• Say judgment stands subsisting until set aside
• Explain states’ power to collect, administer VAT
Gboyega Akinsanmi
Senior Advocates of Nigeria (SANs) have faulted the directives of the Federal Inland Revenue Service that taxpayers should continue to pay their Value Added Tax (VAT) to it in order to avoid paying penalties for failure to do so.
The senior lawyers have, also, argued that the judgment of a Federal High Court sitting in Port Harcourt, Rivers State that the FIRS has no constitutional authority to enforce and administer VAT still subsists until an appellate court decides otherwise.
A human right activist, Chief Mike Ozekhome (SAN); a former Lagos State Attorney General and Commissioner of Justice, Mr. Adeniji Kazeem (SAN) and an erstwhile National Legal Adviser of All Progressives Congress (APC), Mr. Babatunde Ogala (SAN) expressed these views in separate responses to THISDAY’s inquires yesterday.
Just after the federal high court had decided against the power of the FIRS to administer VAT, the Rivers State House of Assembly had duly passed the State the Valued Added Tax Bill, 2021.
Rivers State governor, Mr. Nyesom Wike had on August 19 signed the Value Added Tax bill into law, thereby confirming Rivers State as the authority to administer and enforce the Valued Added Tax Law No. 4 of 2021 consistent with the decision of a federal high court.
The FIRS, unable to get an order of court to stop the implementation of the law, resorted to issuing a directive to vary a court order.
In a statement by its Director of Communications and Liaison, Abdullahi Ahmad, it asked taxpayers to continue to pay their Value Added Tax to it in order to avoid paying penalties if they failed to honour their tax obligations.
Concerned about the directive of the FIRS, Ozekhome first justified the decision of the Government of Rivers State to enact the VAT Law, which according to him, was strictly in compliance with the judgment of the federal high court.
The senor advocate, also, pointed out that the Constitution of the Federal Republic of Nigeria 1999 (as Amended), by its express provisions “does not in any way specifically give any tier of government the exclusive power to legislate on VAT.”
On this ground, Ozekhome argued that the Rivers State VAT Law, 2021 “does not in any way contravene the provisions of the Constitution. The actions of the Government of Rivers State to enact its own VAT Law, 2021 were strictly in compliance with the judgment of the federal high court.
“In any event, the FIRS has already filed an appeal against the said judgment. It must obey the judgment of the Federal High Court, Port Harcourt for now until reversed,” the human rights lawyer argued.
Ozekhome, also, broadened the scope of its argument to cover all the states of the federation, noted that any state desiring “to enforce the judgment of the federal high court in the instant case must first repeal its existing consumption tax law(s), if any.
“While parties are still on appeal over the court’s decision in this matter, parties must maintain the status quo by allowing Rivers State taxpayers to continue to pay money to the state Inland Revenue Service, rather than remit such VAT charges to FIRS.
“In my humble opinion, this is a more civilised way to deal with this vexed issue, rather than resorting to brute force. This is to prevent chaos and anarchy,” Ozekhome said in a comprehensive analysis of the judgment of the federal high court.
With the decision of the federal high court, Ozekhome contended that In spite of litigations on the constitutionality or otherwise of Value Added Tax Act, the fate of the federal law “still hangs in the balance
“What is clear however is that the absence of an express provision on consumption tax in the constitution poses a clear and present danger to the sustenance of the present centralised VAT arrangement,” the human right lawyer submitted.
Kazeem, another Senior Advocate of Nigeria, also shared Ozekhome’s position, though argued that it might be difficult for the Rivers State Government “to take advantage of the judgment without a valid law to impose and collect VAT within its territorial jurisdiction.”
He provided robust background to the administration of the VAT Act, which according to him, was originally Decree No. 102 of 1993, promulgated under the administration of General Ibrahim Babangida and came into force on December 1, 1993 until it became an Act of the National Assembly in 2004.
Under Section 7(1) of VAT Act, Kazeem pointed out that the FIRS was designated “to administer and manage the tax payable under the federal legislation.”
He, therefore, argued that Rivers State “must have a law that will empower its tax authority to manage and administer the VAT,” a position that justified the Rivers State VAT Law, 2021 duly enacted after the judgment of the federal high court.
He argued that since VAT “is an indirect tax based on consumption which is not expressly mentioned in the Exclusive or Concurrent Legislative Lists, it is constitutional and just as the Supreme Court upheld the legislative competence of Lagos State to enact the Hotel Occupancy and Restaurant Consumption Tax Law.”
In a federal system of government, Kazeem clarified that the federal government “is not a master or father that will continually breathe down on the component units known as states. In any society where the rule of law is thrown into the ocean, what you have eventually is chaos and anarchy.”
The senior advocate explained that the directive by the FIRS asking taxpayers “to disregard a law validly made by the Government of River State Government appears to be a confirmation of the attitude of the federal government to the clamour for fiscal federalism.
“The FIRS cannot constitute itself into a court that will determine whether taxpayers should comply with a law or not and the position of the law is that a judgment of Court even if it is a nullity must be obeyed until set aside,” he warned the federal tax enforcement authority.
Having appealed against the judgment, Kazeem urged the FIRS to wait for the appellate court “to determine its appeal one way or the other and not by calling taxpayers to disobey the judgment of court and disregard a valid law made by the state government.”
Providing a slightly different perspective to the judgment of the federal high court, Ogala pointed out that the constitutionality of the enforcement authority of the VAT had not been tested before now to a logical conclusion, though acknowledged that the Lagos State under the Babatunde Fashola Administration had challenged it before the Supreme Court.
Ogala, a former member of Lagos State House of Assembly, explained that he had seen the judgment of the federal high court that confirmed the power of Rivers State Government to collect, enforce and manage the VAT within the confine of the state.
He expressed concern about the position of the court that the National Assembly “is not supposed to be a party in the litigation. The totality of the issue brought before the court was about the constitutionality of the National Assembly to legislate on consumption tax, which is the VAT Act.
“If it is an Act of the National Assembly, the necessary parties may not have been present in that suit contrary to what the court seems to have suggested that the National Assembly ought not to have been a party in the suit.”
Secondly, the senior advocate contended whether the matter should be “a dispute between the Rivers State Government and FIRS or a dispute between Rivers State and Federal Government for which the Supreme Court ought to have original jurisdiction.
“This is because the FIRS is an agency of the federal government. If the federal government is constitutionally empowered to collect this tax, in my humble opinion, it can as well delegate that power to any of its agencies. And in this case, it is the FIRS.
“I know that the judgment has been subjected to further scrutiny before an appellate court. I understand that there is a motion for stay of execution. I am also aware of the hurriedly passed Rivers State VAT Law, 2021.
“In my own opinion, it is for us to wait for the outcome of the appeal currently before a court of appeal. But whatever is not listed in the Exclusive and Concurrent Legislative Lists goes directly into the Residual Legislative List. That is vested in the Local Government and not the State.
“Lagos State is the one that opened the vista in various areas before the Supreme Court. Lagos State Waterways Authority Law, 2008 was tested. Hotel Occupancy and Restaurant Consumption Tax Law, 2009 was tested. Wharf Landing Fees Law, 2009 was also tested,” the senior advocate pointed out.
