VAT: Imminent confusion trails Nigerian businesses

The ongoing tango between federal and state government over Value Added Tax (VAT) collection is already spelling doom as members of the organised private sector raise the alarm that Nigerian businesses are confused over possible double deductions. TAIWO HASSAN reports.

Indeed, the country’s business community has been complaining over the adverse effects of multiple taxes emanating from federal and state governments. However, none of them knoww that even the VAT, which has been the statutory responsibility of the Federal Government under the supervision of Federal Inland Revenue Service (FIRS), would become a contentious issue between the federal and state governments over who has the right for collection.

The feud

In a move to justify that the country’s 7.5 per cent VAT should be legally collected at the state government level, the Rivers and Lagos State Houses of Assembly have passed their respective Bills into law in order to start collection of VAT, thereby cutting the responsibility off from FIRS. Indeed, since Rivers State Governor, Nyesom Wike, and his Lagos State counterpart, Governor Babajide Sanwo-Olu, signed into law the controversial 7.5 per cent VAT collection, confusion has trailed the country’s tax system as some states aree already in support, while others are against the move. For instance, two more states, Ogun and Akwa Ibom, have stated they were ready to enact laws that will enable them collect the tax in their states. Some other states such as Edo, Ondo, Oyo and Taraba said they were still studying the ruling of the Federal High Court in Port Harcourt on the matter, while Delta State affirmed it was consulting before it will take a position on the issue. This is in spite of the ruling by the Court of Appeal sitting in Abuja last week Friday that Rivers and Lagos states, which already enacted laws to collect VAT in their states, should stay action on the matter pending the determination of the appeal for stay of execution filed before it by the FIRS. Kogi State Governor, Yahaya Bello, and Ebonyi State Governor, David Umahi, have stated that they were not in support of Rivers and Lagos states’ passage and signing into law of the controversial VAT Bill. According to Umahi, “Ebonyi State is not in support of any state collecting VAT, we are in support that FIRS should continue to collect tax and share.”

OPS’ reactions

Following the development, the Lagos Chamber of Commerce and industry (LCCI) stated that the controversial VAT move had put Nigerian businesses into confusion over who is in charge. The LCCI insisted that this was not healthy for the business community. Director-General of LCCI, Dr. Chinyere Almona, made this known to New Telegraph in Lagos recently, saying that the VAT collection imbroglio had put many Nigerian businesses into confusion as they cannot be paying different taxes to Federal Government and state government.

Almona explained that the chamber was visibly apprehensive and thinking along same direction with the Nigerian business community on this looming feud. She said the Chamber had made some statements in the media to caution the government on the dangers of this confusion and ask for a quick resolution of the controversies to save the business community from unnecessary troubles in the coming weeks. The LCCI DG said: “A recent Federal High Court judgment restrained the Federal Inland Revenue Service from the collection of Value Added Tax and empowered the Rivers State Government to collect tax from within the Atate.

“Following this, the Rivers and Lagos State Houses of Assembly passed respective Bills into law in their states to start collection If VAT. Today, the Court of Appeal, Abuja, has ordered both Rivers and Lagos states to maintain the status quo on the collection of VAT, pending the determination of an appeal filed by the FIRS. “The first concern of the Chamber is the confusion that businesses face as to who is in charge of VAT collection. This is not healthy for the business community. She continued: “Your Chamber has made some statements in the media to caution the government on the dangers of this confusion and ask for quick resolution of the controversies to save the business community from unnecessary troubles in the coming weeks. “We would monitor happenings in this regard and update you over time.” In his reaction, Director-General of Manufacturers Association of Nigeria (MAN), Mr Segun Ajayi-Kadir, noted that as leading payers in Value Added Tax in Nigeria, having contributed N44.9 billion in the first half of 2021, the manufacturing sector was going to be hardest hit by the looming impasse in the country’s tax system.

Ajayi-Kadir said that the business community could not afford the anxiety and confusion currently generated by the controversial tax suit in Rivers State. According to him, the sector should not be made to suffer while the two tiers of government fight over who should control tax. Ajayi-Kadir said that the recent controversy over the control of VAT in the face of the court judgements and the strong statements emanating from the two tiers of government was unhealthy for business. “Manufacturers, like many other business operators in Nigeria, are deeply concerned about what becomes of their fate come September 20 when businesses are expected to file VAT claims and beyond. “The contentions are worrisome and potentially inimical to the smooth operations of our businesses as on the one hand, the Federal Inland Revenue Service is insisting on continuing to collect VAT. “Rivers State Government is ordering immediate and complete collection of the same tax while Lagos State is preparing the grounds to go the way of Rivers and who knows, other states may be warming up to join the fray. “What we except, thereforee, is for the federal and state governments to stop the grandstanding and find a mutually acceptable way forward,” he said. Also responding, the National President of Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture,(NACCIMA), Ide John Udeagbala, said the Micro, Small and Medium scale Enterprises, currently the bedrock of the economy and provide most of the employment, would certainly be most hard hit and may not survive the looming feud between the federal and state governments over the VAT saga because of their businesses. Udeagbala noted that the country’s federation account was already being hit following the state governments’ insistence to collect VAT, saying revenue target for this year by FIRS may be encroached in the process. According to him, NACCIMA, as the apex regulatory body of chambers of commerce in the country, is already concerned with the implications of the ongoing VAT, Stamp Duty and other tax related remittances on Nigerian businesses at a period many private sector operators are yet to overcome the straits of the COVID-19 on the economy. He pointed out that NACCIMA and other OPS groups were calling for immediate suspension of implementation of the FIRS Tax Appeal Practice Direction by the Chief Judge of the Federal High Court pending its revision.

Last line

The organised private sector’s stance is that there is need to urgently resolve the impasse between the federal and state governments on the 7.5 per VAT collection because it is already affecting revenue generation to the federation account and also impacting Nigerian business stability.




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