The Federal Government, the Federal Capital Territory and about 34 states may face revenue drop to the tune of over N3.9tn if the governments of Rivers and Lagos states begin the collection of the Value Added Tax in their respective states.
The last five years alone, the Federal Inland Revenue Service, a Federal Government agency that hitherto collected VAT on behalf of all the states and the Federal Capital Territory, realised N5.6tn. Out of this sum, Lagos and Rivers states contributed about N3.9tn.
Following the moves by the two states to start collecting their VAT independently, having enacted laws to that effect, the aggregate sum realised from VAT, which was shared by the three tiers of government, may suffer a decline.
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.
The court on Monday also dismissed the FIRS’s application for stay of execution, noting that since the state had enacted a law to that effect, courts are bound to obey laws. He said the law remained valid until set aside by a court of competent jurisdiction.
Meanwhile, the Court of Appeal sitting in Abuja on Friday ordered Rivers and Lagos states to stay action on the collection of VAT pending the determination of the appeal for a stay of execution filed before it by the FIRS.
Justice Haruna Tsammani, who delivered the lead ruling of the three-man panel of the appellate court, gave the order when the matter came up before the court.
He ordered that “the status quo ante bellum” be preserved.
“The parties shall refrain from taking any step regarding the judgment pending the hearing and determination of the application for stay of execution,” he said.
The FIRS in an appeal marked CA/PH/282/2021 prayed the appellate court to set aside the ruling of the Federal High Court in Port Harcourt, which granted River State power to collect VAT and PIT. The tax body also wrote to the National Assembly, seeking the inclusion of VAT in the exclusive legislative list. It also asked the federal lawmakers to approve for it the establishment of the Federal Revenue Court of Nigeria.
Lagos joins Rivers in A’Court battle
The ongoing dispute between the two states and the FIRS, however, assumed a new dimension on Friday as the Lagos State Government applied to the Court of Appeal to be joined as a co-respondent in the appeal filed by the FIRS.
The matter slated for the day’s activity in court on Friday was the application filed by FIRS seeking stay of execution of the trial court’s judgment.
However, the Attorney General of Lagos State, Moyosore Onigbanjo (SAN), informed the court of their application for the Lagos State Government to be joined as a party in the appeal. He argued that the application for joinder should be taken first before FIRS’ application for stay of execution, adding that it was in the interest of justice for Lagos State to be joined in the suit.
But the counsel for the FIRS, Mahmoud Magaji (SAN), argued that their application for stay of execution should take precedence over the application for joinder. Magaji, relying on the case of Pam V. Mohammed, argued that the court could restrict itself to the business of the day.
The counsel for Rivers State, Emmanuel Ukala (SAN), spoke in support of Lagos State. He also quoted late MKO Abiola saying that you cannot shave a man’s head in his absence and that the Lagos State Government ought to be joined in the appeal.
After listening to the submissions from all the parties, the court stood down the matter for the ruling.
Justice Tsammani noted that it would be in the best interest of justice for the motion for joinder to be heard first. He stated that it was not necessary that the first application to be filed must be the one to be heard first.
Magaji, however, informed the court that he had just been notified by the FIRS office in Port Harcourt that they received the application for joinder. He prayed the court to allow him to prepare and file his response to it. He also applied for the status quo to be maintained.
Consequently, the court 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.
Also present in court were the Attorney General of Rivers State, Zacchaeus Adangor; the Rivers State Commissioner for Justice, Isaac Kamalu and the Deputy Director and State Coordinator for the Rivers, Edo, and Delta Zone of FIRS, Hamisu Ibrahim.
The Acting Director, Civil Appeals, Federal Ministry of Justice, Tijjani Gazali (SAN), represented the Attorney General of the Federation, who was joined as the second respondent in the appeal.
How FIRS generated N5.6tn in five years
The FIRS generated N5.6tn VAT in five years. According to the data available on the FIRS website, Nigeria earned a total VAT revenue of N5,629,739,500,000 between 2016 and 2020.
In 2020, Nigeria earned a total of N1,531,170,900,00, comprising Import VAT collected by the Nigeria Customs Service, N347,724,800,000, and Non-import VAT of N1,183,446,100,000.
In 2019, the total VAT collected was N1,189,981,100,000, comprising N244,517,200,000 Import VAT and N945,463,900,000 Non-import VAT.
The total VAT in 2018 was given as N1,108,040,000,000, comprising N249,021,800,000 Import VAT and N859,018,200,000 Non-import VAT.
For 2017, total VAT income was N972,348,400,000, comprising N202,000,500,000 Import VAT and N770,347,900,000 Non-import VAT