Africa
Since the politicians have resorted to shifting the goalpost as far as the issue of restructuring the country and giving the nation a new constitution are concerned, Nigerians should brace up for more battles to rescue the nation and the people from several ill-conceived laws and policies that have held it down from achieving its potential. The current battle for VAT control is laudable and the way to go.
By Goddy Ikeh
FOR some Nigerian elites, controversy has joined the list of “new normal” in the country like the daily killings, banditry, kidnaping, industrial actions by health workers and university teachers, agitations for secession by some ethnic groups among others. Unfortunately, politicians have been blamed for being the major drivers of these challenges plaguing the nation. There are reflected in the current poor state of the nation, which has been battling several crisis and controversies arising from poor governance issues and the failure of the ruling party and the federal government to embrace restructuring and give the embattled nation a new constitution.
As the controversy raised by the announcement that the country’s GDP grew by 5.01 percent in the second quarter of this year by the National Bureau of Statistics, NBS, was dying down, the nation’s newspapers were again awash with the news that the Federal Inland Revenue Service, FIRS, has been barred from collecting Value Added Tax, VAT, in Rivers State. This directive followed the ruling a Federal High Court in Port Harcourt in which Justice Stephen D. Pam upheld the constitutional authority and competence of the Rivers State Government to impose, charge, demand, and collect VAT on taxable goods and services within Rivers State and declaring that the Federal Government through the FIRS has no power to impose and collect VAT within the state. According to local media reports, the court also issued an order of perpetual injunction restraining the Federal Inland Revenue Service and the Attorney-General of the Federation, both first and second defendants in the suit, from collecting, demanding, threatening, and intimidating residents of Rivers State to pay to FIRS, Personnel Income Tax, PIT, and Value Added Tax, VAT.
With this judgment, Gov. Nyesom Wike, ordered the Rivers State Revenue Service, RSRS, to fully implement the State Value-Added Tax Law 2021, which he has already assented to recently. He therefore direct the Rivers State Revenue Service to ensure the full and total implementation and enforcement of this law against all corporate bodies, business entities, and individuals with immediate effect.
“Let me warn that the Rivers State government is fully in charge of the state and will not tolerate any further attempt by the FIRS to sabotage or undermine our authority to freely administer our tax and other related laws in our own state. Those who play with fire risk having their fingers burnt; enough of the shenanigans,” he said in a state-wide broadcast.
The governor also directed all corporate bodies, business entities, and individuals in Rivers State to willingly, truthfully and promptly comply with their tax obligations under the law. And for the victorious Gov. Wike, the ruling of the court will contribute to the advancement of fiscal federalism by enabling the federating states to explore their potential and capacity for generating greater internal revenues. Before heading to the Appeal Court in Abuja, the FIRS had challenged the ruling at the same Federal High Court in Port Harcourt on August 15, 2021, seeking a stay of execution of the judgment in order to stop the Rivers State Government from commencing the collection of VAT, but this request was turned down by the High Court.
The achievement by Rivers State attracted the support of other states, including Lagos, which applied to be joined as a co-respondent to the suit filed by the FIRS at the Appeal Court in Abuja. The Attorney General of the State and Commissioner for Justice, Moyesore Onigbanjo, who represented the state government at Friday’s hearing at the Appeal Court, informed the court of the interest of the state in the case. Onigbanjo therefore urged the court to take the application for the joinder first before the application for the stay of execution filed by the FIRS.
Although the Appeal Court ruled for a stay of execution by all parties in the case, the action of the Rivers State government has received the support of some states, especially Lagos state, which has passed the Value Added Tax bill and the governor assented to it.
According to Governor Babajide Sanwo-Olu of Lagos State, the law will empower the Lagos state Internal Revenue Service to impose and charge VAT on certain goods and services in the state. The signing of the VAT, makes Lagos the second state, after Rivers, to have a VAT law that empowers states to collect the tax.
“Given this new development, we expect the majority of the states to have revenue challenges given that (1) 50.0% of the total VAT generated across the Federation is shared amongst all states and (2) Lagos and Rivers state contribute c.60.0% of total VAT generated in the country. However, we expect it to have a negligible impact on the FGN because VAT revenue (4.2% of retained revenue between 2015 and 2020) represents a negligible fraction of total revenue. Nonetheless, we expect the FIRS and state governments to continue to be in a legal tussle till the (1) Supreme Court rules on the matter or (2) National Assembly passes a new law on VAT administration in the country,” the governor said.
Two other states – Ogun and Akwa Ibom have said that they were ready to enact laws that will enable them to collect VAT in their states, whiles Edo, Ondo, Oyo and Taraba states assured that they were still studying the ruling of the Federal High Court in Port Harcourt on the matter, while Delta State said that it was consulting before it would take a position on the collection of VAT by states. In addition, Bayelsa, Ekiti and Benue states said they were awaiting legal opinion on the matter, while Osun State said it would wait for the Supreme Court to decide on the issue.
Reacting to the ongoing battle on VAT, the minority caucus in the Senate was quoted by some local media as lending their support to the moves by Lagos and Rivers states to commence the collection of VAT in their states.
Although VAT is a consumption tax that is levied on a products repeatedly at every point of sale at which value has been added. But Gov. Wike explained that VAT was also collected from all the contracts that the state government awarded for roads and other projects in the state and could not see that singular action could be justified by the FIRS, which collected them and shared to both the federal government and the states. According to the data from the National Bureau of Statistics, N1.53 trillion was generated as VAT in the country in 2020 alone. According to sharing formula, the federal government gets 15 percent of the VAT, while the states get 50 percent, and local governments share 35 percent. No doubt, the amount generated through VAT is quite hug and the current battle for who collects it is justifiable, especially at this difficult and harsh economic period in the country.
While the nation awaits the outcome of the appeal at the Appeal Court, many Nigerians see the ongoing controversy over VAT as one way of agitating for true Federalism, which they have been agitating for decades. And like Gov. Wike aptly said: “The objective of such action was to contribute to the advancement of fiscal federalism by enabling the federating states to explore their potential and capacity for generating greater internal revenues.”
– Sept. 13, 2021 @ 17:41 GMT |
A.I
Tags: Value-Added Tax
