• Why Nami may not survive the VAT storm as Rivers, Lagos deals him a black eye
With heavy steps, Babatunde Fowler left his exalted office at the Federal Inland Revenue Service (FIRS), hoping perhaps, that fate would design a retributory jail-cell for his detractors, who hounded him out of office.
If that was his dream, then the former FIRS boss must be ecstatic to see his successor, Muhammad Mamman Nami, run from pillar to post Rivers aand Lagos State Fowler may have found poetic justice in the fate that has befallen Nami: the latter is fighting real hard to prevent states from collecting Value Added Tax (VAT). The crusade, which has become a hot button issue in the polity, is being spearheaded by the Rivers State governor, Nyesom Wike.
The Wike-led Rivers State Government and the State House of Assembly had duly enacted the Rivers State Value Added Tax No. 4, 2021, which made it a legitimate right of the state to collect VAT.
Subsequently, a Federal High Court sitting in Port Harcourt, Rivers State, dismissed an application by the FIRS seeking to stop the state government from commencing VAT collection in the state.
The ruling came on a day the Lagos State House of Assembly read for the first and second time, the state’s VAT bill and asked its Committee on Finance which is handling it, to report back on Thursday. Following the ruling, the Lagos State Government asked the FIRS to stop giving demand notices for payment of VAT in the state and to render accounts, within seven days, of all sums collected as VAT in the current accounting circle in the state.
The Rivers State Assembly had lamented low monthly allocation from VAT to the state by the Federal Government despite huge collection from the state.
Consequent to the court ruling on September 6, Governor Wike directed the Rivers State Revenue Service (RSRS), to immediately commence collection of VAT from corporate bodies and businesses in the state.
FIRS had, yesterday, prayed the court to stay execution on the earlier judgment of its that stopped it from collecting VAT.
The FIRS had, following the judgment against it, which held that it is constitutionally the role of state governments to collect VAT, prayed the high court to stop Rivers State Government from executing the judgment.
But Justice Stephen Pam, in his ruling, said granting the application will negate the principle of equity. He also noted that in as much as the state government and the state legislature had enacted a law in respect of VAT, courts are bound to recognise such a law.
There is no gainsaying the Rivers State judgement has far-reaching implications for the FIRS and its new boss, Nami; among other things, it has imposed a severe constraint on the agency’s revenue generation drive. Nami is faced with the onerous task of meeting now unrealistic revenue targets.
Expectedly, the Federal Government is kicking against losing a big chunk of its projected revenue, especially after recording a revenue shortfall of N1.76 trillion in the first half of this year.
More grievous consequences of the impasse are in the offing as several states grappling with insolvency depend on the allocations given to them from the common VAT pool by the federal government.
Pundits, however, contend that the current practice whereby the federal government pools VAT together to share among the states would continue to foster idleness, poverty and lack of initiative among several states.
The Federal Government’s control of VAT manifests an aberration as it is always in the best interests of each state to determine its VAT regime and collect it. This is why it is not listed on the exclusive list.