Following the Federal High Court sitting in Port Harcourt judgment rejecting Federal Inland Revenue Service’s (FIRS’) Motion on Notice for stay of execution on an earlier judgment validating the constitutional rights on states to collect Value Added Tax (VAT), states across the country have begun consultations on the next steps to take on VAT collection within their domains.
The FIRS in suit No. FHC/PH/CS/149/2020, through a Motion on Notice, had applied for a stay of execution on the earlier judgement of the court headed by Justice Stephen Dalyop Pam, which ruled that it was the constitutional role of state governments to collect VAT and not the FIRS.
In his ruling on the FIRS application for a stay of execution, Justice Pam maintained that granting the application would negate the principle of equity.
According to him, the Rivers State government through the State Assembly, has duly enacted Rivers State Value Added Tax No. 4, 2021, which makes it a legitimate right of the state to collect VAT.
The presiding judge pointed out that all courts in the country were constitutionally mandated to obey every legislation enacted by both the National and State Assemblies respectively, stressing that the Rivers State Government’s law on VAT remains valid until it is set aside by a court of competent jurisdiction.
Justice Pam stated that since FIRS was ab initio acting in error by collecting VAT in Rivers State, and had a huge burden of refund of those monies, there was a need not to allow it incur further liability.
Consequently, the judge refused the FIRS’ application and dismissed it in the light of the fact that all subsisting laws concerning the collection of VAT stand in favour of the Rivers State government.
Before the judgement, Justice Pam had read a letter that FIRS’ lawyers served the court, seeking for a stay of execution on any ruling on their application.
However, since there was no requisite document attached to the letter to justify the action, the judge dismissed the letter.
Reacting to the ruling, counsel to Rivers State government, Mark Agwu, said: “Today, the Court has delivered its ruling, dismissing the said application for a stay of execution, though without cost. In fact, the court’s reason is that if it should grant a stay, it is more or less like overruling itself.
“And then, since the Court is empowered to recognise all laws enacted by the National Assembly or the State Houses of Assembly; therefore, that law (by Rivers) stands, it is a substantive law. Therefore, in the issue of collection of VAT, as it stands today, Rivers State government is still entitled to collect. That is where we are today”, Agwu added.
Also, the state governor, Governor Wike, shortly after the ruling in a state-wide broadcast commended the Federal High Court judge on the latest judgment and urged the state governors to stand up for the actualisation of devolution of powers between the centre and the federating units.
Wike said: ‘’As we all know, following the recent judgment of the Federal High Court, Port Harcourt, which upheld the constitutional right and authority of state governments to impose, collect and utilize value added taxes, VAT, within their respective territorial jurisdictions, Rivers State government enacted the Rivers State Value Added Tax Law 2021 to regulate the effective administration of VAT in Rivers State.
“However, being a government that believes in the rule of law, we decided on our own to suspend the enforcement of the Rivers State VAT Law 2021, pending the outcome of the FIRS’s application for stay-of-execution.
“With today’s (yesterday) judgment, the way is now clear for the administration and enforcement of Rivers State Value Added Tax Law 2021 across the entire state until otherwise decided and set aside by the superior courts.
“Consequently, I, hereby, direct the Rivers State Revenue Service, RSRS, to ensure the full and total implementation and enforcement of this law against all corporate bodies, business entities and individuals with immediate effect”, the governor added.
Meanwhile, the Lagos State Value Added Tax Bill was read for the first and second time in the state House of Assembly after which the Bill was referred to the Committee on Finance to report back on Thursday.
Speaker of the State’s Legislature, Dr. Mudashiru Obasa, before the bill was referred to the Committee on Finance, expressed the hope that when passed into law, it will lead to “increase in revenue and in infrastructural development. This is in line with fiscal federalism we have been talking about.”.
The lawmaker, therefore, urged the state government to do everything legally possible to ensure the enforcement of the Federal High Court judgment.
While lamenting the current fiscal regime in which about N500 billion was generated from Lagos State, and N300 billion was generated from other South West states, with little amounts disbursed to them in return, Hon. Obasa described the latest judgment as “an opportunity for us to emphasise again the need for the consideration of true federalism.”
In his post-judgment remarks, Lead counsel to FIRS, Reuben Wanogho, said the court delivered its ruling on the basis of how it saw the facts of the case before it, but maintained that his client and the legal team did not agree with the ruling and had already resolved to take all necessary steps to challenge it.
He said: “The court has delivered its ruling on the basis of how it saw the facts of the case. We do not agree with the ruling and we will take all necessary steps to challenge it. That is why the appellate system is there.
“The appellate system is there to enable us ventilate our grievances if for any reasons the court makes a pronouncement we do not agree with it.
“For sure, we feel that the ruling should have gone in our favour, but the court has taken a position against us, so we will do the needful by taking it up immediately before the court of appeal.
“The natural consequences of the ruling is that the Rivers State Government will be collecting the VAT, but we will take steps to ensure we ameliorate the situation as quickly as possible”, Wanogho maintained.
Investigations by our correspondent revealed that many governors believe the judgment was right and have begun consultations on how to start the collection of VAT from corporate entities located in their states.
But then, Katsina State Governor, Bello Masari, had at the weekend faulted the earlier ruling of the Federal High Court in Port Harcourt on the VAT action instituted by Rivers State Government, saying the judgment could trigger economic chaos across the states of the federation.
The governor, who vowed not to implement the court ruling, expressed his views on the ruling when a delegation from the Revenue Mobilisation and Fiscal Commission (RMAFC) paid him a sensitisation visit at Government House in Katsina.
