The ruling of the Federal High Court in Port Harcourt, a number of varying interpretations of the Court of Appeal’s judgement to maintain the status quo, diverse interpretation, and counsel of different professionals and stakeholders could not stop some manufacturers and service-based companies from remitting their August 2021 VAT returns to the Federal Inland Revenue Service, FIRS.
Information reaching Taxmobile from a report by The Nation New has it that companies in these identified sectors are making payments to FIRS offices nationwide already.
Prompt payment by these companies is coming on the heels of September 21st due return date of August VAT irrespective of the current VAT controversies. This decision may not be far from a late return penalty as the ongoing legal tussle could swing either way.
Recall that in recent times, Attorney-General of the Federation and Minister of Justice Abubakar Malami, as well as Minister of Finance Mrs. Zainab Ahmed last week had reiterated that VAT should be remitted to the FIRS and not to any state government. This is contrary to the Rivers and Lagos State laws authorizing the payment of VAT to them.
As deduced from the FIRS source as contained in the report, the FIRS is still empowered by its Act to place a lien on the accounts of defaulting companies and even seal their premises.
The anonymous source highlights below,
”The laws are yet again applicable. Penalties and interests would apply to defaulters.
“The FIRS is empowered by its Act to place a lien on the accounts of defaulting companies and even seal their premises.”
Before clamping down on defaulters, the FIRS had revealed it was going to give enough room for appeal.
“However where the appeal fails, recalcitrant companies will have their premises sealed, penalties and interests given against them, and in serious cases, their bank accounts frozen.”
FIRS’ Interpretation of Court of Appeal Judgement
On Friday, September 10th, 2021, the Court of Appeal had ruled that the status quo be maintained on VAT collection. This judgement since inception had generated varying interpretations with some pointing at the FIRS as sole collectors of VAT while others pointed to the state.
Below represents FIRS’ interpretation as stated by one of its officials.
“What the Court of Appeal’s status quo order means is that whatever was operational before the judgment of the Federal High Court, is to remain the position of things.
“The VAT Act and the Finance Act 2020 remain in force and are applicable. This means that the formula for sharing to beneficiaries would continue as has been the case. They will receive their portions as stipulated under our extant laws.”
Timeline of Events
- The war on VAT broke out in August when the Federal High Court, sitting in Rivers State gave a judgment empowering state government from collecting VAT.
- Following this, the Rivers State House of Assembly passed a VAT collecting Bill which became law while Governor Nyesom Wike Assented to it.
- However, the FIRS challenged the judgment at the Court of Appeal.
- Lagos State house of Assembly had also in the manner of Rivers State passed the VAT collection Bill.
- Fast forward to September, the Court of Appeal ruled that parties should maintain the status quo.
- Akwa Ibom State recently started the process of enacting a law like Rivers and Lagos states.