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VAT collection: Govs, FIRS who will blink first?

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The Federal High Court sitting in the Garden City of Port Harcourt on August 9, 2021 ruled that the Federal Inland Revenue Service (FIRS), the federal government agency responsible for assessing, collecting and other revenue accounting for tax and other revenue accruing to the federal government, should stop collecting Value Added Tax (VAT) and personal income tax (PIT) in Rivers state. It further directed the Rivers state government to take charge of the collection. The governor of the state, Nyesom Wike, has truly taken charge by banning the FIRS from collecting taxes, although the agency has appealed the judgment. Lagos and many states from the south and the north, have issued conflicting comments and threats, prompting JOHNMARK UKOKO, to ask who will blink first. He writes.

On August 9, 2021 the Federal High Court sitting in Port Harcourt ruled that the Federal Inland Revenue Service (FIRS) should stop collecting Value Added Tax (VAT) and Personal Income Tax (PIT) in Rivers state.

The honourable judge directed the Rivers state government to take charge of the collection of the taxes.

Without wasting time, the Rivers state governor, Nyesom Wike, on August 9, 2021, signed into law the Rivers State Value Added Tax Law which provides for the imposition and administration of VAT in Rivers state.

In his judgment, Justice Stephen Pam stated that “there was no constitutional basis for FIRS to demand and collect VAT and other such taxes in Rivers state or any other state of the federation, since the constitutional powers and competence of the federal government was limited to taxation of incomes, profits and capital gains which does not include VAT and other of such taxes.”

Promptly reacting, on August 23, 2021, the FIRS went public, warning taxpayers that refusal to pay VAT to the federal government’s agency would lead to serious penalties.

The agency urged tax payers, especially those in Rivers state, to continue to pay their VAT to it, to avoid paying penalties for default, adding that it had appealed the judgment as well as a stay of execution so that the River state government would not go ahead with the tax collection.

A few days ago, a Federal High Court sitting in Port Harcourt dismissed the suit by the FIRS seeking to stop the Rivers state government from commencing the collection.

Speaking on a television live programme recently, Governor Wike said, “Rivers state awarded contracts to companies and, within the last month (July – August), we paid over 30 billon to the contractors and 7.5 percent will be deducted from that and to be given to FIRS. Now, look at 7.5 percent of 30 billon of contracts we awarded to companies in Rivers state.

“You will be talking about almost N3 billon only from that source. Now, at the end of the month, Rivers state government has received a mere 2 billon from VAT. “So, I have contributed more through the award of contracts and you are giving me less.What’s the justification for it?

Our findings showed that three of out of the 36 states and Federal Capital Territory in Nigeria provide 81 percent of the VAT collected by the FIRS.

Lagos state has the highest VAT collection, amounting to 55 percent of Nigeria’s VAT. FCT is in the second place with 20 percent, while 6 percent is from Rivers.

Kano gives five percent, while the remaining 33 states provide only 14 percent of the total VAT in Nigeria. Lagos states provides four times what 33 states provide, combined.

Further investigations showed that religion and cultural beliefs are responsible for low VAT

collected by many states of the federation.

A case in point is what happened in November 2020 when Hisbah Board enforcing a certain

religion belief destroyed about two million bottles of beer worth N 200 million confiscated in

Kano state.

In February 2021, 3000 alcohol bottles were destroyed in Kastina, in the same month Bauchi

state destroyed 260 crates of alcohol, i.e., drinks. So also goes for many states across the far

north of the country.

Commenting on this a chartered accountant and a fellow of the Chartered Institute

of Taxation of Nigeria (CITN), Mr Vincent Osiemete, said, “Certain

states refuse certain businesses from operating in their states, yet collect taxes

from them when other states allow them.

“It seems ridiculous that a state like Niger revoked all licenses of liquor dealers

throughout the state, yet collects VAT from other states like Lagos where

alcohol business is all allowed to thrive,” he stressed.

Lagos state, which has been playing the big brother role for years on VAT issue,

swiftly pounced on the news and insisted that, following the judgment in Rivers

state, FIRS should stop issuing demand notices for payment of VAT in the state.

While states like Lagos, Rivers and FCT are joyous about the Port-Harcourt ruling, it is

expected that many others will be unhappy about the current development.

Checks by our correspondent at FIRS’S website showed that, in the first half of 2021, VAT

collected was about 1 trillion, this is about 20 percent increase from about N800 billion

collected in the corresponding period of 2020.

This shows that, while there is a year-on-year increase in taxes collected, a state like Lagos

isn’t getting anything commensurate.

Record showed that Lagos got N21 billion in VAT revenue last year from FIRS but the state

Assembly said N500 billion worth of VAT was collected from businesses operating in the


Some states are against the collection of VAT in their state because they lack the capacity to

collect VAT receipts, lacking the technical and organisational capacity to manage the process

of VAT receipts.

Reacting to the issue, the Plateau state governor said “How many industries do we have in

Plateau state? There are not many. “So, the position of the Plateau state government on VAT

is that the federal government, through the FIRS, should continue to collect VAT on our

behalf and, thereafter, remit the proceeds to us,” he stated.

In his remarks, the Gombe state government appealed to the southern states to allow the

existing arrangement to continue. The state urged the Lagos, Rivers states and the richer

states to continue to be the “big brothers” they have been over the years.

The Gombe state government said, “The state (Gombe) lacked the capacity to effectively

carry that responsibility so the federal government should continue collection

In their position, the Nigerian Association of Chambers of Commerce, Industry, Mines and

Agriculture (NACCIMA) has put their weight behind the suspension of the execution of the

order pending its revision.

This was the position taken by NACCIMA’s 3rd Council Meeting in which it said that “the

NACCIMA council is of the firm view that if the tax practice direction in which compels

companies to pay 50 percent of assessed tax to FIRS before any appeal to contest the

assessment is allowed to proceed, most business in the private.”

Sector will practically collapse.

“The resolution and call became necessary because feelers from the Organised Private Sector

indicate that many businesses have been struggling to survive an unfriendly business

environment which has been made more difficult due the COVID-19 pandemic.

A lecturer at Lagos State University, Ojo, Dr Bayo Badejo, in a telephone interview, contended

That VAT was on the exclusive legislative list and only the federal government could legislate on


According to Ojo, “The issue of VAT is a very complex one that only people knowledgeable in

tax matters understand. It is like a bastard child confidently demanding for DNA test in protest

against sharing the inheritance with another child he or she considers to be underserving.

“If every state stands alone, you will realise that your bragging is on thin air. We have

clearly seen that Lagos, Abuja, Rivers and Kano lead the pack,” he stressed.

As at the time of going to press, the Lagos State House of Assembly had passed VAT

and Anti-open Grazing Bills.

Also, 32 state attorneys general had dragged the federal government to the Supreme Court over

the stamp duty issue.

People who expressed opinions on the issue cautioned the political actors and the top goons at

FIRS not to overheat the polity and that they should watch their utterances, a referring to a

statements by a state governor that his “state fund is not for Abuja people; let Heaven fall” is not


They opine that the country has too much issues to grapple with and that the judiciary shouldn’t

allow itself to be manipulated by the politicians and the government agencies.

Others say the business firms and Nigerians that pay VAT on a daily basis shouldn’t be

confused by having to pay their taxes to two demanding authorities of their state or/and the

federal FIRS.

The respondents are curious to know how Rivers and Lagos state hope to enforced the laws their

states House of Assembly have passed.

The respondents tasked Lagos, Rivers, Kano and FCT to heed the plea of the Gombe state

governor who pleaded, “I appeal to the southern states to continue to be their brothers’ keepers.”

The majority of the states in the northern region have been ravaged by terrorists and bandits

which have almost destroyed the states’ economy, adding VAT issue into the mix would further

compromise the states’ situation.

The respondents appealed to Governor Wike and his Lagos state counterpart not to overheat the

polity as the country’s politicians have time and time again showed that the political class are

always united in issues that concern them, as they have shown when they freely wine and dine

each time their sons or daughters wed or when they want to buried their loved ones.

As shown in the President Muhammadu Buhari’s son wedding when the ruling All Progressive

Congress (APC) and the main opposition People Democratic Party (PDP) faithful freely wined

and dined together.

The question on the lips of many Nigerians is “who will blink first?” Only time will tell.

Enough of this VAT trouble. Afterall, the money, whether it goes to the federal government

purse or the generating states, will not change the fortunes of the masses as the politicians and the

top government and civil servants are the ones to corner the fund to their private pockets.

“It seems ridiculous that a state like Niger revoked all licenses of liquor dealers

throughout the state, yet collects VAT from other states like Lagos where

alcohol business is all allowed to thrive,”

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