The Rivers State government yesterday held an interactive meeting with corporate bodies operating in the state as implementation of the state Value Added Tax (VAT) Law begins full blown.
This is even as Lagos State government has vowed to execute judgement granting states the power to collect Value Added Tax (VAT) as ruled by a Federal High Court in Port-Harcourt
On the other hand, the Federal Inland Revenue Service (FIRS) is insisting that it has the backing of the Value Added Tax (VAT) Act to collect the tax.
Rivers State government is currently locked in a legal battle with the tax agency over collection of VAT.
Speaking during the meeting at the Government House, Port Harcourt, the state governor, Nyesom Ezenwo Wike, said with the infraction of the constitutional provision on VAT collection addressed, his administration has commenced full implementation of the State’s VAT law without hesitation.
Wike said it was necessary to state the position of the law to the business community in the state, noting that such understanding will guard them against falling prey to the antics deployed by the Federal Inland Revenue Service (FIRS) officials who think they could use force to collect what does not belong to them.
The governor said FIRS had in the past collected VAT in the state with impunity, knowing it was unconstitutional for them to do so.
He said, “Our administration challenged their impunity in court, and the Federal High Court in Port Harcourt in its declarative ruling had stated that the constitution is right in vesting powers to collect VAT in the state government within its jurisdiction.
“When we challenged the federal government through the Office of the Attorney-general and FIRS in court, do you know what they did? They wrote this letter dated 1st July, 2021. Remember, it was in 2020 that we filed this action against them. But see how corrupt this country is.
“Corruption is not only about kickbacks, it is also about doing something illegally. We were in court in 2020. Then on July 1, 2021, the chairman of FIRS wrote to the National Assembly through the office of the Deputy Speaker of the House of Representatives.
“He asked them to amend the constitution and insert VAT under item 58 of the exclusive legislative list, when we were already challenging that it is not their responsibility to collect VAT. They knew that what they were doing was not the right thing”.
Noting that his responsibility in office included making sure that Rivers people are not denied their entitlements, Wike said it was unfortunate that FIRS has resorted to writing threatening letters to intimidate corporate organisations to pay to them even after they have lost their appeal that sought a stay of execution of the declarative ruling on VAT collection in the state.
The governor urged the business community to be ready to pay VAT for the month of September 2021 and subsequent months to the Rivers State Internal Revenue Service.
He said he had already assented to the Rivers State VAT law passed by the State House of Assembly.
He warned corporate organisations not to feign ignorance of the State VAT law, even as he declared that the state government will not hesitate to seal up the premises of any company that defaults.
Governor Wike noted: “We are going to inaugurate the Tax Appeal Commission by Friday which will be headed by a retired judge of the state.”
The governor described the disparity in VAT proceeds and what is given to the states as an inexplicable form of injustice that weakens the performance potential of the states.
He said, “Let me tell you the injustice in this country. In the month of June 2021, which we shared in July, VAT collected in Rivers State was N15.1billion. What they gave us was N4.7billion. See the gross injustice and this money includes contracts awarded by the Rivers State government.
“This is not an issue of the party; it is the issues of infraction of the constitution, issues of illegality. Look at Lagos; it is not the same party as mine. In the month of June 2021, the VAT collected in Lagos was N46.4 billion but see what Lagos got, N9.3 billion.
“Have you seen the injustice in the country? VAT collected in Kano was N2.8billion and they gave them N2. 8billion. Is there any justice in this country?”
Wike further described as morally offensive a situation whereby Rivers State government will award contracts for state roads worth N200 billion and the FIRS will illegally receive 7.5 per cent of the amount as VAT to be distributed among the states.
The governor said, “So you allow me to call the big companies, award contracts to them, then you, FIRS, comes and collect the tax and then go and distribute it to other states who are not awarding contracts. How does it sound?”
He said nobody had been courageous to challenge the illegality perpetrated by FIRS and that history would be kind to Rivers State to have mustered the courage to speak out and also challenge it.
Wike continued: “Nigeria is a constitutional democracy and not a military government where the rule of law is grossly disregarded.
“I overheard the FIRS chairman saying that I’ll soon know the power of the federal government. And that they’ll show me that they have the power to muzzle the judiciary. You can muzzle them as you want. Let the Court of Appeal and Supreme Court interpret the law so that all of us will go and rest.
“Use all the power you want to use, but history will be written one day and those who will allow themselves to be used to muzzle and misinterpret the law will face God one day.”
The governor further stated that it was not possible for all states to be at equal standing or be mechanically placed in position of performance without allowing them to exercise their rights within the constitution.
He advocated that the federating states should be allowed to explore their creative abilities in utilising the functions as provided in the constitution in order to grow.
“The powers have already been devolved in the constitution but the federal government does not allow us. All they want us to do is to come and beg and I say I will not beg. Give me what the law says I should get,” he added.
Meanwhile, Lagos State government yesterday declared its determination to execute the judgement granting states the power to collect Value Added Tax (VAT) as ruled by a Federal High Court in Port-Harcourt.
The state Attorney-general and commissioner for Justice, Moyosere Onigbanjo (SAN), gave the state’s position during a public hearing at the State House of Assembly on ‘A Bill for law to impose and charge value Added Tax on certain goods and services provided for the administration of the tax and other Related Matters.’
The attorney-general was responding to a representative of civil society organizations, Adeola Samuel, who cautioned the state government on the execution of the judgment in favour of Rivers State.
Onigbanjo said, “That judgement on VAT law is not valid only in Rivers State. Any state in Nigeria stands to benefit. Your statement is not correct on the position of the law.
“The National Assembly does not have power on VAT, that is what brings us where we are today. The position as it is today the VAT law is no longer applicable in Nigeria. I respectfully disagree with your position sir.”
Soeaking with journalists shortly after the hearing, the chairman of the House committee on Finance, Hon Rotimi Olowo, said, “It will make no sense if all money accruable to us in Lagos State is taken by the federal government. Lagos is working hard and we are sweating.”
He argued that there is a lot of pressure on the state government in terms of infrastructure, saying with the proposed law on VAT in the state it would bring about holistic development in the state.
We have Backing Of VAT Act, FIRS Insists
But the Federal Inland Revenue Service (FIRS) insisted yesterday that it has the backing of the Value Added Tax (VAT) Act to collect the tax.
FIRS group lead, Special Tax Operations Group, Matthew Gbonjubola and his digital and innovation counterpart, Mrs Chiaka Ben-Obi, gave the position of the organisation in Abuja.
Gbonjubola said the bulk of VAT revenue comes from imports as well as contractors of federal government ministries departments and agencies (MDAs).
He noted that in-country VAT revenue from the states was minimal.
According to him, no state government controls any port and as such, it would be very difficult, if not impossible, for sub-nationals to collect.
MAN Contributes N44.9bn VAT In Q1, Urges End To Impasse
Relatedly, the Manufacturers Association of Nigeria (MAN) has charged the federal and state governments to find a mutually acceptable way forward on the collection of the value added and other related taxes to address anxiety and confusion in the business community.
This is just as the association disclosed that the manufacturing sector as the leading payers of Value Added Tax (VAT) in Nigeria, having contributed N44.9 billion in the first half of 2021, was going to be hardest hit by the looming impasse
MAN’s director-general, Segun Ajayi-Kadir, gave the charge in a statement made available to journalists in Lagos.
He 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 stressed 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.
Ajayi-Kadir said that the recent controversy over the control of VAT between the federal and state governments in the face of the court judgements and the strong statements emanating from the two tiers of government were unhealthy for business.
He state: “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 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,” he said.