Northern States Join FIRS in fighting Southern States over VAT Legal Battle
The Attorney General of the Federation AGF and the governments of Adamawa, Plateau and Kaduna States are set to join the Federal Inland Revenue Service (FIRS) in its appeal against the judgment of the Federal High Court in Port Harcourt that empowered Rivers state to collect the tax.
The high court had in the judgment ruled against the FIRS in the tax collection tussle and ordered that the Rivers State Government was the rightful collector of the tax among others.
The FIRS had challenged the judgment at the Court of Appeal seeking that high court verdict be set aside.
However, dependable sources closed to the AGF and governors of the three states on Sunday in Abuja confided in our correspondent that they would file a leave of the court to be joined in the suit on Tuesday.
Although the AGF is already a defendant in the appeal, the source hinted that the Federal Ministry of Justice under the AGF has opted to be part of the appellant in the matter so as to enable it argue effectively in support of the FIRS.
“They are going to seek to be joined in the suit as co-appellants against the federal high court’s judgment that favours Rivers State.
“These states understand the possible consequences if the final judgment at the Supreme Court goes against the FIRS.They are going to take the fight as if it is theirs,” the source stated.
“In fact, their motion papers would be ready by October 4 and will be filed on Tuesday October 5. I can confirm that one to you, the source revealed .
The source also added that more states especially Kogi and Zamfara are going to be joining the suit to form a coalition with the FIRS.
However, Dr Jibrilla Umar Gwandu, Senior Special Assistant to AGF Abubakar Malami SAN could not be reached for comment at the time of filing this report.
The decision of the three states is coming on the heels of the communique released by the Northern State Governors’ Forum last week where they expressed dissent and disagreement with the VAT laws of Lagos and Rivers State.
“VAT is being confused by Lagos and Rivers state governments as a sales tax. If every state government enacted its own VAT law, multiple taxation would result in increase in prices of goods and services and collapse in inter-state trade,”
Plateau State Governor, Simon Lalong had offered this while reading the communique of the meeting of the Governors.
Tax experts have also argued that were states to collect their VAT, there is likely going to be a chaotic VAT regime of possible instances of double taxation, over-taxing, poor efficiency of collection, deterioration of the ease of doing business gains, among others.
In a paper titled “How To Fix Nigeria’s Broken VAT System”, one Taiwo Oyedele who claimed to be a leading tax expert in West Africa, and the Fiscal Policy Partner and Africa Tax Leader at PwC, wrote: “If states enact their VAT or Sales tax laws, the guaranteed winners will be the federal government in respect of import VAT and international transactions (whether retained by FG only or paid into the Federation account and shared), and the FCT.
“States that may either lose or gain are Lagos and Rivers due to Headquarters effect and subject to collection efficiency.
“Lagos also has to deal with granting input VAT at 7.5% on items sourced by businesses outside the state against the lower output VAT rate of 6%. All other states and 774 local governments will be worse-off, all things being equal.”
He also argued that states would experience difficulty in collection and audit compliance.
“The positions of all states will be negatively impacted by lack of capacity to collect, difficulty in auditing compliance and higher cost of collection which may be up to 15% especially in states where consultants and other forms of agency structures are used for tax collection.”
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