VAT Verdict: States Begin Consultation As Court Quashes FIRS Application


States across the federation have initiated consultations on the next steps to take as a Federal High Court sitting in Port Harcourt yesterday dismissed an application by the Federal Inland Revenue Service (FIRS) seeking to stop the Rivers State government from collecting Value Added Tax (VAT) in the state.

FIRS, in suit No. FHC/PH/CS/149/2020, had, through a motion on notice, applied for a stay of execution on the earlier judgement of the court headed by Justice Stephen Dalyop Pam, which ruled that it was the constitutional role of state governments to collect VAT and not the FIRS.

In separate interviews with LEADERSHIP yesterday, some state governments said they would consult with legal authorities on the way forward but ruled out opposing the implementation of the verdict.

Others said they would await pronouncements from the Appeal Court and Supreme Court on the matter, adding that after the judgements of the two appellate courts, the controversy surrounding the lower court ruling would be resolved.

Justice Pam, in his ruling on the FIRS application for a stay of execution, said that granting the application would negate the principle of equity.

He said the Rivers State government through the State Assembly, had duly enacted Rivers State Value Added Tax 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 respectively, adding that that the Rivers State government’s law on VAT remains valid until it has been set aside by a court of competent jurisdiction.

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

The judge therefore refused the FIRS application and dismissed it in the light of the fact that all subsisting laws concerning the collection of VAT stand in favour of the Rivers State government.

Earlier, the presiding judge, Justice Pam, had read a letter that FIRS lawyers had served the court seeking for a stay of execution on any ruling on their application.

But in the absence of any requisite document that ought to have been attached to the letter, the judge dismissed the letter.

Speaking on the implication of the ruling, the counsel to Rivers State government, Mark Agwu, said the state government was still entitled to collect VAT within the state.

[b]“Today, the court has delivered its ruling, dismissing the said application for a stay of execution, though without cost. In fact, the court’s reason is that if it should grant a stay, it is more or less like overruling itself.

“And then, since the court is empowered to recognise all laws enacted by the National Assembly or the State Houses of Assembly; therefore, that law (by Rivers) stands, it is a substantive law. Therefore, in the issue of collection of VAT, as it stands today, Rivers State government is still entitled to collect. That is where we are today.”[/i]

In his reaction, Rivers State commissioner for finance, budget and economic planning, Isaac Kamalu, said the decision by the Lordship had confirmed the position, both constitutionally and legally, that Rivers State had the authority to collect VAT.

“Well, first we need to thank God. Second, we need to thank the judge for the courage. If you recall, the court has already declared that it is the Rivers State government that has the constitutional responsibility for the collection of Value Added Tax.

“Following that decision of the High Court, which is binding on all parties and institutions, the Rivers State government and the State Legislature have the Value Added Tax Law of Rivers State No. 4 of 2021 in force, too.[/b]

“I think the decision by the Lordship this morning is to confirm the position, both constitutionally and legally, that the State has the authority to collect Value Added Tax (VAT).”

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

According to him, they do not agree with the ruling and had already resolved to take all necessary steps to challenge it.

In an interaction with LEADERSHIP, Delta State Governor Ifeanyi Okowa said his administration would not join Governor Bello Masari of Katsina State to stop the enforcement of the verdict because he (Masari) did not consult other governors before issuing the threat.

The chief press secretary to the governor, Mr Oliseh Ifejika, said Governor Masari can go test the case in court, stating that nothing concerns Governor Okowa about that.

“I don’t understand why he is going to court. Governor Nyesom Wike of Rivers State proved it as the right of the state,” he stated

Also, Mr Charles Aniagwu, the Delta State commissioner for information, said it was a wrong approach on the side of Masari, as he said Wike did not sue him and he was not a party to the suit.

“What locus is he going to use?” he asked, arguing that it was only the federal government that was involved that is supposed to contest the matter in court and not Governor Masari.

Masari had at the weekend frowned at the recent ruling, saying it was a recipe for potential economic chaos across the states of the federation.

He said the decision would not stand and threatened to resist the implementation.

Masari spoke when a delegation from the Revenue Mobilisation and Fiscal Commission (RMAFC) paid him a sensitisation visit at Government House.

He also called for a review of the current revenue sharing formula which he described as unfair and unjust as it gives more funds to the federal government at the expense of the states and local governments.

In Niger State, the chief press secretary to the state governor, Mrs Mary Noel Berje, told LEADERSHIP that the state had not taken position on the legal tussle over the collection of VAT.

She said that the state government will thoroughly study the situation with the aid of expert legal advice before taking a definite position.

The governor’s spokesperson said, “The state, for now, is observing unfolding events before taking a definite position that will be in line with established constitutional framework.”

Berje said in line with the development, consultations are on for a well informed decision that could stand further legal scrutiny.

Osun State has not taken a decision on whether to support the ruling of a Federal High Court saddling the River State government with responsibility to collect Value Added Tax.

Speaking in a telephone conversation with our correspondent in Osogbo, the chief press secretary to the governor, Ismail Omipidan, said the fact that government had not taken a stand on the issue makes it impossible to say whether it would join Governor Bello Masari of Katsina State to challenge the court ruling.

Mohammed Alkali, chairman of Borno State Internal Revenue Service, in his reaction, said the state was awaiting the Appeal Court’s ruling on the matter.

Alkali added that Borno stands with the FIRS’ position that the collection of value added tax is the exclusive duty of the FIRS.

“We will wait for the court’s determination of the matter,” Alkali said.

In Imo State, the commissioner for Information and Strategy, Chief Declan Emelumba, said the state will decide what to do, and not that another state will prompt it.

“The government will decide what it wants to do, and not others will make us take an action. For us it is not an issue; we will decide what we want.”

According to him, the state government stands with legality and will continue to work in tandem with the federal government for the overall interest of Nigerians.

In Lagos State, the commissioner for justice, Moyosore Onigbanjo (SAN), said the FIRS must obey the judgment of the Federal High Court in Rivers State.

He said Lagos State would enforce the outcome of the judgment in the Federal High Court in Port Harcourt in Lagos State.

She said, “We are demanding VAT from people that seek to do business in Lagos. We have our law which will be out in a couple of days. We will make sure that the judgment of the Federal High Court in Port Harcourt is enforced to the letter.

“We are not going to relent; we are not going to give an inch to FIRS to collect VAT in Lagos State. FIRS must obey the judgment of the court of Law.”

The Ebonyi State Commissioner for Information and State Orientation, Barr. Uchenna Orji yesterday said that the state government would not take a stand on the Rivers State court ruling on VAT collection by states.

Speaking to LEADERSHIP in Abakaliki, Barr. Orji stated that the state believes in the tenets of the constitution of the Federal Republic of Nigeria, adding that issues before the court cannot be discussed by the administration.

According to him: “I can assure you that the outcome of the decision of the court of competent jurisdiction in the matter shall be complied with.

“We do know that Judicial decisions form part of the policy issues governments of all jurisdictions would need to factor in, in their administrative processes. We are not going to take any side now in the matter until the highest court in the land makes a final pronouncement.”

Speaking on whether Plateau State Government will join Governor Bello Masari of Katsina State to challenge Rivers court ruling on VAT, the Commissioner of Information and Communication, Hon. Danmajang, told our correspondent that the state government is very comfortable with its current position.

According to him, “No, we are pleased with our present position,” he said.

When LEADERSHIP contacted Abia State commissioner for information, Chief John Okiyi Kalu, he said he did not know whether Governor Okezie Ikpeazu will join Masari on the matter.

In Cross River State, the deputy chief press secretary to the governor, Mr. Linus Obogu said, “This is not an issue that I have to make comments on. I would advise that you seek this kind of information from the attorney general of the state or the state attorney general/ commissioner for Justice or the permanent secretary, Cross River State Ministry of Justice.”

Calls were put across to the state Attorney-General/Commissioner for Justice, Barr. Tanko Ashang, but they were not anwered. Efforts to get the input of the permanent secretary in the state Ministry of Justice, Mr. Peter Bassey, also failed as he, too, did not pick calls from our correspondent.

The Commissioner of Information in Enugu State, Chidi Aroh, said since it is a court judgement, the state was waiting for the attorney general of the state to advise the state executive council properly.

Meanwhile, Rivers State Governor Nyesom Wike has accused his Katsina State counterpart, Aminu Bello Masari, of leading some other state governors to conspire against efforts of the state government to resume the collection of VAT within its jurisdiction.

Wike spoke yesterday in a state-wide broadcast, on the heels of the decision of the Federal High Court, Port Harcourt, to dismiss an application for stay of execution brought by the FIRS on its earlier judgement on the collection and administration of VAT in the state.

The governor said that with the latest decision of the Federal High Court, the coast was clear for the full implementation of the Rivers State Value Added Tax Law 2021 across the entire state, even as he directed the Rivers Internal Revenue Service (RIRS) to begin the full and total implementation as well as the enforcement of the new law.

He said: “As we all know, following the recent judgement of the Federal High Court, Port Harcourt, which upheld the constitutional right and authority of State Governments to impose, collect and utilize value added taxes (VAT) within their respective territorial jurisdictions, the Rivers State Government enacted the Rivers State Value Added Tax Law 2021 to regulate the effective administration of VAT in Rivers State.

“As expected, the Federal Government, through the Federal Inland Revenue Service (FIRS), disagreed and filed an appeal coupled with a request for stay-of-execution of the judgment before the Federal High Court.

“While the appeal was pending and without any stay-of-execution of the subsisting judgement, the FIRS went about to bully corporate bodies and business entities from paying the VAT to the Rivers State Government even when they knew that an appeal does not serve as a stay, neither was there anything to stay in a declaratory judgement.

“As a mere agency of the Federal Government without any political authority, the effrontery and impunity exhibited by the FIRS against the Rivers State Government was ill-advised and highly provocative.

“However, being a government that believes in the rule of law, we decided on our own to suspend the enforcement of the Rivers State VAT Law 2021 pending the outcome of the FIRS’ application for stay-of-execution.

“Today, the FIRS has failed in its attempt to frustrate the enforcement of the State’s Law on VAT with the Federal High Court’s dismissal of its application for stay-of-execution of the judgement.

“It is important to reiterate the fact that we did no wrong in exercising our legal right under our constitutional democracy to stop the continuing breach, denial and curtailment of the constitutional right of States to lawfully impose and collect value added and other related taxes within our jurisdiction to the exclusion of the Federal Government.

“And in doing so our singular and progressive objective was to contribute to the advancement of fiscal federalism by enabling the federating states to explore and exploit their potential and capacity for generating greater internal revenues with which to fund their development goals and reduce the outdated over-reliance on pitiable federal allocation and other handouts.

“Naturally, some states with presently low economic activities and ethically restrictive social policies with economic implications may be adversely affected for now, but this is not our own making. Like the right to derivation, this is also a constitutional prescription, which we all swore as political leaders to respect and defend as the supreme law of the land.

“Above all, fiscal federalism remains the right path to economic self-reliance and sustainability for all states and the benefits derivable from this case by all the states in the long run far outweigh the immediate revenue loss that some states may presently suffer.

“It is therefore very unfortunate that some state governors led by that of Katsina State are vainly conspiring to truncate this progressive reality in favour of the inequitable status quo so that the federal government can continue to rob Peter to pay Paul as the nation’s self-imposed tax master-general.

“For us in Rivers State, we will continue to ensure and project our constitutional rights to access all possible resources we can take hold both within and outside our geographical boundaries to advance the progress of our state.

“And with today’s judgement the way is now clear for the administration and enforcement of the Rivers State Value Added Tax Law 2021 across the entire State until otherwise decided and set aside by the Superior Courts.

“Consequently, I hereby direct the Rivers State Revenue Service (RSRS) to ensure the full and total implementation and enforcement of this law against all corporate bodies, business entities and individuals with immediate effect.

“All corporate bodies, business entities and individuals are advised to willingly, truthfully and promptly comply with their tax obligations under this law to avoid the full weight of the stipulated sanctions, including having their business premises sealed-up.

“Let me warn that the Rivers State Government is fully in charge of the state and will not tolerate any further attempt by the FIRS to sabotage or undermine our authority to freely administer our tax and other related laws in our own State. Those who play with fire risks having their fingers burnt. Enough of the shenanigans.”

He added, “We have heard the judgment of the State High Court in Rivers and we have appealed against that judgment.

“It means people will begin to pay double VAT because if you pay VAT in Kano at the point of departure, when you come to Katsina you will pay another VAT.

“If you pay VAT in Lagos, it means you will also pay VAT all along the way until you reach your destination. It will bring a lot of burden on the people. That judgment is not fair.

“It is other parts of the country that make Lagos and Rivers States what they are. We have to work together as a nation and come up with something that will work for all of us.”

Don’t Panic, FIRS Tells Tax Payers
Meanwhile, the FIRS has urged taxpayers not to panic over the recent court ruling by the Federal High Court sitting in Port Harcourt which dismissed its motion for stay of execution of the judgment that Rivers State can collect VAT from its residents, stating that “until the Court of Appeal, or even the Supreme Court determines the matter, taxpayers are required to continue to comply with their VAT obligations within the status quo framework.”

The FIRS disclosed this in a statement by the Special Assistant to the chairman of the FIRS on Media and Communications, Johannes Wojuola.

“The FIRS, having lodged, in the Court of Appeal, both an appeal against the decision of the Federal High Court sitting in Rivers State in Suit No. FHC/PH/CS/149/2020, Attorney General of Rivers State Vs Federal Inland Revenue Service, and an injunction pending appeal of the said judgement, assures taxpayers that there is no cause for alarm.

“The Federal High Court ruling should not breed any confusion as to the obligations of taxpayers. Taxpayers must continue to comply with the Value Added Tax Act pending the final determination of appeal.

“Taxpayers must continue to honour their tax obligations under the VAT Act. Failure to do this would put them on a collision course with the law”, the statement read.

“For the avoidance of doubt, records of appeal have been transmitted to the appellate court. The Service is confident that, given the extant laws, the arguments and case put forward, it will earn a favoured judgment at the appellate court”, the statement concluded.

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