Human rights lawyer, Mr. Femi Falana, yesterday, said the judgement of the Federal High Court in Port Harcourt, which ruled against the administration and collection of Value Added Tax (VAT) by the Federal Inland Revenue Service (FIRS), not only corroborated the struggle for restructuring via litigation, but also strengthened the campaign.
The senior advocate explained that the judgement of the federal high court, “has confirmed the struggle for restructuring via litigation. That means that the judgement will strengthen the campaign for restructuring.”
He urged all state governments to team up with Rivers State Government to defend the judgement. However, Falana warned that the FIRS should not be prevented from collecting VAT, pending the hearing and determination of the appeal. He said dispute over the enforcement authority of VAT, should not call for anarchy.
Falana, a former President of the West African Bar Association (WABA), also contended that it was evident in the 1999 Constitution of the Federal Republic of Nigeria (as Amended) that VAT, “is neither listed in the Exclusive Legislative List nor on the Concurrent Legislative List,” as reported in THISDAY.
Justice Stephen D. Pam of the Federal High Court in Port Harcourt had ruled that the FIRS lacked constitutional authority to enforce and administer taxes not expressly stipulated under Items 58 and 59 of Part I of the Second Schedule to the 1999 Constitution.
Emboldened by the judgement of the Federal High Court, the Rivers State House of Assembly duly passed the State Valued Added Tax Bill No. 4 of 2021, which the state governor, Mr. Nyesom Wike subsequently signed into law.
Falana pointed out that in view of the valid and subsisting judgment of the Federal High Court, the Rivers State Value Added Tax Law No. 4 of 2021, “has not impugned any provision of the 1999 Constitution (as Amended).”
“VAT was increased from five per cent to 7.5 per cent last year by the National Assembly. Right now, VAT collected is between N1.5 trillion and N1.8 trillion per annum.
“VAT is fully collected by the federal government and payable into the federation account for distribution among the three tiers of government. Even though state governments have joined the campaign for resource control, the judgement is not in favour of the majority of them.”
“If the judgement is implemented, the Lagos State Government, which contributes about 70 per cent of VAT, will be the greatest beneficiary. The Federal Capital Territory will be the next beneficiary with 15 per cent contribution to VAT.”
“Apart from Rivers and about four other states that will benefit minimally, not less than 30 states will be adversely affected as they contribute little to the VAT. It is expected that apart from FIRS, which is allocated four per cent from VAT as cost of collection, other state governments may file applications to join the case at the Court of Appeal as interested parties.”
“It is also interesting to note that the judgement does not affect the collection of import VAT on international trade. The judgement requires all stakeholders to take advantage of the current constitutional review to examine the collection of VAT as it is neither in the exclusive nor in the concurrent legislative lists under the 1999 Constitution.”
He said FIRS should not be prevented from collecting VAT, pending the hearing and determination of the appeal. He said the dispute over the enforcement authority of VAT “is not a call for anarchy.”
To compound the crisis, Falana acknowledged that Rivers State Government “has enacted a Value Added Tax Law. The effect is that the law takes precedence over the practice of suspending action until the hearing and determination of the motion of the FIRS for stay of execution.
“As soon as the vacation of the courts ends, the FIRS will ensure that the trial court hears its motion for stay. If the motion is granted, the status quo remains but if it is refused the Rivers State Government will continue to collect VAT under the new law, because of the serious issues involved in the case, the legal battle will be pursued up to the Supreme Court.”