government. It was not even published. Its range went beyond the mood of the military rulers of the time. For example, it recommended, as Hicks and Phillipson had done in 1951, that there should be a uniform tax regulation for the country and that the pricing of Marketing Board produce should be harmonized; it also recommended that the Federal Government should finance all higher education.

Some of these have, subsequently, been adopted piece-meal, for example, pricing policy of Marketing Boards, uniform income tax regulation, and financing of universities.

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The last but not least is the Professor Ojetunji Aboyade (1931-1994) from Awe in Oyo State, technical committee on revenue allocation of 1977. The Constitution Drafting Committee had been appointed in 1975 to prepare a draft Constitution as part of the political programme of the Federal Military Government.

Accordingly, the Technical Committee on Revenue Allocation was appointed in 1977 to review the existing revenue allocation scheme; its proposals were to be submitted to the Constituent Assembly and, if adopted, to be made a part of its constitutional proposals.

The Committee’s approach to the problem of revenue allocation extended to problems of development. It recommended that all federally-collected revenues, without distinction, be paid into the Federation Account.

The proceeds of this Account are to be shared among the Federal Government, the states and, for the first time, local government councils in the order of 60 per cent, 30 per cent and 10 per cent, respectively. This recommendation brought the states and local government councils into the most lucrative revenue sources: petroleum profit taxes and companies income tax.

It created a Special Grants Account ( three per cent from the Federal Government’s share) – and much like Dina’s – to be administered by the Federal Military Government for the benefit of mineral producing areas and in need of rehabilitation from emergencies and disasters, etc.

The principles for sharing among the states were built into a five-factor formula: equality of access to development opportunities, national minimum standards, absorptive capacity, independent revenue and tax effort, and fiscal efficiency. The formula was to be applied to increments, in the Account beyond the level of the previous year. The scheme was accepted but modified by the Federal Military Government.”

The governor’s forum should as a matter of urgency press for a new revenue allocation formula. It is not too late for the states and the local government to be saved. The death of the local and the states governments will affect governance in this country.