Just as advised by tax professionals, the Federal Government is considering settling the controversy of the constitutionally empowered tier of government enabled to collect the Value Added Tax, VAT between the Federal Inland Revenue Service, Rivers, and Lagos states.

As recently announced, the government at the centre will now seek a political solution to the issue rather than going through the long legal process that can result in instability in the tax system.

As an aftermath of the judgement from the Federal High Court on August 9th, 2021 by Justice Stephen ruling VAT in favour of the Rivers State Government, the argument has been on the front burner with the likes of Lagos joining the fray

The new move by the apex government made it to the public domain in a recent announcement by the Minister of Finance, Budget, and National Planning, Mrs Zainab Ahmed, noting that efforts were ongoing on the issue.

In a similar development, Lagos state had hinted that it will embrace a proposal to settle out of court when presented.

In her words as quoted in an interview with Channels TV,

“I’m not supposed to be talking about issues in court but I do hope that this problem can be solved by sitting on the table; not on the pages of newspaper or disagreements in court because it is possible to solve it on the table, talking of political solution.”

 “There are a lot of efforts going on right now. As I said, I don’t want to discuss it because it’s in court so I have to be careful. But there will be a positive political solution. We are working towards an out-of-court solution.”

Fact Analysis

  • Recall that on August 9th, 2021, a High Court Sitting in Port Harcourt had ruled that VAT away from its current collection realities should be in the purview of the State government.
  • Following the judgement, the Rivers State Government enacted a law to empower the state to collect VAT. The governor, Nyesom Wike, signed the bill into law on August 19.
  • This judgement has been refuted and appealed by the Federal Government in the court of Appeal which had ruled that all party maintains the status quo.
  • Also, the FIRS had written to the Senate to seek the inclusion of VAT collection in the exclusive legislative list.
  • The temerity of the Rivers State Government has rekindled the same quest in other states Like Lagos with successful court filling and others still yet to take action but envisage state collection.
  • Lagos State request for joinder as a respondent in the suit before the Court of Appeal was also granted by the court, following the enactment of its VAT law. The governor, Babajide Sanwo-Olu, signed the bill into law on September 10.
  • The case due to its severity is predicted to reach the Supreme Court if legal proceedings are to continue.
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