The long raging battle over the sharing of Value Added Tax generated from one state being given to another may be nearing its end.
This is due to a landmark ruling by a Federal High Court sitting in Port Harcourt, Rivers State, in which it was declared that Rivers State Government and not the Federal Inland Revenue Services (FIRS), an agency of the Federal Government, should collect Value Added Tax (VAT) and Personal Income Tax (PIT in the state.
The very first profound impact of this judgement is that VAT generated from the sales of Alcohol in Port Harcourt can no longer be shared with a state like Kano, where the imposition of Sharia law means that Alcohol cannot be sold or consumed in the state.
- Read also; N512.25 bn generated as VAT in Q2 2021, 56.56% increase YoY
- Meyer Plc Directors propose N1.5 interim dividend, more than double the share price
In the case presided over by Justice Stephen Dalyop Pam, the court also issued an order of perpetual injunction restraining the FIRS and the Attorney General of the federation, both first and second defendants in the suit, from collecting, demanding, threatening and intimidating residents of Rivers State to pay to FIRS, personnel income tax and Value Added Tax.
Justice Pam made the assertion while delivering judgement in Suit No. FHC/PH/CS/149/2020, filed by the Attorney General for Rivers State (plaintiff), against the Federal Inland Revenue Service (first defendant) and the Attorney General of the Federation (second defendant).
The Court, which granted all the eleven reliefs sought by the Rivers State Government, stated that there was no constitutional basis for the FIRS to demand for and collect VAT, Withholding Tax, Education Tax and Technology levy in Rivers State 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 did 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.
The Defendants legal team had seen their preliminary objection that the Court lacked jurisdiction to hear the suit and that the case should be transferred to Court of Appeal for interpretation dismissed by the Judge.
A further objection raised by the defendants that the National Assembly ought to have been made a party in the suit was equally dismissed by Justice Pam. The Judge went further to declare that the issues of taxes raised by the state government were issues of law that the court was constitutionally empowered to entertain.
He declared that after a diligent review of the issues raised by both the plaintiff and the defendants, the plaintiff has proven beyond doubt that it was entitled to all the eleven reliefs it sought in the suit.
The court agreed with the Rivers State Government that it was the State and not FIRS that was constitutionally entitled to impose taxes enforceable or collectable in its territory of the nature of 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.
Also, 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 the residents of Rivers State and indeed any state of the federation.
According to Thisdaylive, Lead counsel for the Rivers State Government, Donald Chika Denwigwe (SAN), who spoke to journalists after the court session, explained that the case was all about the interpretation of the constitution as regards the authority of the government at the state and federal levels to collect certain revenue particularly, VAT.
Counsel to FIRS, O.C. Eyibo said he would study the judgment and advise his client.
Nnamdi Maduakor is a Writer, Investor and Entrepreneur