The Lagos State government has disagreed with the position of federal government on collection of Value Added Tax (VAT), insisting that it is the rightful entity to collect the tax.
Recall that a Federal High Court in Port Harcourt had ruled that collection of VAT falls within the jurisdiction of state governments.
The court presided over by Justice Stephen Pam, on August 9, restrained the Federal Inland Revenue Service (FIRS) from collecting VAT and personal income tax (PIT), saying, “ the law does not back FIRS authority above state governments in the collection of VAT and PIT.”
Following the judgement, Lagos state government directed FIRS to stop issuing demand notices for payment of VAT in the state and to render accounts, within seven days, of all sums collected as VAT in the current accounting circle in the state.
However, FIRS appealed the ruling and advised the public to maintain a status-quo on the payment of the taxes. And subsequently wrote to Lagos State government – which accounts for the bulk of VAT collections in the country – maintaining that it will continue to collect VAT from businesses.
FIRS executive chairman, Muhammed Nami in the letter dated August 24 and addressed to Moyosore Onigbanjo, the attorney general and commissioner for justice in Lagos state, said since the Rivers court decision has been appealed, “the law does not allow a party to a suit to carry out an action to forestall the decision of the appellate court once an appeal has been entered”.
It added that there were contrary rulings by similar courts on the same matter, Cable reported.
FIRS added that parties must maintain the status quo until the decision of the appeal court.
“The instant judgement of the Federal High Court, Rivers State, is in conflict with the extant judgement of the Federal High Court, Kogi State on the same subject matter i.e. the validity of VAT Act as administered by the Service,” the letter read.
“The conflict created by the later judgement can only be resolved by the appellate court; and the right of the appellate court in this wise should not be compromised.
“In view of the foregoing, parties have to maintain the status quo ante (i.e. their positions before the instant judgement of the Federal High Court, Rivers State).
“The FIRS shall continue to collect VAT and administer the VAT Act until the final resolution of the legal dispute by the relevant appellate court
However, responding to Nami’s letter on Tuesday, Gbenga Omotosho, Lagos commissioner for information and strategy, insisted that the FIRS’ appealing the case at the Appeal Court does not translate to a stay of execution.
“An appeal is not a stay of execution. For us in Lagos, our position is that we have the backing of the law to demand and collect VAT. The court has ruled and we are following the judgment,” he said.
“As a state, we believe the development is good for progress and true federalism that we have been clamouring for.”