GROpinion
VAT legal tussle: The implications and way forward
Written By: Chukwuemeka Oluka
It is no longer news that some states of the federation struggle to keep their head above water because of the paucity of funds occasioned by challenging internally generated revenue structures.
These states also allege that they are being short-changed by the Federal Government when sharing the national proceeds from Value Added Tax (VAT). It is on this premise that the Rivers State Government, one of the biggest contributors to the VAT proceeds has filed a suit through the state’s Attorney General against the Federal Inland Revenue Service (FIRS) and the Attorney General of the Federation to challenge the legality of the FIRS to collect VAT within the state.
In a verdict delivered by a Federal High Court sitting in Port Harcourt on August 9, 2021, Justice Stephen Dalypop Pam ruled that the Rivers State Government and not the FIRS is entitled to collect VAT and Personal Income Tax in Rivers state territory.
The judgement by extension means that other states government’s constitutional right and authority to impose, collect, and utilize VAT within their respective territorial jurisdictions were upheld too.
Not satisfied with the judgment, the FIRS approached an Appeal Court to challenge the ruling.
While the appeal was yet to begin, the revenue collection agency returned to the same Federal High Court in Port Harcourt to seek a stay of execution on the court’s ruling, pending the determination of their appeal.
Recall that sequel to the landmark judgement in favour of Rivers state, the state House of Assembly had enacted the Rivers State Value-Added Tax Law of 2021 and it was signed by the Governor, Nyesom Wike on August 19th, 2021.
It is against this backdrop that this research examines the issues around the current legal tussle. It examines the implications for parties involved while proffering some suggestions on the way forward.
What is VAT?
Yes, one may ask, what does VAT mean? VAT is an acronym for Value Added Tax. It is a consumption tax paid when goods are purchased and services are rendered.
It is a form of indirect sales tax paid on products and services at each stage of production or distribution, based on the value added at that stage and included in the cost to the ultimate consumer.
VAT was introduced in Nigeria with the enactment of the VAT Act No. 102 of 1993, to replace the Sales Tax, which had been in operation since 1986 under the Federal Government Decree No. 7 of 1986.
According to the Decree establishing VAT, the FIRS claim it remains the legitimate authority to administer it. But the Rivers State Government would maintain that the inability of VAT to be captured in items 58 and 59 of the exclusive legislative list of the 1999 constitution makes the FIRS unable to administer VAT. This is the bone of contention; this is the crux of the matter!
Matters Arising…
With this knowledge, it is interesting to know that the public spat between the Rivers State govt and the FIRS over the administration of VAT appears not going away soon.
This followed the trial court’s dismissal of the application of FIRS for a stay of execution of its judgment in favour of the Rivers State Government to collect VAT and not the FIRS. In delivering his ruling on the stay of execution application by the FIRS, Justice Pam said the revenue collection agency failed to file an application to set aside the Rivers State Tax Law of 2021.
Therefore, he maintained the state’s law on VAT remained valid and subsisting. But despite the ruling, the FIRS had remained defiant, resisting the ruling of the court and had directed taxpayers in river state to continue to comply with the VAT Act pending the determination of its appeal by a superior court.
As events kept unfolding, Gov. Wike of Rivers took the battle a step further by releasing a letter written by the FIRS to the National Assembly dated July 1, 2021, asking the legislators to amend the 1999 constitution by moving VAT administration from the concurrent legislative list to the exclusive legislative list.
The letter with reference number FIRS/EC/CWREP/0416/21/037, was titled, ‘Request for sponsorship of a bill for the establishment of the proposed Federal Revenue Court of Nigeria and the insertion of Value Added Tax under item 58 of the exclusive legislative list’.
In the letter, the FIRS Executive Chairman, Muhammad Nami, specifically pleaded with the Chairman of the Constitution Review, who is also the Deputy Speaker of the House of Representatives, Idris Wase to vest, exclusively on the FIRS, all adjudication of tax disputes, including federal tax laws, companies’ income tax, petroleum tax, income tax, capital gain tax, stamp duty, VAT, taxes, levies and other laws, regulations, proclamations, government notices, and rules.
According to Wike, the FIRS letter, more or less, reinforced the judgement of the court and vindicates the position of the Rivers State Government that it is not the responsibility of the FIRS to administer VAT generated in the states.
While the Rivers State Government was still rejoicing in the recent trial court rulings at the time, The appellate court in Abuja, on Friday, September 10, 2021, ordered the Rivers State Government as well as the Lagos state government – that had applied to be joined in the subsisting suit – to stay action on their bids to collect Value Added Tax (VAT) pending the resolution of the legal dispute on the matter.
Premium Times reported that Haruna Tsammani, the judge who delivered the lead ruling of a three-man panel also suspended the operation of the law passed by the Rivers State House of Assembly and assented to by Governor Nyesom Wike, for the collection of VAT by the State government.
The court held that since parties had submitted themselves to the jurisdiction of the court (of appeal) for adjudication on the issue, they must not do anything that will destroy the subject matter of the appeal.
Honestly, one never gets enough of the myriads of evolving issues in the tussle between the Rivers State and the FIRS.
It has been and continues to be a roller coaster of controversies. Nonetheless, this research would go on to explore the implication(s) the ongoing VAT controversy has on parties involved and most especially, on the fiscal federalism that is being practised in Nigeria.
The Implications
As the VAT legal battle rages, the researcher is somewhat coy and a bit careful not to pre-empt the decision of the superior courts before which the final interpretation of the law on the matter lies.
This is based on the realization that when a matter goes on appeal, a superior argument will arise. Even, a case can be lost on appeal based on technicalities. When a matter is entertained based on substance, one could still lose a case on appeal.
Nonetheless, based on the realities on the ground and since the trial court’s ruling in Port Harcourt has been in favour of states to administer VAT, most of the implications the research identifies, tilts towards what obtains if Rivers State wins the legal battle in the end.
With this, the first implication will be that states can now enact their tax laws within a new tax regime and then set a rate for it. This will give them leverage to improve their financial statuses.
Whether this development will be welcome across economically less-viable states of the federation is a different question. But certainly, this is a conversation Nigeria must not shy away from, because, now is the time for it to be heard.
Another implication is that the current revenue allocation formula will now be up for serious scrutiny and discussion.
The reality had been that some states – especially those with huge VAT revenue potentials – have held that the Federal Government has been unfair to them in terms of the revenue sharing formula. In the month of June, VAT collected in Rivers State was N15.1billion; what they were given was N4.7billion.
The VAT collected in Lagos state was N46.4 billion but what it got was N9.3billion. However, Kano state contributed N2.8billion and then was given the same amount in allocation.
This is why the governor of Rivers state would describe this sharing formula as an injustice. So, the current litigations give states like Rivers and Lagos, which have always cried of injustice, an excellent window to put things in the right perspective. But when this is done, the truth is that some states with low economic profiles are likely going to get impoverished.
Even the Federal Government will bear the brunt hugely should they lose the legal tussle eventually. This is because the FIRS has been one of the largest revenue pools for it. Also, given that the Federal Government is being plagued of late with borrowing funds at all costs, their balance sheets will now go from the sublime to the ridiculous.
How this will affect the national Gross Domestic Product (GDP) in the long run is yet to be seen, considering that the economy showed signs of full recovery after a period of strong recession.
Meanwhile, business operators in Nigeria are deeply concerned about what becomes their fate in the anticipatory VAT regime.
The argument is that it will lead to multiplicity of taxes especially where items are sold and then moved from one jurisdiction to another.
The disparity in VAT charges at the point of goods’ procurement and sales that will hold sway in different states of the federation would lead to tax-payers paying double.
Also, the practice over the years, by the Federal Government of collecting tax accruing to the states has been alleged to stifle and prevent fiscal federalism from blossoming successfully in Nigeria.
Should the final judgement be in favour of states to collect VAT, the implication will be that the Federal Government will now rethink other governmental functions and financial relations accordingly amongst states and local governments with a view to shedding more of its weight to end any perceived ‘uneven’ fiscal federalism. This will set the precedent for a properly federated structure to come on board.
The Way Forward
Now that the legal battle has been taken to superior courts, it becomes expedient that they accord accelerated hearing to it. In doing so, the judiciary must decline any temptation to be used by the Federal Government to do any dirty jobs in the VAT legal tussle.
Any attempts, for instance, to move the matter from where it currently is to another court that will be seemingly favourably disposed to granting judgement to one party at the expense of the other, will automatically throw a spanner in the works of our democracy.
The scandal of ex-parte order of interim injunctions and conflicting rulings from courts of coordinate jurisdiction must be resisted in this case.
Reliance on the Federal Government has made some states feel somewhat lazy and laid back. As a potentially new tax regime takes form, it presents a wake-up call for governors of economically less-viable states to wear their thinking caps to start thinking outside the box.
They must move away from the idea of a ‘feeding bottle’ system of government that goes cap in hand to Abuja to beg for funds.
These states must roll up their sleeves, work hard and explore alternative and viable ways to survive. This includes collaborating with other regions to grow their revenue base.
In the meantime, the logic of not consuming certain things but benefit from them when VAT revenues are shared should be discouraged.
Many states in the North have Sharia (Hisbah) police in place and they prevent people from drinking or selling alcohol, but they end up benefiting from the same VAT proceeds from alcohol collected in other parts of the country.
These states should rethink the destinies they have chosen for themselves and start creating the enabling environment for businesses to thrive. In a related development, if a beauty pageant is disallowed in a state, for instance, Investments that would’ve come to the state concerning entertainment would’ve been lost.
By this, states are encouraged to scale up their economic policies to attract investments since they will be the ones to get the VAT benefits.
While states of the federation anticipate the final judgment on VAT administration, it is being suggested that they should prepare for a transition period of VAT regime if the final verdict goes in their favour.
There should be a lot of orientation and education for business owners and the public to know the institution empowered by law to collect VAT going forward.
Do some states have the capacity to collect VAT like the FIRS do in case the legal tussle finally goes their way? Well, while capacity talks about the infrastructure or the provisions made for the seamless collection of VAT, these states, if they do not have the capacity in place, can learn from investments hubs like Lagos, Ogun, Kano, and Rivers states to understudy how they’ve been able to manage their tax collection schemes over the years.
While this is done, the conversation has to be shifted from VAT collection to the responsibility of the states – if the power eventually rests on their table – to properly now administer the humongous amount of money that will be coming to them through VAT.
In all, there is simply no gainsaying that Nigeria has witnessed a dramatic turn of events lately due to the current impasse between Rivers State and the FIRS over VAT collection and administration.
It shows that we are living in interesting times, and interesting it is to see that states are gearing up to take their destinies into their own hands.
Good a thing parties involved in the legal tussle are respecting the rule of law and doing so within the ambits of the law. Therefore, the time is now for our courts to rise to the occasion, not fearing whose ox is gored in the VAT tussle, and be ready to expand the frontiers of our legal jurisprudence for good while saving our democracy some impending blushes.
About The Writer
Chukwuemeka Oluka writes in from Enugu, Nigeria. He is a passionate writer and a research enthusiast. He is also a graduate of Electronic and Computer Engineering from Nnamdi Azikiwe University, Awka. He tweets @mekus_oluka and can be reached via “[email protected]”
Columnists
Atiku Abubakar’s Coalition on a Path to Failure after Struggles
By: Prof. Ojo Emmanuel Ademola
In Nigeria’s political landscape, Atiku Abubakar’s coalition stands as a significant challenger to the status quo but faces challenges like internal disputes, regional divides, and distrust among stakeholders. To succeed, the coalition must present a clear economic vision resonating with an informed electorate. Fostering unity, transparency, and inclusivity while addressing internal conflicts and regional disparities will enhance trust and strengthen its position in Nigerian politics.
Atiku Abubakar is leading a coalition of major political parties, including the APC, PDP, and Labour Party, to challenge President Bola Tinubu in the 2027 elections. The coalition aims to tackle regional insecurity and economic issues, which Atiku believes the current government is mishandling. In response, President Tinubu is employing a carefully crafted strategy, termed a divide-and-rule approach by some analysts, to weaken this coalition. However, analysts suggest that Nigerians are increasingly focused on economic solutions rather than divisive politics.
Political analysts assert that Atiku Abubakar’s coalition faces immense challenges, indicating it is “dead on arrival.” Atiku Abubakar’s coalition is plagued by internal conflicts, particularly between him and Peter Obi over leadership and the presidential candidacy. Regional divisions have weakened the coalition, with the PDP losing influence in the South-South and South-East to Obi’s Labour Party. Trust issues persist as members question Atiku’s motives and whether the coalition serves a collective purpose. Amid Nigeria’s economic and political instability, the coalition struggles to gain support and maintain unity, highlighting the need for cohesion to navigate upcoming challenges, especially ahead of the 2027 elections.
Public opinion plays a crucial role in the success of political coalitions like Atiku Abubakar’s, influencing political dynamics significantly. Support from the public can enhance a coalition’s credibility and momentum, making it a stronger alternative to the current government. As politicians are attuned to public sentiment, aligning coalition goals with public concerns can motivate them to join or support the coalition. Positive public opinion leads to greater media coverage and supporters while mobilising essential resources for campaign efforts. Ultimately, electoral success depends on the coalition’s ability to connect with voters, making it imperative for Atiku’s coalition to engage with and address public concerns effectively.
Prioritising youth engagement, economic growth, and sustainability is essential for any administration aiming for progress. With Nigeria’s large youthful population, active involvement can enhance political participation, spark innovation, and build a strong workforce. Addressing the youth’s needs through targeted policies on education, job creation, and inclusivity is crucial.
Additionally, focusing on economic development is vital to tackle unemployment, poverty, and regional disparities, requiring policies that promote entrepreneurship and attract foreign investment. Emphasizing sustainability ensures economic progress while protecting the environment; this includes investing in renewable energy and eco-friendly technologies. President Tinubu’s commitment to these areas is key to fostering a more inclusive, prosperous, and sustainable Nigeria.
It’s an interesting perspective that Atiku Abubakar’s coalition might be seen as a distraction rather than a genuine attempt to address Nigeria’s challenges. In the digital age, where information flows rapidly and citizens are more informed, such strategies can indeed face significant hurdles. Here’s an expanded view on why this approach might struggle and what could be more effective:
Challenges of Distraction Politics in the Digital Age:
In today’s digital age, Nigerians have greater access to information through social media and online news, making traditional political diversion tactics less effective. This increased transparency allows citizens to monitor government actions closely and hold officials accountable. The youth, who are active online, prefer practical solutions over distractions, highlighting the need for meaningful policies to drive genuine progress and change.
Effective Strategies for Democratic Development:
Focusing on economic empowerment through sustainable initiatives such as job creation, small business support, and investment in technology can significantly improve citizens’ well-being. Enhancing education and skills for youth prepares them for the job market and strengthens the economy. Inclusive governance that addresses regional disparities fosters national unity and stability. Additionally, promoting environmental sustainability through green technologies and renewable energy ensures long-term prosperity and a healthier future for everyone.
Inspiring Examples:
Digital innovation has transformed governance and public services in Estonia, highlighting transparency and efficiency. Nigeria should adopt similar strategies to enhance its performance. Youth-led initiatives are crucial for economic growth and support young entrepreneurs. The tech industry in Nigeria is booming, with start-ups gaining global recognition.
Community engagement is vital for effective political movements, requiring grassroots involvement to address diverse needs. Leaders who connect with communities foster strong support, essential for successful governance. Nigeria can build a brighter future by embracing innovation, empowering youth, and engaging communities.
Distraction politics may have worked in the past, but the digital age requires more transparency. By focusing on real solutions and engaging with an informed electorate, leaders can foster democratic development and a brighter future for Nigeria.
Atiku Abubakar and his coalition have faced challenges in developing winning strategies. Let’s examine some democratic perspectives on the reasons behind this and potential alternatives.
Challenges Faced by Atiku Abubakar and His Coalition:
Progress in Nigeria’s political landscape hinges on overcoming formidable hurdles such as the lack of a unified vision, deep-rooted trust deficits, and intricate regional and ethnic divides. The coalition must navigate complex agendas and historical disappointments to present a cohesive front and inspire confidence among voters. Addressing Nigeria’s diverse societal scope requires inclusive strategies that bridge demographic disparities and deliver tangible solutions to pressing economic and social woes. By forging a unified vision, rebuilding trust, and fostering cohesion among varied communities, the coalition can chart a path towards transformative change and sustainable development in the nation.
Engaging Democratic Views:
To succeed, a coalition must first establish a unified vision that transcends individual ambitions and resonates with the broader public. Rebuilding trust is key, requiring transparency, accountability, and consistent communication to demonstrate a commitment to democratic principles. Inclusivity in policymaking is vital, necessitating engagement with diverse groups to address regional and ethnic needs effectively. A strong focus on the economy, with clear and practical plans for job creation and infrastructure investment, is essential for garnering voter support. Additionally, prioritizing youth engagement through education, skills development, and political participation initiatives can ensure a more inclusive and sustainable political strategy.
Inspiring Examples:
Building grassroots movements is essential for a coalition’s success, as local networks create strong support. Digital campaigns via social media and online platforms can broaden the coalition’s reach. Collaborative leadership fosters voter confidence, as united leaders convey solidarity and commitment.
Atiku Abubakar and his coalition have struggled to meet essential foundational criteria. Despite the challenges they face, there are effective strategies they could implement to enhance their prospects. However, various reasons limit their ability to adopt these strategies. Instead, they should foster unity, trust, inclusivity, and economic development. By doing so, they can craft a compelling vision that truly resonates with the Nigerian public.
In conclusion, Atiku Abubakar’s coalition is at a pivotal moment, with the potential to either reshape Nigerian politics or struggle with its challenges. To succeed, the coalition must present a unified vision that resonates with all Nigerians. It needs to rebuild trust through transparency and accountability while addressing the diverse needs of the country’s various regions and demographics. By focusing on economic empowerment, youth engagement, and sustainable development, the coalition can provide a compelling alternative to the current administration. In a time when voters seek genuine solutions and meaningful change, the path to success lies in tackling the real issues facing Nigeria and engaging the public in a transparent and inclusive manner.
GROpinion
Insecurity In Zamfara – Hold Lawal Accountable, Not Matawalle
Writes Nasiru Aliyu, Media Advisor to the Hon. Minister
The recent protest organized by the All Progressives Congress (APC) Akida Forum raises significant questions about political motivations and accountability.
Led by Musa Mahmoud the APC AKIDA group staged a demonstration at the Abuja headquarters of the Department of State Services (DSS), demanding an investigation into the Minister of State for Defence, Dr. Bello Mohammed Matawalle, amid allegations linking him to banditry in the state.
The protest, predominantly featuring hired women and youths from Abuja, was framed as a response to escalating security concerns in Zamfara.
However, the underlying motives appear to be rooted in political rivalry rather than genuine concern for public safety.
The leader of the APC Akida Forum Tijjani Ramallan claims that Governor Dauda Lawal has accused Matawalle of collusion with bandits, suggesting that such ties have perpetuated the insecurity plaguing the region.
A critical point overlooked by Mahmoud and his supporters is that Matawalle is no longer the executive governor of Zamfara.
The current governor, Dauda Lawal, now holds the title of the state’s chief security officer, and therefore, he bears the primary responsibility for addressing the security crisis.
Instead of engaging in a blame game, Lawal should focus on implementing effective strategies to combat the rampant insecurity and provide the dividends of democracy to the people of Zamfara state.
The animosity towards Matawalle seems to stem from his previous role as the Director General of Bola Ahmed Tinubu’s campaign in the Northwest, where he played a pivotal role in securing significant electoral support for the current president.
This success has reportedly fueled envy among some political figures like Tijjani Ramallan, including Musa Mahmoud and others who may feel threatened by Matawalle’s rising profile.
It is noteworthy that allegations against Matawalle have been investigated by the National Security Adviser’s office, which found no evidence to support claims of his involvement in banditry.
This investigation contributed to President Bola Ahmed Tinubu’s decision to retain Matawalle in his ministerial position, where he has reportedly managed security matters in the Northwest with professionalism.
Adding to the complexity of this situation, a Kano High Court recently issued a restraining order against Governor Lawal and others, prohibiting them from continuing their smear campaign against Matawalle. This legal development underscores the court’s recognition of the potential harm caused by unfounded allegations and the need for accountability in political discourse and the state government has found an ally in APC AKIDA led by Tijjani Ramallan.
Despite the court’s intervention, Governor Lawal continues to leverage media platforms to tarnish Matawalle’s reputation, linking him to banditry and corruption without substantiating evidence.
Such tactics appear to be desperate attempts to undermine Matawalle’s credibility, likely motivated by Lawal’s desire to solidify his political standing.
The ongoing campaign against Matawalle by Lawal and his associates raises serious concerns about the integrity of political discourse in Zamfara.
It is imperative for the public to remain vigilant against misleading narratives and to recognize the broader implications of such political maneuvers.
The Kano High Court’s ruling serves as a reminder of the importance of due process and the need for responsible governance.
In conclusion, the focus of accountability in Zamfara should shift towards Governor Dauda Lawal, who now holds the reins of security in the state.
Instead of casting blame on former officials, Lawal must take ownership of the security situation and work towards tangible solutions that prioritize the safety and well-being of the people of Zamfara.
Furthermore, since Matawalle operational visit to sokoto led to the elimination of Bandit leader Halilu Sububu who is alleged to have died with the treasure of the sponsors of banditry in zamfara state, the pain propelled them to further embark on campaign of calumny.
The recent activities of some individuals with one Davids Iyida attempting to sabotage the MoMo Payment Service Bank project intended to benefit, especially Enugu Ezike people, have raised significant concern and outrage within the community.
Such actions aimed at undermining a project with immense potential to uplift and empower the people of Enugu Ezike can only be described as malicious.
The MoMo PSB project is designed to bring financial services closer to the people of Enugu Ezike, facilitating easier access to banking and financial transactions.
This project is expected to create jobs, stimulate local businesses, and provide a much-needed boost to the local economy. In a region where such opportunities are rare, the MoMo PSB project represents a beacon of hope for many residents.
It is particularly baffling and disheartening to witness a member of the community collaborate with outsiders to hinder the progress of their own people.
The reasons behind such alliances remain unclear, but the impact of these actions is evident and deeply troubling. Working to obstruct the project is not only delaying progress but also actively working against the welfare and advancement of Enugu Ezike.
The efforts to destroy Kingsley Ifeanyi Adonu’s good intention, despite all the positive contributions he has made, are nothing short of wickedness.
Adonu, a visionary entrepreneur and the leading MTN Partner in the South East, has dedicated significant resources and efforts to bring the MoMo Payment Service Bank project to fruition.
His vision for the community includes economic growth, financial inclusion, and overall development. Attacking his vision is an attack on the progress and future of Enugu Ezike.
The question that lingers in the minds of many is: Why sabotaging our own benefits? In a time when unity and collective effort are paramount for the community’s advancement, such actions of sabotage are counterproductive and harmful. The community needs all hands on deck to drive development and improve the quality of life for its residents. Internal conflicts and malicious actions only serve to set back these efforts.
Despite the challenges and the malicious attempts to derail the project, it is important to reaffirm that S Mobile Group vision for establishing a MoMo Payment Service Bank in Enugu Ezike will prevail.
The community stands behind this vision, recognizing the immense benefits it promises to bring. Efforts to hinder progress will ultimately fail in the face of collective determination and support.
The actions of these ungrateful individuals, aimed at sabotaging the MoMo PSB project, are grave disservice to the community of Enugu Ezike.
In a time when progress and development are desperately needed, such malicious activities are deeply regrettable.
However, the vision and determination of Kingsley Ifeanyi Adonu and the community’s support ensure that the project will succeed, bringing much-needed growth and prosperity to Enugu Ezike.
Let it be known that no amount of sabotage can dim the light of progress and unity.
Nwodo, a public commentator writes from Enugu State
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