The FIRS issued the directive following 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.
Owing to the court ruling, Governor Nyesom Wike has enacted a law empowering Rivers state to take over the collection of VAT in the state.
However, in a statement entitled, “Rivers Judgment: FIRS Urges Taxpayers to Continue to Pay VAT”, the FIRS disclosed that since the Service has already appealed the Rivers judgment in which it also sought 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.
The FIRS statement reads in full: “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.”
The controversial issue on which two courts had previously ruled against the FIRS, came to the fore again with the recent ruling of Justice Stephen Pam of the Federal High Court, Port Harcourt, Rivers State which also restrained FIRS and the Attorney-General of the Federation, both 1st and 2nd defendants in a suit, from collecting, demanding, threatening and intimidating residents of Rivers State to pay to FIRS, both PIT and VAT.
Justice Pam in his judgment in the suit by the Attorney-General for Rivers State against FIRS and AGF granted all the 11 reliefs sought by the Rivers Government.
He held that there was no constitutional basis for the FIRS to demand and collect VAT, Withholding Tax, Education Tax and Technology Levy in Rivers or any other state of the federation, being that the constitutional powers and competence of the Federal Government was limited to taxation of incomes, profits and capital gains, which does not include VAT or any other species of sales, or levy other than those specifically mentioned in items 58 and 59 of the Exclusive Legislative List of the Constitution.
CITN last Wednesday cautiously said it will await the CTC of the ruling before commenting on the issue which its Registrar, Adefisayo Awogbade, noted has recurred after two courts had declared some provisions of the VAT Act unconstitutional, noting that the Rivers case was “not the first time”.
The two previous cases are, the Registered Trustees of Hotel Owners and Managers Association of Lagos v. A. G. Federation, in which the court invalidated some of the provisions of the VAT Act,” while the second was the case between Ukala v. FIRS, in which the court also nullified the VAT Act.
“As soon as we receive the certified true copy of the judgement, our legal advisers will study it and advise us accordingly,” the statement further reads.
“When that is done in the next few weeks, the Institute will take an informed position, and the public will be duly communicated.
“We are mindful of our statutory mandate as a tax regulatory professional Institute, and we will not shirk our responsibility to the public in all matters relating to taxation in Nigeria”, Awofeso stated on the issue which could take away a large portion of FIRS generation and functions.
Justice Pam ruled that it was the state and not FIRS that is constitutionally entitled to impose taxes enforceable or collectable in its territories like consumption or sales tax, VAT, education and other taxes or levies, other than the taxes and duties specifically reserved for the Federal Government by items 58 and 59 of Part 1 of the Second Schedule of the 1999 constitution as amended.
The court declared that the defendants were not constitutionally entitled to charge or impose levies, charges or rates (under any guise or by whatever name called) on residents of Rivers and indeed any state of the federation.
Rivers State Government had asked the court to declare that the constitutional power of the Federal Government to impose taxes and duties was limited to items listed in items 58 and 59 of Part 1 of the Second Schedule of the 1999 Constitution (as amended).
The state government also urged the court to declare that by virtue of the provisions of items 7 and 8 of Part II (Concurrent Legislative List) of the Second Schedule of the Constitution, the power of the Federal Government to delegate the collection of taxes can only be exercised by the state government or other authority of the state and no other person.
