• Sat. Sep 30th, 2023

VAT collection controversy: FIRS seeks judicial interpretation of role

ByBassey Udo

Aug 16, 2021


The Federal Inland Revenue Service (FIRS) says it has filed an appeal against a recent judgment of the Federal High Court in Port Harcourt Rivers State on its role in the collection of Value Added Tax (VAT) and related taxes in the country.
Consequently, in a statement on Sunday the FIRS said it has sought an injunction restraining the court from executing the judgment pending the resolution of the controversy.
The tax service urged tax payers nationwide to continue exercising their obligations on the issue until the controversy was resolved by the Appeal court.
The statement read: “This is to inform the general public that the Federal Inland Revenue Service has lodged an appeal against the judgment of the Federal High Court Port Harcourt Judicial Division delivered by Honourable Justice Stephen Pam, in SUIT NO. FHC/PH/CS/149/2020-ATTORNEY GENERAL OF RIVERS STATE v. FEDERAL INLAND REVENUE SERVICE & ANOTHER.
“We have also sought an injunction and a Stay of Execution of the said judgment.
“As the decision is being appealed and in view of  the pending applications for injunction and stay of execution which the FIRS has filed in court against the judgement, members of the public are advised to continue complying with the Value Added Tax obligations until the matter is resolved by the appellate courts in order to avoid accruing the consequent penalties and interest for non-compliance.”
Last Monday, Justice Stephen Pam of the Federal High Court, Port Harcourt, Rivers State, ruled that it was the Rivers State and not the Federal Government through the (FIRS) that was rightfully authorized under the constitution to collect Value-Added Tax (VAT) and personal income tax (PIT) in the state.
The ruling was in respect of the suit by the Attorney-General of Rivers State that sought to restrain the FIRS and the Attorney General of the Federation (AGF) from continuing to demand, collect,  or threatening and intimidating residents of Rivers State to pay for VAT and PIT to the FIRS.
Also, the state government urged the court to declare that by virtue of the provisions of sections 7 and 8, 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, including the FIRS.
In addition, the Rivers State government asked the court to declare that all statutory provisions made or purportedly made in the exercise of the legislative powers of the Federal Government by FIRS containing provisions which are inconsistent with or over the powers to impose tax and duties, as prescribed by sections 58 and 59 of Part I of the Second Schedule of the 1999 Constitution, or inconsistent with the power to delegate the duty of collection of taxes, as contained in sections 7 and 8 of Part II of the Second Schedule of the Constitution, are unconstitutional, null and void.
In his ruling, Justice Pam declared that there was no constitutional basis for the FIRS to demand and collect VAT, withholding tax, education tax and technology levy in Rivers State or any other state of the Federation on behalf of the Federal Government.
The Court argued that the constitutional powers and competence of the Federal Government to demand and collect taxes 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 items specifically listed under Section 58 and 59 of Part 1 of the Second Schedule of the 1999 Constitution (as amended).
No date has been given yet  for the hearing on the appeal.
Under the Federal Inland Revenue Service (Establishment) Act 2007, FIRS is charged with the responsibility of assessing, collecting and accounting for tax and other revenues accruing to the Federal Government.
In line with the federal structure of the Nigerian State, tax administration in the country is multi-tiered, with the States Boards of Internal Revenue and the Local Government Revenue Committees performing similar functions at the State and Local Government levels. 
But the revenue collection from VAT are in a central pool in the Federation Account and distributed among the three tiers of government in accordance with the approved revenue sharing formula by the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC).

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