Our Reporters
9 September 2021
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The crisis over the Value Added Tax deepened on Wednesday with the Rivers State Governor, Nyesom Wike, ordering companies based in the state to start paying VAT to the state government.
Wike gave the order during a stakeholders’ meeting in Port Harcourt with representatives of Shell Petroleum Development Company and other oil companies as well as business owners in the state.
The governor, who accused the Federal Inland Revenue Service of threatening companies based in the state, said any organisation that failed to pay VAT to the state would be sealed off.
Similarly, the Lagos State Government said on Wednesday that a letter written by the FIRS to the National Assembly seeking inclusion of VAT on the exclusive legislative list would not stop the bill on the tax currently before the state House of Assembly.
The PUNCH reports that the FIRS, in a bid to retain the collection of the tax, wrote to the National Assembly to seek the inclusion of VAT collection in the exclusive legislative list.
Last month, the Federal High Court sitting in Port Harcourt, in a judgment in suit number FHC/PH/CS/149/2020, held that the Rivers State Government had the powers to collect VAT within its territory.
Although the FIRS applied to the court for a stay of execution, Justice Stephen Pam rejected the application, saying granting it would negate the principle of equity.
The VAT crisis took a different dimension on Monday when a bill to empower the Lagos State Government to collect the tax scaled the second reading in the state House of Assembly.
On Tuesday, the Akwa Ibom State House of Assembly said it would soon start work on a bill to enable the state government to collect VAT.
On Wednesday, a letter written by the FIRS to the National Assembly on the matter was obtained by one of our correspondents.
The letter, signed by the Executive Chairman of the FIRS, Muhammad Nami, and dated July 1, 2021, was addressed to the Chairman of the House Constitution Review Committee, who is also the Deputy Speaker of the House of Representatives, Idris Wase.
The letter, with reference number FIRS/EC/CWREP/0416/21/037, which was received by Wase’s office on July 2, 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’.
The federal tax agency specifically pleaded with the legislature to vest exclusively in it 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.
The letter read in part, “The Federal Inland Revenue Service further proposes the amendment of Section 251 (1) (b) of the Constitution of the FRN, 1999 (amended) by removing the exclusive jurisdiction of the Federal High Court only on anything connected or related to federal tax matters since same would be vested in the proposed federal revenue court.
“The Federal Inland Revenue Service also proposes the insertion of Value Added Tax immediately after Stamp Duties under item 58, part II of the 2nd schedule of the 1999 Constitution of the FRN.
“The Federal Inland Revenue Service appreciates the maximum cooperation and support we are receiving from your good office on tax matters generally.
“This has boosted our morale and determination to do more for the government in tax revenue generation.
“The FIRS therefore wishes to further request that the House of Representatives consider the request for the establishment of the Federal Revenue Court. “
Wike unveils Rivers VAT law, orders business owners to begin payment
The Rivers State governor, on Wednesday, ordered construction firms, manufacturers and business owners as well as other firms in the oil-rich state to begin the remittance of their VAT to the state from this month.
The governor, who said Rivers State was generating an average of N15bn VAT to the FIRS monthly, lamented that the Federal Government was only giving the state a paltry 25 per cent of the revenue.
Wike said he did not care if the heavens would fall and insisted that Rivers money was not meant for “Abuja people,” but for the development of the state, adding that the legal system had empowered the state to begin the collection of VAT.
He also said the amount being generated into the FIRS purse was too much and, therefore, slashed the amount payable as VAT by business owners. The governor, however, did not specify the percentage to be paid.
Wike unveiled the Rivers State VAT Law, 2021 and vowed to sanction any firm that failed to comply with the remittance of VAT to the state revenue board.
‘River generated N15bn VAT in June, got N4.7bn; Kano earned N2.8bn, got same back’
Speaking at the stakeholders’ meeting, Wike lamented the injustice in the country, saying Rivers State generated N15bn VAT revenue in June this year, but got N4.7bn in return, while Kano generated N2.8bn in the same month and got the same N2.8bn back, adding, “Sometimes, you don’t want to believe these things exist.
“Rivers State is challenging the FIRS from collecting VAT in Rivers State. I am not challenging the FIRS from collecting VAT in Abuja. Let it be understood. The law says Rivers must collect VAT in the state.”
“The Federal Government surreptitiously lobbied to amend the constitution to place VAT collection in the exclusive legislative list.
“We have challenged it and we have no apologies to anybody. I don’t want to be in the good books of anybody, but in the good books of God.
“You don’t bully a state like us. The FIRS should be very careful. I have the political will to do a lot of things. If they continue to bully us, I will take (over) all their offices in the state.”
‘Rivers’ll start VAT collection this month’
The governor warned oil companies and business owners not to henceforth remit their VAT to the FIRS, but to the Rivers State Government.
He stated, “I don’t want you to fall prey to the people, who think they can use force to take our money.
“If you want to take advantage and say you don’t know who to pay to, it is a lie, you know.
“From this September, we must collect all our VAT.
“All the banks playing pranks by saying they have not heard from their head offices, I will seal off your branches. If I say I will, know that I will.
“We will not look back but seal off the premises of such companies.”
Wike added that Rivers did not need the Nigeria Police Force to enforce the collection of VAT, but would use the state-created security outfit that was backed by law.
He stated, “I will be happy at my time that heaven came down, because I will create a record that it was my time that heaven came down.
“We don’t have to use the police; we have our security (outfit) as allowed by law and we will use it.
“Please tell your authorities to pay our VAT to our revenue board, which of course you have been told how to do it.
“Until there is a (court) order stopping us, we won’t stop the collection. If an appeal (court) revokes it, no problem, but the position of the law today is that VAT is for Rivers State.
“We are even going back to collect the one they took before. All the ones they have taken before, we are compiling it; they have to pay back to us.
“All those states that are loyal (to the Federal Government) should wait, but the Rivers State Government will collect all that is due to us within the confinement of the law; we will not go outside the law.
“I have looked at the total VAT every month, I have even reduced it; I don’t want this; it is too much; I have even reduced it to what I will collect and I have projects to do with it every month.
“The FIRS cannot threaten you. We are the landlords here, I hope you know that. We have enormous powers to use by law.”
All govs will perform with adequate revenue, says Wike
Wike also said all state governors would perform well if their states were getting enough revenue.
He said, “The problem with us is that we only depend on federal allocations. That is why you hear that most governors are not performing; how will they perform?
“Please, pay the money on time, because every Friday, I will check it.
“By the end of this month, I want to see the VAT collection.
“If somebody takes what does not belong to them, what do you call them? These people, who take what does not belong to them, collect it for us and you will see what we will do with it; we will turn this state around.
“I have told the attorney-general to give you the VAT law, the Withholding Tax, the Stamp Duty and everything payable to us.
“The Rivers State Government is fully in charge of this and we will not hesitate to apply sanctions as provided under the VAT Law No. 4 of Rivers State, 2021.”
Wike also alleged that the FIRS was writing threat letters to intimidate corporate organisations to pay taxes to it, even after it lost an appeal that sought a stay of execution of the declarative ruling on VAT collection in the state.
VAT collection won’t work at state level, says FIRS
But the FIRS said the collection of VAT at the sub-national level was not achievable in the country.
The Group Lead, Special Operations Group, FIRS, Matthew Gbonjubola, said this during a chat with journalists in Abuja on Wednesday.
Gbonjubola said contrary to misconceptions in some quarters, the FIRS was administering VAT on behalf of the three tiers of government and not for the Federal Government alone.
According to him, the revenue from VAT is administered under an arrangement that allows the Federal Government to collect 15 per cent; the states, 50 per cent; and local governments, 35 per cent.
FIRS letter to N’Assembly won’t stop our bill – Lagos
The Lagos State Commissioner for Information and Strategy, Mr Gbenga Omotoso, said the state would go ahead with its VAT bill irrespective of the action of the FIRS.
Omotoso, in an interview with one of our correspondents on Wednesday, said the state had the right to make laws that would help it to govern the people.
He said, “The FIRS has a right to write to the National Assembly to seek some concession in whatever aspect of any law it deems necessary; it is a right that nobody can take away from it; states also have a right to formulate laws that they think will help them in the business of government.
“As far as this revenue allocation matter is concerned, Lagos State has taken some steps that will further enhance its stability to go along the line that it recognises as a right in this debate over VAT.
“The process that the state government has started, there is nothing there that will make it reconsider it. The bill has been sent to the state House of Assembly and the House is already considering the bill. Irrespective of whatever the FIRS is doing, the Lagos State Government is not going to fold its hands and miss the opportunity for us to push the argument for true fiscal federalism forward.”
By Sunday Aborisade, Dayo Ojerinde, Kayode Oyero, Amarachi Orjiude, Lesi Nwisagbo and Dennis Naku