More states to join push for VAT collection

More states are weighing plans to demand Valued Added Tax (VAT) from businesses operating within their jurisdictions in a rare move that brings Nigeria closer to a true federalism.

The states are pushing to collect VAT in line with the recent judgment of a Federal High Court in Port Harcourt, which gives that right to them.

Nigeria generated a sum of N496. 39 billion from VAT in the first quarter of 2021, a surge of 52.93 percent year-on-year compared with N324.58 billion recorded in the corresponding period of 2020. In the whole of 2020, Africa’s largest economy collected N1.53 trillion in VAT, according to data from the National Bureau of Statistics (NBS).

Aside from Lagos and Rivers, which have insisted on the implementation of the court judgment, a number of states, especially in the South, are said to be consulting with their Houses of Assembly and considering laws to give legal backing to VAT collection.

It was learnt that one of the states in the Southwest would soon be making a pronouncement on the issue as its ministry of justice and legislature are working on a bill to that effect.

Already, in Lagos, the government is now a few steps away from actualising its push to VAT from business operators as a bill on this passed a second reading on Monday.

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This comes as the FIRS again on Monday lost in suit number FHC/PH/CS/149/2020, seeking a ‘stay of execution’ on the earlier judgment of the Federal High Court presided over by Stephen Dalyop Pam, that declared that it was the constitutional role of state governments to collect VAT, and not Federal Inland Revenue Service (FIRS).

Pam, in his ruling on the FIRS application for a ‘stay of execution,’ said granting the application would negate the principle of equity. He noted that the Rivers government through the state House Assembly had duly enacted Rivers State Value Added Tax Edict No. 4, 2021, which makes it a legitimate right of the state to collect VAT.

According to the judge, every court in the country is constitutionally mandated to obey every legislation enacted by both the National and State Assemblies.

He explained that the Rivers State government law on VAT remained valid until it had been set aside by a court of competent jurisdiction.

Pam stated that since FIRS was, ab initio, acting in error by collecting VAT in Rivers State, and has a huge burden of refund of those monies, there was a need not to allow it to incur further liability.

He declared that the FIRS application “is refused and dismissed” in the light of the fact that all subsisting law concerning the collection of VAT stands in favour of the Rivers State government.

The dismissal of the FIRS application further threatens the Federal Government’s revenue collection projection of N7.9 trillion for the 2021 fiscal year.

According to a revenue performance report obtained from the budget office of the federation, the Federal Government’s projected revenue for 2021 was N7.9 trillion, of which N3.9 trillion was earmarked as a pro-rata target for the first six months.

Earlier, the judge had read a letter that FIRS lawyers had served the court seeking a stay of execution on any ruling on their application. But, in the absence of any required document that ought to have been attached to the letter, the judge dismissed the letter.

Counsel to Rivers State government, Mark Agwu, speaking in reaction to the ruling, said the state government was still entitled to collect VAT within the state.

“Today, the court has delivered its ruling dismissing the said application for stay of execution, though without cost.”

But lead counsel to the FIRS, Reuben Wanogho, said the court had delivered its ruling on the basis of how it saw the facts of the case before it.

Meanwhile, the Lagos State government is now few steps away from actualising its push to collect VAT from business operators in line with the recent ruling of a Federal High Court in Port Harcourt.

This is also as the court in Port Harcourt has dismissed a stay of execution plea brought to it by the FIRS, seeking to stop state governments from collecting VAT pending a pronouncement of an appellate court on the issue.

The state is also at the verge of making real the resolution of the Southern Governor’s Forum to outlaw open grazing in Nigeria’s Southern region, as a bill on anti-open grazing, on Monday, scaled second reading on the floor of the state House of Assembly.

As should be expected, the House has committed the anti-open grazing bill to its committee on agriculture for further legislative action. The next stages of the bill would be third reading, confirmation of clean copy by the committee of the entire House, after which it should be sent to the state governor for assent.

And in a bold move to make good Lagos’ insistence on VAT collection, the House of Assembly, also on Monday, read for first and second time the VAT bill and directed its committee on finance, handling the matter, to report back on Thursday.

Mudashiru Obasa, speaker of the House, described the ‘Prohibition of Open Cattle Grazing Bill’ as timely and one that would ensure harmonious relationships between herders and farmers and protect the environment of the state and the southwest zone.

Obasa suggested that the bill should make provision for the registration of herders and prepare them for ranching.

“Allocating parcels of land is not enough but there should be training of those who would go into ranching,” he said, noting that ranching was expensive and required adequate preparation.

On the bill on VAT, the speaker said it would lead to “increase in revenue and increase in infrastructural development. This is in line with fiscal federalism that we have been talking about.”

Obasa said the VAT law, when passed, would help the state meet challenges in its various sectors. He called on the executive arm government to do everything legally possible to ensure the judgment of the Federal High Court, in Port Harcourt, was sustained even up to the Supreme Court.

Obasa decried a situation where about N500 billion was generated from Lagos while N300 billion generated from other Southwest states, and paltry amounts were disbursed to them in return.

“It is an opportunity for us to emphasise again on the need for the consideration of true federalism,” he said.

Speaking earlier on the bill on open grazing, Bisi Yusuff (Alimosho 1), lamented the havoc that herdsmen had caused in the South-western zone.

According to him, farmers have continuously become afraid to visit their farms thus causing a shortage of food. He also said many farmers had become indebted as they now found it difficult to pay back loans they secured.