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VAT legal tussle: The implications and way forward

Written By: Chukwuemeka Oluka

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Chukwuemeka Oluka VAT

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.

VAT controversy

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]

GrassRoots.ng is on a critical mission; to objectively and honestly represent the voice of ‘grassrooters’ in International, Federal, State and Local Government fora; heralding the achievements of political and other leaders and investors alike, without discrimination. This daily, digital news publication platform serves as the leading source of up-to-date information on how people and events reflect on the global community. The pragmatic articles reflect on the life of the community people, covering news/current affairs, business, technology, culture and fashion, entertainment, sports, State, National and International issues that directly impact the locals.

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Cybersecurity in 2024: Towards Ever Greater Sophistication of Tactics

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Chester Wisniewski, Director Global Field CTO

Writer: CHESTER WISNIEWSKI, Director Global Field CTO, Sophos

With 2024 fast approaching, what are the results for 2023 and what are the developments in the threat landscape for this new year?

The year 2023 was marked by persistence in the tactics of cybercriminals, with the predominance of ransomware, the exploitation of vulnerabilities, theft of credentials and even attacks targeting the supply chain. The common point in all his attacks is their formidable effectiveness.

It is therefore essential to ask what trends will persist in 2024 and what strategies businesses should adopt to deal with these future cyber threats.

Between persistent trends and evolving cybercrime tactics

In 2024, the threat landscape is not expected to change radically, particularly with regard to attack typologies and criminal tactics and procedures.

Criminal groups still primarily focus their attention on financial gains and ransomware remains their weapon of choice. These cybercriminals tend to take the easy way out by opportunistically attacking unpatched security vulnerabilities.

The recent Citrix Bleed attack demonstrated the agility of cybercriminals when it comes to quickly and effectively exploiting these new vulnerabilities.
However, once patches are applied to these vulnerabilities, cyberattackers tend to revert to more common strategies of stealing credentials or, failing that, cookies or session cookies, which, while slightly slower, constitute always a proven means that allows them to penetrate within a system.

In 2024, however, we should expect increased sophistication in defense evasion tactics, particularly due to the generalization of certain technologies such as multi-factor authentication. These attacks will combine malicious proxy servers, social engineering techniques and repeated authentication request attacks or “fatigue attacks”.

AI and regulations will continue to shape cybersecurity

In 2024, the development of AI will have a positive impact on the efficiency of IT teams and security teams by enabling them to strengthen defenses and work more efficiently, including through the processing of vast volumes of data in the aim of detecting anomalies. It should make it possible to respond more quickly in the event of an incident.

Indeed, analysis of attacks in 2023 showed a shortening of the time between network penetration and the triggering of a final attack – using malware or ransomware. The need for rapid detection and response tools to prevent costly incidents is therefore essential.

Finally, regulatory developments could have a major influence on measures taken against ransomware. The need to take more substantial measures could push some states to penalize the payment of ransoms, which would represent a brake on malicious actors and change the perspective of companies in the event of an attack.

Other stricter legislation, such as the implementation of the European NIS2 Directive, is also expected to force companies to take additional measures, particularly regarding their abilities to collect data sets.

To protect themselves against increasingly rapid, effective and costly attacks, companies will need to strengthen their defenses by equipping themselves with tools that allow them to detect and respond to incidents more quickly.

The worsening cybersecurity talent shortage does not appear to be as serious as some studies claim. On the contrary, companies have implemented more lax hiring criteria and more open-mindedness in the recruitment process.

From this perspective, to guarantee their survival in a constantly evolving threat landscape, companies have every interest in establishing partnerships with cybersecurity experts whose main mission is to make the hyperconnected world safer, to advise and assist them. in setting up effective defenses.

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The Internal Threat: The Hidden Face of Corporate Threats

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CHESTER WISNIEWSKI on Insider threat
By: CHESTER WISNIEWSKI, Field CTO – Applied research

Businesses today face many threats; but if those coming from outside are their main source of concern with a priority focus on ransomware, they too often forget to consider internal threats which can be just as devastating.

In fact, they take less time to assess the adaptability of their internal security measures in case a cyberattacker manages to break through their defenses from the inside and recover sensitive data that is easily accessible to him. So, what are the means to put in place to detect these threats and respond to them effectively?

The sources of these insider threats are diverse and very often undetected or detectable. They can thus be the result of negligence or even malice.

They can, for example, come from an implementation of relaxed security controls that do not apply to certain systems, or from a lack of logging and identification of these malicious activities.

Although, difficult to measure – since they are rarely the subject of dedicated reports – these internal attacks have already affected many companies.

What are the reasons for the appearance of these threats?

Intentionally or not, insider threats are legion. For example, when an employee carelessly forgets a USB key containing copies of critical information on the train, he then neglects to comply with all the rules in force.

This type of situation can be tragic for the company since there is therefore a risk of theft or public exposure of information that could lead to a violation of official regulations imposed by a governing body (usually GDPR, PCI and HIPPA) or by several regulatory bodies’ premises.

The company must then be extremely transparent by disclosing to its employees – and more broadly to the general public – that it has been the victim of a data breach within the organization, and it must also be held accountable. of all actions associated with this data breach.

But it can also be actions triggered intentionally for a wide variety of reasons. An employee may, for example, realize that he has the possibility of carrying out a malicious action in his workplace because of relaxed controls or because he has high visibility.

This type of situation can lead to the theft of confidential information belonging to the company. The employee then seizes this opportunity to harm the company with impunity.

Various flaws and patterns

Cybersecurity experts have identified three distinct insider threat motives which are revenge, greed, and inattention.

The first two reasons include, for example, intentional and accidental acts, and are more likely to occur following a dismissal or a resignation. However, these reasons vary according to the type of activity of the company.

In the case of the defense sector, it can be corruption or espionage, unlike the ICT sector, where commercial data theft is more widespread.

Employees in charge of selling products and solutions can thus save their customers’ contact details in files and programmers can steal the source code. Despite their media coverage, on the whole, cases of espionage or sabotage remain, fortunately, exceptions.

More generally, data leaks are often caused by insider threats, when sensitive information belonging to the company becomes “uncontained”, when it should be classified confidential according to the operational context.

This information then becomes “public” and people whose position has nothing to do with it can consult it. Very often, when businesses are faced with such accidental data loss or leakage, it is the result of carelessness, inadvertence or clumsiness – such as the loss of mobile devices, USB storage media or public exposure of repositories stored in the cloud.

The classic example of accidental data release comes from the use of the “To” and “CC” fields when sending an email to multiple external recipients, where personally identifiable information is exposed to all of these recipients; a situation that could have been avoided by using the “CCI” (blind copy) mode.

Finally, data destruction is also a typical action where the integrity and availability of data is taken away from the business.

This has the effect of preventing him from accessing critical information, which can directly impact the operational capacity of the company. While this activity is mostly associated with ransomware operators, it can also be attributed to insider threats.

It should be borne in mind that there are many reasons that could lead to such acts, but the main reason remains that the data is generally stored in a weak way, which allows too many people to access information that has nothing to do with the tasks entrusted to them.

These people can steal sensitive data for revenge, but also destroy it or remove it from the company or even try to extort its return.

How can we best respond to these threats?

The implementation of a strategy to prevent these internal threats remains difficult to implement, since once the attack has been launched, anticipation and control are already outdated. It is therefore extremely important to set up preparation sessions aimed at determining the impact of these attacks.

Thus, training employees in the correct use and understanding of internal company systems and processes can go a long way towards avoiding errors associated with accidental data leaks.

In addition, it can be useful to turn to several solutions and tools such as file and document management systems to better manage the critical data that the organization has in its possession. ZTNA limits access to only required tools/services/apps rather than everything on a company’s LAN.

It is also possible to employ Data Leakage Prevention (DLP) tools, capable of preventing accidental data leaks – except in the case of intentional theft. XDR systems and firewalls can also be very useful as part of the disaster prevention and recovery plan because they allow DLP to be implemented and log access and data movement at the same time.  Their actions facilitate forensic work, particularly in understanding failures and their consequences.

Finally, the implementation of technical controls capable of regulating access to data and systems that contain sensitive information, as well as the monitoring of the results of these controls and the responses to violations of the security policy contribute to the detection of ‘a malicious attack in progress.

To protect their company and their employees from these internal threats, managers must imperatively limit access to the data to the persons concerned and ensure the implementation of strict controls on the most sensitive data, while providing them with the support they need.

In essence, therefore, the right balance must be struck between people, process and technology, since any imbalance can favor the introduction of instability, as well as an easier increase and spread of risks – whether they either external or internal to the company.

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[OPINION] Kperogi’s Veiled Campaign for Tinubu

Article by Hashim Suleiman

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Professor Farooq Kperogi and Tinubu
Professor Farooq Kperogi and Tinubu

I’ll start on this by referring you an earlier piece I had written on 17 April, 2021 about Professor Farooq Kperogi when he attempted to hoodwink his readers and Professor Pantami that he was the latter’s friend but still went ahead to disparage him by spewing lies and supposed private matters on the Professor, the piece can be read here.

At that point, I had just switched from being his ardent fan to seeing him for who he really is, a propaganda merchant who thrives on the docility of Nigerians to cash out.

Kperogi had to acknowledge that article as it bursted his little games on 24 April, 2021 in his column tagged ‘On my friendship with Pantami’ and which can be read here.

I read Kperogi piece of today 11th February, 2023 where he attempted to as usual disparage Buhari’s naira policy and linked it as a ploy to stop a BAT and I found the analogy in it very ludicrous to say the least. I wonder why Kperogi has developed a permanent feeling and understanding that Nigerians are extremely daft and so he could spew anything at them albeit hypocritically after cashing out his little coins behind the scene.

Kperogi is a supporter of Tinubu but just like so many Nigerians who share his type of double character, he is  finding it difficult to come clean about it, so he is using mind games this time around to blame Buhari and his policy as the reason why Tinubu would fail even though according to him, he doesn’t want it but he would prefer that the failure of Tinubu occurs through ballots and not through sabotage.

However, what Kperogi and the likes who don’t have the audacity and criticality to formulate critical campaign strategies to market Tinubu don’t understand is that the suffering of Nigerians which had largely made them to make up a mind did not start with the naira scarcity and it’s attendant suffering which in my opinion is over bloated by the likes of Kperogi and other propaganda merchants to unfairly blackmail Buhari into succumbing to perhaps use state resources to install Asiwaju as president and that won’t happen because in reality Nigeria has long moved away from such. You have to have some level of popularity to rig elections in any society and rather than campaign enough to get the masses support for Asiwaju, Kperogi and the likes believe the victory must only be gotten through blackmail.

While on my way back from office yesterday, I critically examined the menial marketers like ‘suya’ sellers and the rest, and I saw a normal activity going on as I used to know it and I wondered in my mind where the excessive suffering that was been hyped was? It has also been established and I know that those people in the remote villages that Kperogi attempted to refer to do not need more than one to five thousand Naira to transact and while in the beginning things got a little rough, POS merchants have since gotten cash for them and things are normalizing, so I’m sure that the whole propaganda about suffering is being spewed by some political elements who perhaps see free and fair contest as a threat to their victory and such narrative has to stop quickly because in recent past it was same kind of narrative that made Jonathan loose elections, Nigerians desist such fearful narrative.

Furthermore, Kperogi alluded to the fact that Asiwaju always used billion vans to win his way through elections, assuming without conceding that was true as coming from him, is Kperogi then telling us that he supports a corruption of the electoral system? If anything, is ensuring a free and fair contest by Buhari not worthy of commendation? I can bet you Nigerians especially those from

Northern Nigeria have accepted this policy not because there are not minor and temporary discomfort about it but because they see it from the prism of Buhari doing what he ought to have done a long time ago which was to annihilate corruption and its practices, so it appears the people were ready to bear this brunt in as much as it guarantees free and fair contest.

Speaking about a payback by Buhari after Tinubu had supported him, I have maintained in different fora that the agreement for the reciprocation was a party matter and that had been settled at the primary elections because indeed all stakeholders allowed Tinubu to emerge even though they had other preferences which is normal with every human. However, general elections are a totally different games because there are other contestants and it is a democratic regime we are in where numbers of votes garnered matters most, so Kperogi and co should rather concentrate on fetching votes for Tinubu rather than blackmailing Buhari to hand over powder to Tinubu already baked.

Kperogi supports Tinubu,I knew this penultimate the primary elections, when he kept dropping hammers on Osinbajo, a contract he collected to disparage Osinbajo in the eyes of the northerners so as to pave way for Asiwaju and that worked but the current one won’t work because the ordinary people from the north have bought into it to a large extent maybe not so much from the beginning of it but much more now. Rather than all these intellectual shortcuts, I have advised the APC and it’s campaign to make appropriate recruitments to formulate strategies and such recruitments can be out of the ‘big names’ and the usuals, there are millions of smart boys and girls out there who can beat Kperogi and the likes to their cheap and opportunistic games, Daniel Bwala is one of such examples!

May the best man win for Nigeria’s increased progress, Amen!

Hashim Suleiman, PDP, APC and Consensus candidates
Hashim Suleiman can be reached via [email protected]

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