The dispute between the Federal Inland Revenue Service and some states over the collection of Value Added Tax seems to be taking a new turn by the day as two more states, Ogun and Akwa Ibom, say they are ready to enact laws that will enable them to collect the tax in their states.
Some other states such as Edo, Ondo, Oyo and Taraba say they are still studying the ruling of the Federal High Court in Port Harcourt on the matter, while Delta State says it is consulting before it will take a position on the issue.
This is in spite of the ruling by the Court of Appeal sitting in Abuja on Friday that Rivers and Lagos states, which already enacted laws to collect VAT in their states, should stay action on the matter pending the determination of the appeal for stay of execution filed before it by the FIRS.
Justice Stephen Pam of the Federal High Court in Port Harcourt, the Rivers State capital, had on August 10, 2021, ruled that the plaintiff, Rivers State, and not the FIRS, should be collecting VAT and Personal Income Tax in the state.
On Monday, the court also dismissed the FIRS’s application for a stay of execution, noting that the law remained valid until set aside by a higher court of competent jurisdiction.
Justice Haruna Tsammani, who delivered the lead ruling of the three-man panel of the appellate court, ordered that the “the status quo ante bellum” be preserved, as it adjourned the matter to Thursday, September 16, to enable the parties to file their response to the application for joinder filed by the Lagos State Government.
Meanwhile, Rivers and Lagos states already enacted their VAT laws, even though some states such as Kogi are opposed to the move.
On Friday, however, the Speaker of Ogun State House of Assembly, Olakunle Oluomo, disclosed that the Assembly had started working on the bill.
He added that the Assembly would resume from its recess to pass the bill, noting that his office was working with the public account and finance committee to ensure the quick passage of the bill.
He said, “We are already working on the VAT law for Ogun State. If not for the recess, you would have seen actions on it but by the time we resume next week, you will see actions on it. The VAT law would have the same treatment as the Anti-Open Grazing Bill. You know we passed our anti-open grazing bill into law on July 8.
“So, following the judgement in Rivers State, we have all agreed that we will use this month to do it. As I am talking to you, the public account and finance committee is on it. We have to bring it into the peculiarity of Ogun State.
“It is not in the character of Ogun State House of Assembly to do cut and paste passage, that is why we are looking at similar laws, like those of Rivers and Lagos states, to come up with our own.”
Similarly, the Akwa Ibom State House of Assembly said it was studying the judgement to enable it to come up with a bill on it.
The Chairman, House Committee on Information, Mr Aniefiok Akpan, told one of our correspondents that the Assembly was looking forward to having a meeting with the chairman of the state Internal Revenue Service, after which it would come up with the bill.
He stated, “We are currently studying the judgement on VAT collection. We are working with the executive to come up with the bill. We are going to have a meeting with the chairman of the state Internal Revenue Service and after that we will come up with the bill.”
In Edo State, however, the Speaker of the state House of Assembly, Marcus Onobun, said the House will consider enacting a law to enable the state to collect VAT.
He said, “As representatives of the people, we are here to listen to the people, who we are messengers to. Certainly, we know the situation in Rivers and Lagos states, so we are looking at how the situation will be of economic benefit to Edo and its people.
“We are on break now, but we will get to work as soon as we resume on September 27 and decide the position we will take on the matter. So, we will consider putting a law in place as soon as we reconvene.”
In Delta State, the Commissioner for Finance, Mr Fidelis Tilije, told Sunday PUNCH in an interview in Asaba that the state had begun reviewing relevant laws and would soon make an informed decision after serious consultation.
Tilije said, “We are reviewing the laws and the situation and we will make an informed decision after serious consultation and considerations on the issue of VAT.”
The Commissioner for Information, Mr Charles Aniagwu, added that the state would do what was best for the people of the state.
He added, “The fact is that we are looking at the law to know whether the law allows us to collect VAT. We don’t know yet, any law that we are going to come out with will be in the best interest of our people.”
In Oyo State, the Deputy Speaker of the House of Assembly, Muhammed Fadeyi, in an interview with one of our correspondents in Ibadan on Friday said the Assembly was studying the judgment.
He said though there was no executive or private bill on VAT before the Assembly, he hoped Oyo State would also join the struggle because, according to him, Rivers and Lagos states took a step in the right direction, especially as such would ensure fiscal restructuring.
He said, “What we are doing is that we are studying the situation carefully and we are looking at the direction of things. I cannot tell you that there is a bill before the House now but we are going to look at the pros and cons of everything.
“For example, I am studying the Rivers judgment and I have had discussions with our commissioner for finance. I am very sure the governor (Seyi Makinde) has spoken with the Speaker concerning the situation.”
The Commissioner for Finance, Akinola Ojo, declined to respond to an inquiry by one of our correspondents. His number indicated busy when he was called several times while the messages sent to him showed that he read them but he did not reply.
In Taraba State, the Speaker of the House of Assembly, Mr Joseph Kunini, on Saturday said the Assembly was observing developments around the VAT controversy and would take a position after necessary consultations.
Kunini in a reply to one of our correspondents’ enquiry via a text message said, “Already, there is a court order overturning the earlier ruling and we would put all of these into consideration and take a stance.
“Our overriding concern is the interest of the good people of Taraba State who elected us to make legislation on their behalf, and that we will do.”
In Ondo State, the Speaker of the House of Assembly, Mr Bamidele Oloyeloogun, said the Assembly was studying the situation, adding that the outcome of the ongoing legal tussle between the FIRS and the governments of Lagos and Rivers states on the matter would determine the step to be taken by the Assembly.
He added, “We don’t want to rush in and rush out on the matter, which is why we are biding our time. So, let us wait and see what the outcome of the legal tussle will be. We are also studying the VAT law passed by the Lagos State House of Assembly.”
In Cross River State, the House of Assembly said it had yet to take a decision on the matter.
The Deputy Speaker, Mr Joseph Bassey, said the issue might come up for discussion this week.
He stated, “We have not even started (discussion on the matter), so I can’t speak on behalf of everybody. As an individual, I cannot give my personal opinion. It should be that of the House. By next week we will know.”
The Commissioner for Finance, Asuquo Ekpenyong Jr., did not respond to a message sent to him.
The PUNCH reported on Wednesday that 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, even though the matter is currently before the Appeal Court.
Bayelsa State, however, said it had constituted a team to study the judgement and that it would take a position later.
Senate minority caucus backs Lagos, Rivers
The minority caucus in the Senate has thrown its weight behind moves by Lagos and Rivers states to commence the collection of their VAT.
The leader of the caucus, Senator Enyinnaya Abaribe, in an interview with Sunday Punch on Friday described the moves by the two states as a good development. Abaribe spoke as a ranking senator.
George Sekibo, who is the Chairman of the Senate Committee on Navy, said southern senators would oppose FIRS’ request for an amendment to the constitution.
The FIRS in a desperate bid to retain the collection of VAT across the country had written to the National Assembly to seek the inclusion of VAT collection in the exclusive legislative list. It also requested the federal lawmakers to approve for it the establishment of the Federal Revenue Court of Nigeria.
The Punch on Wednesday, obtained the letter, signed by the Executive Chairman of the FIRS, Muhammad Nami, and dated July 1, 2021. The letter, with reference number FIRS/EC/CWREP/0416/21/037, was addressed to the Chairman of the Constitution Review Committee, who is also the Deputy Speaker of the House of Representatives, Idris Wase.
But the Minority Leader insisted that there should be no controversy over the issue because no law empowered the FIRS to collect VAT in Nigeria.
Abaribe said, “There should not be any controversy. Rivers and Lagos states are right. VAT collection by FIRS is not in the constitution. Also, it affirms fiscal federalism which Nigerians have been clamouring for.
“Let states now put on their thinking cap and be creative in enhancing their revenue bases. It’s a good development.”
Speaking further, Sekibo argued that the FIRS was going against the constitution and that its action would be null and void.
He said, “I know we are amending the constitution now, I dare the committee to bring it to the floor of the Senate, it will die because they will not get the required two-thirds to pass it.
“Even if they manage to get it at the National Assembly level, they will not get it at the state level and if we don’t support it in southern Nigeria, the FIRS proposal will die.”
Sekibo wondered why northern states could not collect tax on their cattle instead of depending on VAT realised from the sale of alcohol, when they see the product as a taboo.
“Every state specialises in different types of trade. In the North, there is nothing wrong if we can regulate the sale of cows and collect VAT on that and then use the proceeds to provide basic amenities for the people,” he argued.
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He added, “The Federal Government has no business collecting VAT because it is not in the constitution (for them to do so). The issue of taxation is in the concurrent list and not on the exclusive legislative list.
“Most of the VAT payment comes from the sale of alcohol. In Rivers, for instance, VAT on alcohol is heavy. In Rivers and most of the southern states, people consume alcohol. You cannot generate VAT proceeds from alcohol and share it with people who even by their own religion condemn alcohol consumption.
“By collecting part of the proceeds from alcohol, are they not indirectly drinking alcohol? My thinking is that you abhor it, you don’t like it. You should not use money from it as well. It is a logical argument. The stand of Rivers and Lagos states on it is good for this country.”
Another ranking senator, and a strong member of the Senate minority caucus who spoke on condition of anonimity, berated the FIRS for writing to the National Assembly on the issue.
The lawmaker, who is also a member of the Constitution Review Committee of the Senate, promised to mobilise his colleagues to reject the request of the tax agency.
The senator said, “That letter, I can assure you, is dead on arrival. How can FIRS write the National Assembly on a matter that is pending before the court?
“It is our tradition in the National Assembly not to legislate on any issue that is pending before a court of law. So, the FIRS’ request is dead. We will resist its inclusion in the ongoing amendment to the constitution.
“This is a new development. We urge the judiciary to live up to its expectations because we are already achieving true federalism, which we have been preaching all these years.”
Attempts to get the position of the majority caucus in the senate failed as several calls put across to the Senate Leader, Senator Yahaya Abdullahi, were not answered. The Kebbi North senator had yet to reply the text message sent to his mobile at the time of filing this report.
Similarly, some senators from the three northern geopolitical zones, who were contacted by one of our correspondents, declined comments on the issue.
The senators, spoke on condition of anonimity, maintained that since the case was pending before a court of competent jurisdiction, discussing it on the pages of the newspapers would be subjudice.
A senator from the North-East however told Sunday PUNCH, “I don’t believe we should share income from tax generated by the Federal Government. I believe it should be a sovereign fund so that it could be used for the federation and not be shared among the states.
“Every state should generate its own resources and spend it. Anything coming from the federation should be used for the federation.”
FIRS’ request’ll follow normal procedure – Senate
The Chairman, Senate Committee on Media and Public Affairs, Senator Ajibola Basiru, said the National Assembly had yet to receive the letter from the FIRS, adding that upon its receipt, it would go through the normal process as stated in Section 9 of the constitution.
He said, “Every stakeholder has the right to make a request for the amendment of the constitution. It will be premature to make a statement on its (FIRS) request. We will consult the people we are representing and we would take action based on the direction they ask us to follow.”
FIRS workers fear cut in salaries, bonuses
Some employees of the FIRS are currently in panic mode over the recent moves by states to begin collection of Value Added Tax, Sunday PUNCH has learnt.
Three members of the FIRS workers’ union told one of our correspondents that stripping the FIRS of the power to collect VAT could reduce the commission the agency would have received by as much as N96bn.
The FIRS had stated in a document submitted to the National Assembly that it projected it would be able to collect N2.44tn from both import and non-import VAT in 2022.
The FIRS, which takes four per cent of the amount collected as VAT as its commission, projected it would receive N96bn in 2022.
Should the states begin collecting VAT, the FIRS would lose this huge sum, a top source within the tax body told one of our correspondents.
The source said, “Our highest source of revenue is Petroleum Tax and VAT. Others include Stamp Duty, Company Tax and a few others. VAT is number two for us and we are paid bonuses based on performance.
“If we stop collecting VAT, the FIRS will not be able to pay bonuses and other special packages to staff. As it is, many of us are scared because we don’t know what will happen next.”
Another senior employee told Sunday PUNCH that the FIRS had hired too many staff members and its wage bill was high. He said the service might be forced to reduce its workers once VAT payment was taken away.
Another employee said, “One big problem we have in the FIRS is that almost every big politician has a relative in this agency due to the system of patronage we run in this country, whereby political office holders are given slots. The implication is that we have too many workers and our wage bill and overhead cost are high. We will be lucky if some of us are not sacked.”
Out of the FIRS’ N216.65bn budget for the 2021 fiscal year, the sum of N107.52bn is for personnel cost; N47.22bn for overhead cost; and N61.9bn for capital cost.
As of 2019, the FIRS had about 9,000 staff members but the figure is believed to have increased since then.
The agency has been criticised for frivolous expenses such as setting aside N160m to sew uniforms for 850 drivers and budgeting N825m for refreshment and security vote of N250m, among others in 2019.
NGF divided, can’t meet over VAT – Source
Meanwhile, a source in the Nigeria Governors’ Forum has revealed that governors may not be able to meet over the issue because of lack of consensus. The source explained that there was no way the governors would take a common stance because the battle against the FIRS over VAT collection was being fought by some of its members.
One of the governors, who spoke with one of our correspondents, said there was no way the NGF would ask its aggrieved members to withdraw their cases in court or even ask them not to go ahead with the collection.
The source said, “You must pity the chairman of the forum, Governor Kayode Fayemi of Ekiti State, at this time. We ought to have met on the issue if it was one that would be beneficial to us all.
“But as it is, some are asking for equity, justice and fairness while others are either bragging or begging that the rich states should consider the weak ones. How do you beg a state where alcohol is consumed and such a VAT accumulated from it is shared among states that set up a state apparatus to seize, arrest, harass and even imprison anyone caught with a bottle of beer in their states?
“So, it is better to allow the issue to be settled by the courts that are already adjudicating on it. You can see why the forum seems to steer clear of it? We are watching. Whatever the courts decide will impact on our legal system and our quest for true federalism.”
“We were able to unite on the plan to pay $418m to consultants on the Paris Club refund because doing so would affect what comes to our individual states, but this issue of VAT will not be like that. While it is good for some states, it will deplete the purse of some.”
Orbih tells S’South to embrace law
Meanwhile, the Peoples Democratic Party has called on governors in the South-South to back the recent legal move to reposition the VAT collection to states.
The National Vice Chairman, South-South of the party, Chief Dan Orbih, made the call on Saturday in an interview with the News Agency of Nigeria in Benin City, Edo State.
The party said that the recent judicial interpretation to the VAT law, which reposed in the federating states the powers to superintend over the consumption tax, showed that the judiciary was alive to its responsibilities.
“The court has placed VAT where the duty rightly belongs,” he said, adding that it would be a catalyst for grass-roots development.
Orbih also noted that the recent action to seek interpretation of the VAT law by Rivers and later Lagos State was a big window for the South-South and indeed other states to achieve the long desired quest for fiscal federalism.
“With this development the long desired dream of many Nigerians for equitable distribution of resources has been given a strong push. This is a bold and salutary move in restructuring our tax collection system.
“The soundness in the economics of Wike’s action is seen in the speed with which Lagos state moved in the same direction towards pursuing the same objective,” he stated.
Orbih described the Rivers and Lagos states’ domestication of the VAT law as a nonpartisan action driven by the burning desire to give practical meaning to fiscal federalism.
“I call on other state governors, especially in the South-South, to move with dispatch in support of VAT collection and retention by states,’’ he said.
Appeal Court’s ‘maintain status quo’ empowers Rivers to collect VAT —Ozekhome
Also, human rights lawyer, Mr Mike Ozekhome (SAN), says the ruling of the Court of Appeal sitting in Abuja on Friday meant that the Rivers State Government has the power to collect VAT until the court decides otherwise.
The lawyer stated this in a statement on Saturday titled, ‘FIRS & Rivers State Government: Who Should Now Collect VAT?’
In his interpretation of “maintain status quo” ruled by Justice Tsammani, Ozekhome, he said, “Clearly, the status quo ante bellum was before the breakout of the hostilities.
“The hostilities broke out when the FIRS dragged the Rivers State Government to court, arguing that it cannot collect VAT based on its law. The said law was already duly passed and made operational by Rivers State House of Assembly that it has the constitutional competency under section 4 of the constitution to do so.
Adapted from the Punch