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VAT war: Businesses enter near panic mode in Rivers

...Over conflicting orders

Businesses in Rivers State especially in Port Harcourt have gone into fear and panic mode following conflicting orders and threats from both the Federal Government through the Federal Inland Revenue Service (FIRS) and the Rivers State Government (RSG).

The major panic stems from fears that with the FIRS, payment could be flexible and many aspects could be waived, but with local revenue collectors, the journey could be tortuous and rough such that every kobo would be paid.

Another source told BusinessDay that most customers refuse to pay if you added VAT in the invoice and so they could avoid payment, but in the new dispensation, this may not be possible. There is high fear of a spike in taxes and expenses at a time like when there seems to be financial depression for businesses.

Read also: Rivers set to collect September VAT – Wike

The FIRS had summoned the business owners warning them to disregard the court judgment and continue to remit Value Added Tax (VAT) to the FG. Hearing that, the RSG on Wednesday, September 8, 2021, summoned all businesses and threatened to shut them down if they dared to pay to the FIRS.

The governor lamented that the state in July 2021 got a mere N4.7bn from a collection of N15.1bn whereas Kano that collected N2.8bn got N2.8bn back as VAT. He said most northern states destroy alcoholic drinks and shut down leisure centres and miss VAT only to double back and collect VAT realized from sin-spots in southern states.

These troubles began after a Federal High Court judgment in Port Harcourt a few weeks ago nullified the power of the FG (FIRS) to collect VAT. The judgment ceded the power to the Rivers State government and other states.

The RSG moved quickly to draft a bill and got it passed and soon signed into law giving itself a law for VAT collection.
The FIRS then filed an appeal at a federal appeal court but filed for a stay-of-execution. The motion was treated on Tuesday and the court turned it down, meaning that the power to collect VAT now rests with the RSG and any state that wants it, pending the determination of the substantive appeal which may take windy turns up to the Supreme Court; except the FIRS files an appeal against the stay-of-execution aspect and pursue it to the apex court.

With both the FIRS and RSG threatening businesses in Rivers State in the ensuing VAT war, palpable fear now seems to rule the business world as noticed by BusinessDay when going around the state capital.

Many business owners have evaded media interviews for fear of power clash from state and FG, but Oluwatoyin Alabi, CEO of a fast-food chain, ‘The Promise’, said they are awaiting directive from the Port Harcourt Chamber of Commerce, Industry, Mines and Agriculture (PHCCIMA) as the mother-body on way forward and who to obey. For now, he said, the business owners were in total confusion and fear.

Alabi however said the businesses have seen that at the moment, the court order on the ground wants them to pay to the Rivers State government. “We have even seen what the government is doing with the taxes we pay and the revenue they get. It shows that if they get more, they do more”.

The president of the PHCCIMA and head of the Organised Private Sector (OPS) in the state, Nabil Saleh, told BusinessDay in his response that the business owners were law-abiding persons especially in tax matters and that whatever the law says is what they would obey.

Gov Nyesom Wike in his threat gave them the end of September to start remitting to the state’s revenue service or face several sanctions including a shutdown of their businesses. It is not clear if this is in the new VAT law. They however said the law on the ground, for now, is to pay the Rivers State government.

Many business owners fear that hard days are ahead in terms of conflicting orders and increase in taxes. Manufacturers seem to fret the most as they fear that increase in invoices may make their products unsellable at the moment.

Some however feel that the ensuing crisis would work out better for the economy. Andrew Agorom, general manager of Trans Amadi-based RIVOC said that such taxes should be collected by states and that it is the dawn of true federalism.

The national leadership of MAN has taken a position on the VAT wars as it concerns manufacturers nationwide, but with a focus on Rivers State. MAN thus charged 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.

Segun Ajayi-Kadir, director-general, MAN, gave the charge in a statement made available to newsmen on Wednesday in Lagos. The DG boss noted 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 impasse.

Ajayi-Kadir said that the business community could not afford the anxiety and confusion currently generated by the controversial tax suit in Rivers State.

According to him, the sector should not be made to suffer while the two tiers of government fight over who should control tax.
He further stated that 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.

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