By Olasunkanmi Akoni, Emmanuel Aziken & Bola Owolabi
Posted to the Web: Friday, July 29, 2005

LAGOS — THE Lagos State Government, agreed, yesterday, to the proposal of the Prince Bola Ajibola-led mediation committee to amend the law on the creation of 37 new local government areas in the state, which had pitched the state against the federal authorities.

The Federal Government had, in its reaction to the creation of the local government areas withheld allocations due to the councils. However, following the latest development, the 37 local government areas will transform into Local Council Development Areas to be solely funded by the state government.

Meanwhile, two bills that may deny Lagos State billions of naira in taxes are now before the Senate. The bills seek to amend the personal income tax to stop the state from collecting taxes from companies with headquarters there.

Following the decision of the state government to review its position on the new local government areas, the state Assembly at a special sitting yesterday amended the New Local Government Areas 2004 Bill, now cited the Creation of New Local Government Areas (Amendment) (No. 2) Law of 2005.

Addressing newsmen in Ikeja, state Commissioner for Information and Strategy, Mr. Dele Alake, said with the new development, the statutory allocation accruable to Lagos State from Abuja would be used for the funding of the old 20 local government areas as recognised by the constitution while the state would be responsible for the funding of the 37 local development areas which he affirmed were still legal as elections conducted into them were declared by competent court to be legal.

He announced that the new councils had been structured to perform and referred to as Local Council Development Areas. The state government, he said, arrived at the decision to agree to the terms of the proposal not out of cowardice, but to clear the minds of the public as well as the international community of any doubt.

According to Mr Alake, the resolution read to the Consultative Assembly, had agreed with the core issues in the proposal. Said he: "We were not compelled in any way to do this. It is just a way of showing our commitment to the early resolution of the logjam in the spirit of true democracy and also to remove any doubt from the minds of the public and the international community.

"Before the 2003 election into the councils, the Federal Government had been paying the funds. It was just immediately after the elections were conducted that they stopped the funds. Moreover, we have never asked the Federal Government at any time to pay for the funding of the 57 but the 20 councils. We have agreed pending when the National Assembly formally enlists the new councils.

The December 2004 Supreme Court judgment, which was in our favour, ruled that the state government had the right to create new councils."

He further said the state government had in the wake of the recent victory in the courts been considering filing a contempt charge against the Federal Government but for the wise advice of the mediators led by Prince Bola Ajibola against such move.

The Bill just passed by the state House of Assembly amending Section 2 of the Creation of the New Local Government Areas reads:

Amendment to section 1: Section 1 of the Creation of New Local Government Areas Amendment Law 2004, referred to in this law as the Principal Law is amended by inserting sub-section (2) as follows:

(2) The additional Local Government Areas listed in Schedule II to this law are inchoate until such time as the National Assembly shall pass an Act to make consequential provisions with respect to the names of the said additional local government areas as provided in section 8 (5) of the constitution of the Federal Republic of Nigeria, 1999.

Amendment to section 2: A new section 2A shall be inserted immediately below section 2 of the Principal Law as follows:

(2A) Pending the consequential Act of the National Assembly referred to in section 1 (2) of this law, the local government areas for the time being listed in part 1 of schedule I to the 1999 constitution and in the schedule I to the amendment law are hereby re-established.

All other local government areas referred to in schedule II to the amendment law shall in the meantime operate as Local Council Development Areas, the funding of which shall be borne by the state government.

Citation and commencement: This law may be cited as the Creation of New Local Government Areas (Amendment) )No. 2) Law of 2005.

FG reacts

Reacting to the action of the Lagos State government, Special Assistant to President Olusegun Obasanjo on Public Affairs, Chief Femi Fani-Kayode, said it was a victory for Nigeria, democracy and the rule of law.

He said although there was no victor or vanquished in the protracted legal battle that lasted for over a year, "the decision by the Lagos State Government to revert is a vindication of the position of Mr. President and the Federal Government.

"It is a victory for the whole of Nigeria, democracy and the rule of law. I do not think there is any victor or vanquished in this matter. I think all of us have gained from it. We also have to commend the courage of the Lagos State Government for doing the right thing and lining up with the rest of Nigeria. Now they know that we have a lion in the villa who would do what is right no matter whose ox is gored."

Senate moves to deny Lagos tax revenue

Meanwhile, two bills seeking to amend the Personal Income Tax Act with the implication of Lagos State losing its advantage in collecting billions of naira in taxes accruing from companies with headquarters in the state received strong support in the Senate yesterday.

While Senators raised strong objections to the Federal Government’s bill to impose taxes on previously tax free allowances including housing and transportation, they gave strong support to the privately sponsored bill aiming to link residency to tax collection.

The PIT Amendment Bill sponsored by Senator Inantimi Rufus Spiff (PDP, Bayelsa) is to ensure that workers pay their personal income taxes where they live and work instead of such being paid in the headquarters of their organisations.

Introducing the Federal Government’s Personal Income Tax Act (Amendment) Bill 2005, Senate Leader, Dr. Dalhatu Tafida, said the bill aimed strengthening the tax base.

Clause three of the amendment bill aims to remove the N5,000 non-taxable safety net in the assessment of personal income tax and replace same with a 40 per cent safety net under which personal income will be shielded from taxes.

The removal of the N5,000 safety net was criticised by several of the Senators mainly Senators Kassim Oyofo (PDP, Edo North), Udoma Udo Udoma (PDP, Akwa Ibom South), Tawar Wada (PDP, Gombe South) and Bassey Ewa-Henshaw (PDP, Cross River).

Senator Oyofo said the idea of the bill which was to ensure proper succour for workers would be undermined by the controversial clause three as he called for caution in addressing the issue.

Senator Ewa-Henshaw said in taxing the allowances of workers, government was inadvertently withdrawing the benefits that would to accrue to them through the monetisation policy."What we should be doing is to raise more taxes from those who are earning more. You monetise benefits and say you are giving the benefits in cash and you at the same time turn around to say you are taxing the same benefits, it will further impoverish the people," Senator Ewa-Henshaw, chairman of the Senate Committee on Labour, said. Senator Iyiola Omisore (PDP, Osun) also contributing to the debate on the same government bill urged government to strengthen its collection processes with punitive measures to stop tax evasion.

Presenting the bill, Senator Spiff said it was regrettable that workers were paying taxes to states where they don't reside e or carry out their daily work. "A situation where the personal income tax of (such) workers are computed and paid at headquarters to the states hosting their headquarters is manifestly unjust and calls for immediate redressing.

"A very clear case in point is the situation that exists in the banking industry today in the country. All bank workers, irrespective of where they work, whether at headquarters or in branch offices, pay taxes to the states in which their headquarters are located. As a result, states where banks operate only branch offices are denied the right to tax the personnel that work in them," Senator Spiff said.

Besides banks, he equally cited oil workers who even though they carry out most of their operations in the Niger Delta area pay their taxes in states where their headquarters are located outside the region. Senator Spiff was supported in his bill by Senators David Brigidi (PDP, Bayelsa), Mohammed Anka (ANPP, Zamfara),Udo Udoma (PDP, Akwa Ibom) and Jubril Aminu (PDP, Adamawa).

Following an exhaustive debate on the two bills, they were read the second time and forwarded to the Senate Committee on Finance for further action.