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Southern governors insist on VAT collection, 2023 presidency

By Lawrence Njoku (Enugu) Ameh Ochojila (Abuja), Helen Oji, Gloria Nwafor and Adaku Onyenucheya (Lagos)
17 September 2021   |   4:15 am
The Southern Governors’ Forum, yesterday, expressed its support for states to collect the Value Added Tax (VAT). This was part of resolutions the governors reached in their meeting held in Enugu State.

Southern governors

• Reaffirm commitment to structural, fiscal federalism • Appeal Court declines to stop FIRS from VAT collection
• Reserves ruling on Lagos’ request to join case on VAT dispute • NECA seeks power to determine agency to remit VAT to
• LCCI expresses concern over double taxation on businesses • Port stakeholders align with FG, vote for status quo

The Southern Governors’ Forum, yesterday, expressed its support for states to collect the Value Added Tax (VAT). This was part of resolutions the governors reached in their meeting held in Enugu State.

There has been controversy over the collection of VAT after a Federal High Court ruled that it was not the duty of the Federal Government to collect it. The tax has been collected by the FG since the military era, although the money is shared by the three tiers of government.

Following the court ruling, Lagos and Rivers states passed laws that allowed them to collect VAT in their states. The Federal Inland Revenue Services (FIRS), which used to collect the VAT on behalf of the Federal Government, has, however, challenged the court ruling at the appellate court.

Reading the resolutions of the governors after the meeting, which was attended by nine governors and seven deputy governors, Chairman of the Forum and Governor of Ondo State, Rotimi Akeredolu (SAN), tasked the governors that were yet to enact the anti-open grazing law to do so without much delay.

Akeredolu, in the seven-point communiqué, said the governors were satisfied with the rate at which the states were enacting and amending the anti-open grazing laws, in line with the uniform template and aspiration of the Forum.

The communiqué read in part, “the Southern Governors’ Forum encourages the full operationalisation of already agreed regional security outfits, which would meet, share intelligence and collaborate to ensure the security and safety of the region.

“The Forum reaffirms its earlier commitment to fiscal federalism as resolved at the inaugural meeting held on May 11, 2021, at Asaba, Delta State, and emphasised the need for Southern states to leverage the legislative competence of their respective state Houses of Assembly, as well as representation in the National Assembly to pursue its inclusion in the Nigerian Constitution through the ongoing constitutional amendment.

“The meeting resolved to support the position that the collection of VAT falls within the powers of the states. It also expresses satisfaction with the handling of issues around the Petroleum Industry Act and ownership of Nigerian National Petroleum Corporation by the larger Nigerian Governors’ Forum.

“The Forum also reiterated their earlier position that the next President must come from the Southern part of Nigeria, in line with the politics of equity, justice and fairness.”

The governors agreed that Rivers State would host their next meeting in November. Except host governor, Ifeanyi Ugwuanyi of Enugu State, four other governors of the Southeast region, yesterday, could not attend the meeting. The meeting was in continuation of the earlier ones held in Delta and Lagos states.

During their Asaba meeting, the 17 governors called for concerted efforts at tackling the worsening insecurity, while in Lagos, they resolved to enact laws in their respective states against open grazing as well as presidential zoning in 2023 to the South.

At the Enugu meeting, which is the third this year, governors of Ebonyi, Dave Umahi, was represented by his deputy, Kelechi Igwe; that of Imo, Hope Uzodimma, was represented by his deputy, Prof Placid Njoku; while Abia, Okezie Ikpeazu was represented by his deputy, Ude Oko Chukwu. Governor Willie Obiano of Anambra was neither at the meeting nor sent in a representative.

Other deputy governors at the meeting were those of Oyo, Rauf Olaniyan; Ekiti, Bisi Egbeyemi; and Edo, Philip Shuaib.

Governors of Delta, Ifeanyi Okowa; Akeredolu (Ondo); Babajide Sanwo-Olu (Lagos); Adegboyega Oyetola (Osun); Emmanuel Udom (Akwa Ibom); Nyesom Wike (Rivers) and Dapo Abiodun (Ogun) attended the meeting.

MEANWHILE, the Court of Appeal, yesterday, declined to accede to the request of Rivers and Lagos States for the appointment of Receiver or Manager for the purpose of collecting and keeping VAT in place of the FIRS, pending the resolution of all legal disputes in the matter.

The two states separately canvassed that the order of status quo ante belum granted on September 10 in favour of FIRS to continue the collection be put on hold in view of the appeal already lodged at the Supreme Court against the order.

Counsel to Rivers State, Chief Ifedayo Adedipe (SAN), in his oral application, pleaded with the appellate court to exercise its power under Order 4 Rule 6 of the Court of Appeal to appoint a Receiver or Manager to take custody of the VAT in the interest of justice to parties in the matter.

Attorney General of Lagos, Mr Moyosore Onigbanjo (SAN), who stood for his state, toed the path of Rivers in canvassing that the court be fair and just in the pending appeal.

Onigbanjo specifically asked the Appeal Court to restrain FIRS from further collecting the tax and replace it with a Receiver or Manager that will act for parties locked in the legal battle.

The Lagos AG predicated his expressed fear of unjust treatment on the fact that FIRS, apart from collecting the tax, has been sharing it among the 36 states and the Federal Capital Territory (FCT) despite pendency of the legal tussle.

However, the Presiding Justice, Hamma Simon Tsanami, asked the two states to make their request formal by making it in writing.

The court also reserved ruling in an application by Lagos to make it a respondent in the appeal filed by FIRS against a judgment granted in favour of Rivers State by a Federal High Court in Port Harcourt.

Onigbanjo, who moved the application, argued that Lagos has vested interest in the VAT collection and that the decision of the court would affect it when delivered.

The Attorney General informed the three-man panel of justices that FIRS in its appeal against the Federal High Court judgment made some allegations against it and that it would be in the interest of justice for it to be allowed to join in the appeal to ventilate its defence.

“From the contents of the appellant’s affidavit, Lagos has been made a necessary party in the appeal by some references to it and for it to be bound by the final decision, it is in the interest of justice that it should be allowed to make defence to allegations against it.”

FIRS, as the appellant through its counsel, Mahmoud Magaji (SAN), vehemently opposed Lagos’ request to join, adding that the state has not shown how its interest would be jeopardised if not allowed in the matter.

Processes filed by the Attorney General of the Federation (AGF), Abubakar Malami (SAN), through his counsel, Tijani Gazali (SAN), were struck out on the ground of being incompetent, having been filed out of time.

After taking arguments from parties, Justice Tsanami reserved ruling, adding that parties will be communicated when the ruling is ready.

HOWEVER, there is a looming danger that the federal and state governments might experience a steep drop in revenue accruing from VAT, as some members of the Organised Private Sector (OPS) are considering withholding remitting the consumption tax until the controversy surrounding its payment is addressed.

They also suggested that a new formula for distributing VAT revenue among the tiers of government has become necessary to calm the raging controversy.

The representatives of the OPS, which included the Lagos Chamber of Commerce (LCCI), the Nigerian Employers’ Consultative Association (NECA) and the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) have called on the Federal Government to act fast in addressing the raging VAT ‘war’.

Reacting to the development, Director General of NECA, Dr. Timothy Olawale, said businesses should not remit their VAT until the matter is finally dealt with in the court of law. He also asked for powers where employers can approach the court through inter-pleader proceedings to determine who they should remit the deducted VAT to.

He said the concern of employers is not to remit deducted VAT due to the pending appeal but to avoid penalties and double payment. He suggested that an employer could open an escrow account for the money, which must be different from other accounts of the company. This, he said, should be remitted upon the final judgment of the court, as it appears the case could get to the Supreme Court.

The chamber lamented that companies may soon be subjected to harassment from the FIRS and the states’ revenue services demanding the same tax.

LCCI, in its reaction, said businesses may also be subjected to a cumbersome process by the states who may not already have the required operational and transactional structure to collect VAT.

On whatever happens at the courts, LCCI said there is a need for more accountability and judicious use of tax revenues at the federal, state, and local government levels.

Founder of Independence Shareholders Association, Sir Sunny Nwosu, said the move by Lagos to extricate VAT control from the Federal Government would impact positively on the bottom-line of Deposit Money Banks (DMB).

According to him, the fund generated from taxes by the state would help service the debt they incurred at the issuance of various tranches of bonds. He said since the DMBs are the major investor in the bonds, the bulk of the money would go into their coffers, which will ultimately improve their liquidity and profitability.

“It will help the state government to pay back to individuals and banks and by so doing, the banks will have more money to do business and declare dividend to shareholders while individuals will have more money to invest in capital market,” he said.

President, Shippers Association of Lagos (SAL), Jonathan Nicol, said the Federal Government should state clearly who should be entitled to the 7.5 per cent VAT from the ports. He said all the confusion should be cleared out before forcing investors to pay twice as that would overstress the trading public.
   
The National President, Africa Association of Professional Freight Forwarders and Logistics in Nigeria (APFFLON), Otunba Frank Ogunojemite, noted that the Lagos State government has never been a stakeholder in the maritime business, neither has it invested in the sector. He said ports operations have always received interventions of the Federal Government, especially as maritime is an international business that requires incentives to meet up with other countries.
   
“What has been the impact of Lagos on maritime, especially port operations? We will prefer to pay VAT to the Federal Government. There is no option for us than to go with the Federal Government’s decision because maritime is an international business. We are only appealing to the government to be lenient with the percentage,” he said.
 
Ogunojemite further appealed to the government to look into the infrastructures at the ports, as they serve as obstacles impeding the ease of doing business in the country.