The Institute of Chartered Accountants of Nigeria (ICAN) has charged the Federal Government and the Rivers State Government to urgently seek an amicable resolution of the issue of the Value Added Tax Law controversy between them.
The association cautioned that the controversy should not be allowed to deepen in view of Nigeria’s precarious tax revenue position and the general business environment that it is important to protect the taxpayers and provide certainty to businesses.
The accountants gave the advice in its position on the ‘Rivers State Value Added Tax Law further to the judgment of the Federal High Court in Suit No. FHC/PH/CS/149/2020 between the Attorney General of Rivers State V. Federal Inland Revenue Service and the Attorney General of the Federation’
The position document was signed by Professor Ahmed Kumshe, Registrar/Chief Executive of ICAN
He said in what appears a seminal judgment on the case between the Attorney General of Rivers State and the Federal Inland Revenue Service and the Attorney General of the Federation, the High Court ruled in favour of Rivers State in respect of power to collect Value Added Tax (VAT).
According to him, the court empowered Rivers State to collect VAT as against the Federal Inland Revenue Service (FIRS).
He added:“Given the rapid development of events since the judgment there is the need to guide our members, share our view with policymakers and educate the public and other stakeholders on the possible implications.
“We believe that this development presents an opportunity to us to re-examine our fiscal federalism and leverage on the ongoing constitutional review to fashion out the most suitable fiscal structure for the country in a manner that strengthens the sub-national level of government while ensuring uniformity of treatment as much as possible. This process should include a review of the VAT law, its administration and revenue sharing formula”.
He said a cursory look at the Rivers State VAT law indicates that it was fashioned after the extant VAT Act, stressing that while the rate is 7.5 per cent, taxable persons are to register for the tax within six months of the commencement of the law or six months of commencement of business whichever is earlier.
He added: “This means businesses which have been in business for at least six months are to register immediately while new businesses have up to 18 February 2022 to register. Monthly remittance and returns are due by the 21st of the succeeding month in a manner specified by the Rivers State Internal Revenue Service. This means the first return under the law will become due by 21st of September 2021. The VAT revenue is to be shared 70 percent to the State and 30 percent to the Local Governments.
He expressed that there is no exemption for small businesses with turnover below N25 million as is the case under the national VAT Act.
He explained that while the move by the Rivers State government seeks to promote the principle of fiscal federalism, the matter should be approached carefully to achieve a win-win outcome for all stakeholders.
The Federal Inland Revenue Service (FIRS) had said it was still in charge of collection of Value Added Tax in Nigeria.
It implored taxpayers in the country to continue to pay their Value Added Tax (VAT) to the FIRS failing which they would be slammed with requisite penalties .
The agency’s directive was sequel to numerous enquiries to the Service in view of a recent judgment obtained by the Rivers State Government at the Federal High Court, Port Harcourt, which ruled that states, and not the Federal Government, are constitutionally empowered to collect VAT.
On his part, Abdullahi Ismaila Ahmad, Director, Communications and Liaison Department of the agency, explained that since the Service has already appealed the Rivers judgment in which appeal it is seeking a stay of execution order, the status quo ante subsists on the VAT collection authority, hence taxpayers should continue to pay their VAT to the FIRS.
He said:“The attention of the Federal Inland Revenue Service(FIRS) has been drawn to the trending report that, on 19/08/2021, the Government of Rivers State took steps to enact a Value Added Tax Law for Rivers State following the judgment of the Federal High Court Port Harcourt Division on 9th August 2021 in Suit No: CS/149/2020. The suit was about who has the constitutional duty for the collection of VAT and Personal income tax in Rivers State.
“We wish to inform the general public that, before the above-mentioned steps taken by the Government of Rivers State, FIRS had lodged an appeal against the above judgment and had also filed an application for stay of execution of the judgment as well asking the court for an injunction pending determination of the appeal.
“All parties to the suit are aware that both applications were heard on the 19th and 20th August 2021 and are awaiting the decision of the court.
“Given that the Court of Appeal is yet to rule on the Appeal from the Judgement of Federal High Court and that the Federal High Court is yet to deliver a ruling on FIRS’s applications for stay of execution and injunction, members of the public are advised to continue to comply with their Value Added Tax obligations until the matter is resolved by the appellate courts.”
