There appears to be no end in sight to the controversy between the Federal Inland Revenue Service(FIRS),Rivers and Lagos State Government over the collection of Value Added Tax in the country.
A Federal High Court in Port Harcourt had last month delivered a judgment restraining the FIRS from collecting VAT and personal income tax in Rivers State.
The FIRS appealed the ruling and urged tax papers in the state to continue to remit their VAT to the agency’s coffers pending the outcome of the matter at upper courts
The Federal Inland Revenue Service, has written the National Assembly, seeking the inclusion of VAT collection in the exclusive legislative list and also requested the federal lawmakers to give it nod for the creation of the Federal Revenue Court of Nigeria.
The Executive Chairman of the FIRS, Muhammad Nami, wrote the letter on July 1, 2021 and addressed to the Deputy Chairman of the Constitution Review Committee of the National Assembly, who is also the Deputy Speaker of the House of Representatives, Idris Wase.
The tax agency specifically pleaded with the nation’s apex legislative institution to vest, exclusively, all adjudication of tax disputes, including federal tax laws, companies income tax, petroleum tax, income tax, capital gain tax, stamp duty, VAT, taxes, levies and other laws, regulations, proclamations, government notices and rules on it.
The letter reads: “The Federal Inland Revenue Service further proposes for the amendment of Section 251 (1) (b) of the Constitution of the FRN 1999 (amended) by removing the exclusive jurisdiction of the Federal High Court only on anything connected or related to federal tax matters since same would be vested on the proposed federal revenue court.The Federal Inland Revenue Service also proposes for the insertion of value-added tax immediately after Stamp Duties under item 58 part II of 2nd schedule of the 1999 Constitution of the FRN.
“The Federal Inland Revenue Service appreciates the maximum cooperation and support we are receiving from your good office on tax matters generally.This has boosted our morale and determination to do more for the government in tax revenue generation.
“The FIRS, therefore, wishes to further request that the House of Representatives consider the request for the establishment of the Federal Revenue Court.”
The FIRS in the letter noted that Item 59 of the Exclusive Legislative List Part 1, 2nd Schedule to the Constitution of the FRN 1999 as amended vests the powers to make laws on anything related to tax matters in Nigeria, on the National Assembly.
It added: “Historically, the Federal Revenue Court was established by the promulgation of the Federal Revenue Court Decree No.13 1973.However, the enactment of Section 228(1) and 230(1) of the 1979 Constitution of FRN, renamed the Revenue Court to Federal High Court.
“This was further replicated by the Federal High Court Decree (amendment) 1991Cap (60l LFN, now referred to as the Federal High Court (Amendment) Act 2005 Cap F12 LFN revised edition 2010.This amended Section 7 of the Federal High Court Act (1991), conferred exclusive jurisdiction on the Federal High Court in relation to tax matters amongst others.
“Section 228(1) and 230(1) was further re-enacted as Section 251(1) (a) to (s), of the Constitution of FRN 1999.The FIRS hereby proposes for the insertion of Section 254(G) to 254 (L) in the 1999 Constitution of the FRN to provide for the establishment of Federal Revenue Court, the appointment of Chief Judge, power to make rules for the proceedings, the appointment of judges of FRC and the exclusive jurisdiction of FRC on federal tax matters.”
But,the Rivers State Governor, Nyesom Wike, on Wednesday threatened to annex all offices of the Federal Inland Revenue Service in the oil-rich South-South state if the government agency continues with its “bullying”.
The Governor,who spoke at a stakeholders’ meeting in Port Harcourt, the state capital, while addressing business owners, told the oil firms, construction companies and other business owners operating in the state to start remitting their Value Added Tax to the state government beginning this September.
Wike lamented about the injustice in the country saying Rivers State generated N15 billion in June 2021 but got N4.7 billion, while “Kano produced N2.8 billion in June but Kano also got N2.8 billion.Sometimes you don’t want to believe these things exist”
The governor said he cannot continue to beg the Federal Government for what belongs to his state.
Wike warned the FIRS to desist from “bullying” the state with federal might.
He said: “I overheard the FIRS chairman saying that he will show me the powers of the Federal Government that the Federal Government will muzzle the judiciary.It is not my business.The court has decided.All these bullying (by) FIRS.They should mind the state they are bullying.FIRS should be very careful.You don’t bully state like us…I have the political will to do a lot of things.I am not one of those governors that will shy away.If they continue to bully us, all their offices in the state I will take.”
The governor also warned the oil companies and business owners not to remit their VAT to the FIRS but the Rivers State Government.
“From this September, we will start collecting our VAT. We will not look back but seal up the premises of such companies,” Wike warned, adding that the state does not need the Nigeria Police Force to enforce the collection of VAT, but would use the state-created security outfit backed by the law.
A bill to empower it to collect VAT scaled second reading in the Lagos State House of Assembly on Monday.
Dr. Mudashiru Obasa, Speaker of the Lagos State House of Assembly, on Wednesday, said the proposed law on Value Added Tax (VAT) would help the state meet more of its developmental goals.
Obasa said this during a public hearing on a bill for the Lagos State Value Added Tax (VAT) and for other connected purposes.
He noted that states have always felt financially-strangulated and unfairly-treated by the Federal Government in her administration and appropriation of receipts of VAT.
Speaking through the Deputy Speaker, Wasiu Eshilokun-Sanni, who represented him, Obasa said that Lagos state generates an excess of N500 billion in VAT.
He said:“If we go by generation trend in tandem with the N2.4 trillion forecasted by the FIRS, Lagos state will be contributing about 55 percent of the total VAT collectables in the entire country.But what do we get in return? Some paltry sum. This injustice and inequity are part of the premises on which some of the extant agitations are founded.”
According to him,the agitation had been boosted by the verdict of a Federal High Court in the case of the Attorney General of Rivers State versus the Federal Inland Revenue Service (2020) in which the rights of Rivers state (by extension, other states) were upheld.
“Though the FIRS has expectedly appealed the judgement to the Court of Appeal, it is expected that the appellate court will follow the sound logic in the Federal High Court decision,” he said.
The Speaker said the proposed law would allow the state more resources to meet its developmental goals.
“More so, this action brings to the fore of actualization, the true federalism for which we have been agitating,” he added.
The State Attorney-General and Commissioner for Justice, Mr Moyosere Onigbanjo (SAN), said every state of the federation stood to benefit from the judgement of the court.
Speaking at the event, the Chairman of the House Committee on Finance, Hon Rotimi Olowo, said even though Lagos is prosperous, it can do better and VAT will help with the resources it needs.
“We know that the resources in the state are overstretched,” he said adding that the proposed law has benefits on the state and its residents.
Meanwhile,the Manufacturers Association of Nigeria (MAN) has implored the federal and state governments to find a mutually acceptable way forward on the collection of taxes to address anxiety and confusion in the business community.
Director-General, MAN, Mr Segun Ajayi-Kadir, in a statement explained that as leading payers of Value Added Tax (VAT) in Nigeria, having contributed N44.9billion in the first half of 2021, the manufacturing sector was going to be hardest hit by the looming crisis
Ajayi-Kadir said that the business community could not afford the anxiety and confusion currently generated by the controversial tax suit in Rivers State.
He added that the sector should not be made to suffer while the two tiers of government fight over who should control tax.
According to him,manufacturers should not be put in a situation where they would have to pay both governments the same tax, saying such a move would amount to overkill for the struggling manufacturing sector and a recovering economy.
Ajayi-Kadir said that the recent controversy over the control of the VAT between the federal and state governments in the face of the court judgments and the strong statements emanating from the two tiers of government were unhealthy for business.
“Manufacturers, like many other business operators in Nigeria, are deeply concerned about what becomes of their fate come September 20 when businesses are expected to file VAT claims and beyond.
“The contentions are worrisome and potentially inimical to the smooth operations of our businesses as on the one hand, The Federal Inland Revenue Service (FIRS) is insisting on continuing to collect VAT.
“Rivers State Government is ordering the immediate and complete collection of the same tax while Lagos State is preparing the grounds to go the way of Rivers and who knows, other States may be warming up to join the fray. What we expect therefore is for the federal and state governments to stop the grandstanding and find a mutually acceptable way forward.”
