Court grants Rivers govt. rights to collect VAT

A Federal High Court sitting in Port Harcourt has refused to grant an application by the Federal Inland Revenue Service, FIRS, seeking to stop the enforcement of a judgment granting the Rivers State government the rights to collect Value Added Tax, VAT.

Justice Stephen Dalyop Pam ruled that granting the request would amount to court overruling itself and therefore dismissed the application.

The Federal High Court sitting in Port Harcourt had on August 9, 2021, ruled that the Rivers State government and not the Federal Government through the FIRS is entitled to collect VAT.

Justice Dalyop had in his judgment also ruled that it is wrong for the Federal Government and its agencies to collect taxes that have been constitutionally reserved for state governments to collect.

Following the judgment, Governor Nyesom Wike on August 19, 2021, signed into law the Value Added Tax Bill to pave way for the state government to commence the collection of VAT.

Not satisfied with the judgment, the FIRS decided to go on appeal and while doing so table a motion for an injunction and stay of the judgment pending its appeal.

On the day the application was heard, the FIRS withdrew the first prayer seeking an injunction and wanted the court to stay the execution of that judgment.

Counsel to the Rivers State government urged the court not to grant the request sought by the FIRS arguing that the judgment being declarative cannot be stayed.

Delivering his ruling on the application, Justice Dalyop said the FIRS has not given any special or exceptional reason to be entitled to the leave sought.

He said the FIRS did not make any application to set aside the VAT law, which according to him, is a law validly enacted.

Justice Dalyop noted that the Federal Government already has a huge liability arising from many years of collecting the tax on behalf of Rivers State. 

He hinted that it might be difficult for the Federal Government to refund the state if his judgment authorizing the state to collect the tax is upheld at the appellate courts.

In his wisdom, the judge believes Rivers State can easily remit whatever amount it may have received within the period of the litigation to the Federal Government if it loses at the Appeal Court.

He, therefore, ruled that the Rivers State government should continue collecting the VAT as allowing the FIRS to do such pending it appeal would only increase its liability. 

Meannwhile, Governor Wike had directed the Rivers State Internal Revenue Service to ensure the full and total implementation and enforcement of Value Added Tax Law against all corporate bodies, business entities, and individuals with immediate effect.

The Governor in a statewide broadcast on Monday accused the FIRS of bullying corporate bodies and business entities from paying VAT to the Rivers State government.

Governor Wike said his administration has done no wrong in exercising its legal right to stop the continued breach of the constitutrional right of the states to lawfully impose and collect value added and other related taxes.