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Despite court ruling: Southern governors insist on VAT collection

The governors agreed that instead of the Federal Inland Revenue Service (FIRS), state governments have the power to collect VAT.

The Southern Governors Forum met on Thursday at the Enugu State government house where they resolved to collect Value Added Tax (VAT) in their states.

The governors agreed that instead of the Federal Inland Revenue Service (FIRS), state governments have the power to collect VAT.

Daily Trust reports that there has been controversy over the tier of government that is constitutionally empowered to collect VAT within their various territories. The matter is currently at the Supreme Court.

Thursday’s decision by the southern governors has brought a new twist to the VAT debacle, which experts described as “gradual restructuring” in action.

The Chairman of the forum and Governor of Ondo State, Rotimi Akeredolu, who read the communiqué of the meeting of the southern governors, said that the collection of VAT by various state governments will go a long way in boosting their economic growth and development unlike when the FIRS was solely responsible for collecting VAT, remitted to the coffers of the federal government.

Already, some states favourably disposed to collecting VAT like Rivers and Lagos states have enacted laws to that effect.

The Rivers State government had earlier secured a Federal High Court judgment to collect VAT. However, the Court of Appeal on Friday, September 10, 2021, upturned the judgment.

It ordered the state to stay action on its bid to collect VAT pending the resolution of the legal dispute on the matter.

Haruna Tsanami, the judge who delivered the lead ruling of the panel of judges on the matter also suspended the law passed by the Rivers State House of Assembly and assented to by Governor Nyesom Wike.

He granted “status quo ante bellum” in favour of the FIRS and against the respondents and fixed yesterday for the continuation of the hearing.

During the resumed hearing, the appeal court refused the applications by Rivers and Lagos states seeking to appoint a receiver or manager for VAT collections.

The three-member panel of justices presided by Justice Tsanami also reserved the ruling on joinder of Lagos State to a later date after the lawyers in the matter filed and argued their processes.

Counsel to Rivers State Government, Ifedayo Adedipe (SAN) had appealed to the court to adopt a procedure under Order 4 Rule 6 of the court’s rules on status quo, which would entail appointing a receiver or manager to take custody of the VAT from the FIRS.

Similarly, counsel to Lagos State government, Moyosore Onigbanjo (SAN) argued that if the FIRS goes ahead to collect and distribute the VAT while the matter was pending in court, the affected states would not be able to recover same.

But counsel from the Federal Ministry of Justice, Tijjani Gazalli (SAN) and FIRS, Magaji Mahmud (SAN) asked the justices to discountenance the oral applications, adding that Lagos State had not been joined in the suit.

Earlier, Onigbanjo had asked the court to grant the state leave to join the appeal as an interested party, having been restrained from collecting VAT alongside Rivers State.

He argued that the purpose of the joinder was to prevent multiplicity of suits on the same subject matter.

“The application is reserved for ruling,” the justice said.

Our correspondent reports that Rivers State had on Wednesday, September 15, urged the Supreme Court to set aside the 10 September Court of Appeal ruling ordering it and FIRS to maintain the status quo on the VAT issue.


Northern Governors Forum mum

There was no immediate official reaction from the Northern Governors Forum led by Governor Simon Lalong of Plateau State on the position of the Southern Governors’ Forum on VAT.

Calls and a text message put across to Lalong’s Director of Press and Public Affairs, Makut Simon Macham, were not responded to.

Also, the Commissioner for Information and Communication, Dan Manjang, was contacted and he responded via a text message saying, “You know that I don’t speak for the northern governors.”

Meanwhile, a source at the government house said the Northern Governors Forum and the Plateau State Government were yet to have a position on the matter, otherwise, they would have already responded via a statement.

But the Kano State government said it was still studying all the arguments for and against states collecting VAT.

The state’s Commissioner of Information, Mohammad Garba, told one of our reporters that the state would make its position known as soon as it was done studying the arguments.

The state House of Assembly earlier this week recommended the dismissal of the chairman of the state Revenue Board amidst the dwindling fortune of the state’s IGR.

On its part, the Gombe State Government last night reiterated its call for continuation of the existing formula.

In a phone interview with Daily Trust, the Director-General of Press Affairs to Governor Muhammad Inuwa Yahaya, Ismaila Uba Misilli, said “the position of Gombe State Government is the need to retain the existing collection and distribution of VAT centrally.  “This is to ensure a balance in the collection and refund system that ensures customers are not charged multiple times. Again, the present administration also ensures that 20 per cent derivation is given to states before the sharing based on other indices,” he said.

He added that the state still awaits the verdict of the Supreme Court on the matter and the stand of the Nigerian Governors Forum (NGF)

This newspaper had recently reported that in the event the courts grant states powers to collect tax, more than 30 states in Nigeria may not be able to meet their financial commitments.

VAT contributes significantly to the total revenue generated by the government, accounting for over 16.2% of the Gross Domestic Product (GDP) in 2019.

VAT was introduced via Decree No.102 of 1993. It replaced sales tax operated under Decree No.7 of 1986, which was administered by states and the Federal Capital Territory (FCT).

The FIRS had the responsibility of collecting VAT on behalf of the 36 states and the FCT. Section 40 of the VAT Act requires that the VAT pool be shared 15% to the FG; 50% to states; and 35% to LGs (net of 4% cost of collection by the FIRS). Twenty per cent of the pool is shared based on derivation.

The FG generated over N2.5 trillion from VAT alone in the last 18 months as outlined in the 2020 Finance Act.

According to data filed by the Federal Inland Revenue Service (FIRS) from the National Bureau of Statistics (NBS), Nigeria may have earned about N2.5tr from January 2020 to June 2021 at a 7.5 per cent VAT rate.

Most states depend on funding from the Federal Allocation Account Committee (FAAC) due to their poor Internally Generated Revenue (IGR).


Southern govs vow to implement ban on open grazing

Daily Trust reports that the Southern Governors Forum during their meeting on Thursday also expressed satisfaction with the states in the region that have successfully implemented the anti-open grazing law in line with the decision reached during the meeting which was held in Delta State.

The forum also said the South should be allowed to produce the president of Nigeria in 2023.

The governors present were Ifeanyi Ugwuanyi of Enugu State, Nyesom Wike of Rivers, Emmanuel Udom of Akwa Ibom, Babajide Sanwo Olu of Lagos State and  Ifeanyi Okowa of Delta.

Others were Akeredolu of Ondo, Adegboyega Oyetola of Osun, Douye Diri of Bayelsa, and Dapo Abiodun of Ogun.

The deputy governors present were Mr Bisi Egbeyemi of Ekiti, Rauf Olaniyan of Oyo, Kelechi Igwe of Ebonyi, Ude Oko-Chukwu of Abia, Philip Shuaibu of Edo, Prof. Ivara Esu of Cross River and Prof. Placid Njoku of Imo.