Court says state governments not FIRS, entitled to collect VAT, related taxes - NIGERIAN NEWSORBIT


Wednesday, August 11, 2021

Court says state governments not FIRS, entitled to collect VAT, related taxes

A Federal High Court sitting in Port Harcourt, Rivers State, yesterday, held that the Rivers State Government and not the Federal Inland Revenue Services, FIRS, was the rightful authority to collect Value-Added Tax, VAT, and Personal Income Tax, PIT, in the state.

The trial judge, Justice Stephen Pam, also restrained FIRS and the Attorney-General of the Federation, both 1st and 2nd defendants in the suit, from collecting, demanding, threatening and intimidating residents of Rivers State to pay to FIRS, both PIT and VAT.

Justice Pam in his judgment in the suit by the Attorney-General for Rivers State against FIRS and AGF granted all the 11 reliefs sought by the Rivers Government.

The court held that there was no constitutional basis for the FIRS to demand and collect VAT, Withholding Tax, Education Tax and Technology Levy in Rivers 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 does 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.

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The judge dismissed the preliminary objections by the defendants that the court lacks jurisdiction to hear the suit and that the case should be transferred to the Court of Appeal for interpretation.

Justice Pam, who also dismissed the argument by the defendants that the National Assembly ought to have been made a party in the suit, holding that the issues of taxes raised by the state government were issues of law that the court is constitutionally empowered to entertain.

The judge after a diligent review of the issues raised by the plaintiff and the defendants held that the plaintiff had proved beyond doubt that it was entitled to all the 11 reliefs sought.

The court agreed with the Rivers Government that it was the state and not FIRS that is constitutionally entitled to impose taxes enforceable or collectable in its territory like 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.

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 residents of Rivers and indeed any state of the federation.

Rivers State Government had asked the court to declare that the constitutional power of the Federal Government to impose taxes and duties was limited to items listed in items 58 and 59 of Part 1 of the Second Schedule of the 1999 Constitution (as amended).

The state government had also urged the court to declare that by virtue of the provisions of items 7 and 8 of 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.

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Rivers Government had further asked the court to declare that all statutory provisions made or purportedly made in the exercise of the legislative powers of the Federal Government, which contains provisions which are inconsistent with or over the powers to impose tax and duties, as prescribed by items 58 and 59 of Part I of the Second Schedule of the 1999 Constitution, or inconsistence of the power to delegate the duty of collection of taxes, as contained in items 7 and 8 of Part II of the Second Schedule of the Constitution, are unconstitutional, null and void.

Lead counsel for the Rivers State Government, Donald Denwigwe, SAN, who spoke to journalists after the judgment, explained that “the case is 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.

“So, during the determination of the matter, some issues of law were thrown up like, whether or not the case should be referred to the Court of Appeal for the determination of some issues.

“The court noted that the application was like asking the Federal High Court to transfer the entire case to the Court of Appeal. In which case, if the court so decides, there will be nothing left to refer back to the Federal High Court as required by the constitution.”

According to Denwigwe, the court refused that prayer and decided that the case was in its proper place before the Federal High Court to determine.

Speaking on the implication of the judgment, Denwigwe said it was now, unlawful for such taxes as VAT in Rivers State to be collected by any agency of the Federal Government.

“In other words, the issue of VAT in the territory of Rivers State and Personal Income Tax should be reserved for the government of Rivers State,” he said.

Counsel to FIRS, O.C. Eyibo, said he would study the judgment and advise his client accordingly.

Culled from Vanguard News 

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