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Two Critical Issues Northern Govs Raised About VAT Collection That Southern Govs Should Take Note Of

As the issue of who should collect Value Added Tax, VAT between the states and the federal government agent, the Federal Inland Revenue, FIRS continue to be on the front burner of major Newspapers in Nigeria, the Northern States Governors’ Forum at an emergency meeting on Monday, September 27, in Kaduna State, where issues affecting the nation ahead of the 2023 presidential elections among other issues delineated on the issue of VAT collection by their Southern colleagues. 

Photo Credit: Punch

It was gathered in a report by Punch that the Northern governors pointed out that their Southern colleagues who have already signed and implemented the VAT Law in their respective states were confused about the collection of Value Added Tax. As a matter of fact, this development goes against the decision already taken by the Lagos and Rivers State governors, Babajide Sanwo-Olu and Nyesom Wike, who is said to have been empowered by the law to collect VAT. Again, this decision has received backing from the Federal House of Representatives which is set to pass a bill to empower states with the rights to collect VAT.

Photo Credit: Premium Times

Following the Rivers State governor's disagreement with the FIRS on who should collect VAT in his state of control and his move to sign and implement the VAT law, the case has been appealed by FIRS, and the matter is yet to receive a court ruling. Arguably, this was a tough decision to make by Gov Wike after he made a claim that he had contributed so much to the federal government purse and had received less in terms of monthly allocation, while some states in the North contributed less and received more. According to him, such could be seen as injustice to his state and the entire Southern Nigeria.

It could also be recalled that the Court of Appeal sitting in Abuja had recently ruled that both the Rivers State and FIRS should maintain the status quo in an appeal filed by the FIRS against the judgment of the Federal High Court in Port Harcourt which empowered the Rivers State Government to collect VAT as against the FIRS.

Photo Credit: Vanguard

Photo Credit: Leadership

Against this background, this article seeks to discuss two critical issues that have been raised by the Northern Governors' Forum of Nigeria during the emergency meeting earlier on Monday that the Southern Governors should take note of. 

First, the Northern Governors pointed out that VAT is being confused by state governments in the Southern region as a sales tax. Why did they say that? According to their arguments, it was put forth that if every state enacted its own VAT Law, it would amount to multiple taxations which could result in an increase in the prices of goods and services and collapse in interstate trade. They also made it clear that VAT is not a production tax like excise, but a terminal tax which is paid by the consumer.

Photo Credit: Vanguard

Second, the Northern Governors also made a critical point of view that the confusion on the collection of VAT by states in the Southern region is ignoring the fact that VAT is not a production tax like excise and the likes and the fact that it could lead to multiple taxation issues that may have an adverse effect on the consumer. Based on the foregoing, the NGF maintained that the reason Lagos accounts for 50% of the VAT collection is because most companies and banks as well as other trading activities have their headquarters in Lagos State. According to their argument, that is why we see the wrongful attribution of VAT by the Southern governors.

The forum concluded that except and until the Supreme Court pronounces judgement on the substantive matter between Rivers State and Federal Government (FIRS), the matter remains debatable, and the Northern States Governors Forum would respect the decision of the court.

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Babajide Sanwo-Olu Federal Inland Revenue Kaduna State Northern Northern States Governors Forum


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