The states are dying (3)


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The states are dying

The states are dying

By Eric Teniola

THE Raisman Commission was to review the tax jurisdictions as well as the allocation of revenues from these taxes, but such that the Regions had the maximum possible proportion of their income within their exclusive competence. This prescription for maximum independent revenues for the regions could not be fully realised.

As the Commission reported, “the scope for the enlargement of regional jurisdiction or taxation … seems disappointingly small.” This conclusion is as valid today as it was in 1958. Personal Income tax was, however, made a Regional tax with the Centre being given the power to harmonise the tax laws (not the rates) through an income Tax Management Act.

Raisman created the Distributable Pool Account to facilitate the sharing of some federally collected revenues among the Regions. Each major revenue head was divided into a portion to be paid to the Regions on the basis of derivation, a portion to the Federal Government and a portion to be paid into the distributable pool for sharing among all the Regions on a set of principles.

Payments were made on the basis of derivation on the following items: 30 per cent of import duties (other than on tobacco and motor fuel), 50 per cent of mining rents and royalties.

Raisman’s argument was that “the government in whose Region oil royalties originate should clearly have a significant share in it”. The payments into the Distributable Pool Account were made from 30 per cent of mining rents and royalties and 30 per cent of all import duties except those on wine, beer, spirits, motor spirit and diesel oil and tobacco.

For the allocation to the Regions out of the total revenue there were clearly two principles: derivation and need. But need was reflected by population, by requirements for continuity in government services, for minimum responsibilities of government (in later to be restyled equality of states), and for balanced development.

The weights attached to these principles were not displayed. The result of their calculations was that the North got 40 per cent, the West 31 per cent, the East 24 per cent and Southern Cameroon then still a part of Nigeria, five per cent.

The Raisman formula remained in force until 1965 by which time oil revenue was beginning to show signs of becoming a dominant factor in the structure of the federally collected revenues.

Increases in the import duties and the growth of manufacturing industries which yielded higher excise revenues all helped to enlarge the revenues of the Regions. Raisman had recommended that subsequent reviews should relate only to the mining rents and royalties and the allocation from the Distributable Pool Account. By 1963, the Republican Constitution had been introduced necessitating another review of the existing scheme.

The Binns Commission was appointed under Section 164 of the 1963 Republican Constitution. Its terms of reference were, among others, to review and make recommendations with respect to the allocation of mining rents and royalties and the distribution of funds in the Distributable Pool Account among the regions. Binns, therefore, focused on the distributable pool account.

He increased it to 35 per cent of revenues from import duties, mining rents and royalties and shared the account in the proportion of North 42 per cent, East 30 per cent, West 20 per cent, and Midwest eight per cent.

He applied the principle of “financial comparability”, for the first time; it was somewhat of a hybrid between need and even development. It is determined by the cash position of each Region, its tax effort and the standard of service it provides. The Commission’s work and sittings were conducted in secret leaving an air of mystery around the recommendations.

Within a year of the Binns Report, the military intervention in Government in 1966 changed the political environment. In 1967, twelve states were created out of the former four Regions; the immediate problem was, therefore, how to share the Distributable Pool Account among the 12 states.

The problem was solved very simply by dividing the share of the former Northern Region (42 per cent) among the six new states created out of it on the basis of equality and those of the West and the East among the states newly created out of them, on the basis of population.

In a sense, the two principles of population and equality of states entered partially in the allocation of revenues and became firmly and fully adopted in 1970. The Decree of 1967 was to provide an immediate and temporary solution to an immediate and pressing problem.

Accordingly, the Dina Committee was appointed in 1968 with the following terms of reference: In the light of the creation of 12 states charged at present with the function formerly exercised by the Regional governments to: look into and suggest any change in the existing system of revenue allocation as a whole.

To be concluded next week


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Source: Vanguard News.

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