Debunking the Myth Revolving Around Vat Collection: The Position of The Law
A value Added Tax (VAT) is a consumption tax that is levied on a product repeatedly at every point of sale at which value has been added until it gets to the final consumer.
Every discernible Nigerian that is conversant with the recent happenings in the political space will take note of the crises revolving around the VAT issue between the federal government through its agency—Federal Inland Revenue Services(FIRS) and some state governments.
The position of the law is crystal clear as there are two types of VAT— local VAT and foreign VAT. Local VAT are taxes generated on taxable goods and services within the geographical landscape of Nigeria while foreign VAT are those taxes paid on goods and services imported into the country and are within the exclusive jurisdiction of the federal government. The local VAT is the one that is presently raising controversy as to who is the legitimate authority to collect VAT on goods and services consumed within the states of the federation.
As a rule of interpretation, express mention of one thing is the exclusion of others(Expressio unius est exclusio alterius) therefore, under the second schedule of the 1999 constitution of the Federal Republic of Nigeria(as amended), VAT was not included in items 58 & 59 on the exclusive legislative list, therefore it is not the responsibility of the federal government or its agents to collect VAT on behalf of the states.
However, the enactment of the VAT Act which was introduced in 1993 replaced the Sales Tax Laws of states. In the case of AG Ogun State V Aberuagba, the Supreme Court held that Sales Tax Law of Ogun State was invalid as it encroached the exclusive legislative powers of the federal government.
Contrarily, In Nigerian Soft Drinks V Attorney General of Lagos State, the Court of Appeal upheld the validity of the Lagos State Sales Tax Law as it did not seek to task items covered in the exclusive legislative list. This was the state of affairs until the VAT Act was enacted under the military regime.
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As a result of innovation and to further strengthen true fiscal federalism, some states introduced consumption taxes in other to boost their revenue base. In the case of Attorney General of Lagos State V Eko Hotels & Anor, the Supreme Court held that VAT Act being a legislation of the National Assembly, had covered the field on the issue of Sales Tax introduced by some states and must prevail over the Sales Tax Law of Lagos State. It then follows that the VAT Act is supreme and weighs over and above Sales/Consumption Taxes introduced by some states. This case is a persuasive element but it does not solve the legal conundrum as to who is the legitimate authority to collect VAT. Section 4(5) of the constitution provides that if any law enacted by the House of Assembly of a State runs contrary with any law validly made by the National Assembly, that of the National Assembly shall prevail; and that other law shall, to the extent of the inconsistency, be void.
VAT is charged by the federal government on vatable good and services at the rate of 7.5% and distributed among the tiers of government. VAT is not categorically stated in the exclusive legislative list neither is it stated in the concurrent legislative list, consequently VAT is a residual matter falling under the legislative competence of the state. However, the principal law that gave the FIRS the power to collect VAT on goods and services consumed within the country is the value Added Tax Act(VATA).
The recent ruling of the Federal High Court(FHC) Port Harcourt which favoured River State as the right authority to collect VAT is still subject to the rigours of litigation.
It is therefore submitted that the federal government should not go through the back door by influencing the law makers to include VAT in the exclusive legislative list as this will truncate the legal process that is currently ongoing due to the fact that this landmark case will shape the development of our jurisprudence and fiscal federalism.
REFERENCES..‘VAT’ https://www.investopedia.com/ask/answers/042315/what-are-some-examples-value-added-tax.asp > accessed 14 September 2021 .CFRN,1999(as amended) .Business Day ‘An analysis of Federal High Court Decision Invalidation the VAT Act -Implications for VAT Administration and Compliance’ <https://ng.andersen.com/an-analysis-of-federal-high-court-decision-invalidation-the-vat-act-implications-for-vat-administration-and-compliance/ >accessed 14 September 2021 .(1985)1NWLR(Pt3)395 .(1987)2NWLR(Pt57)444 .Business Day ‘An analysis of Federal High Court Decision Invalidation the VAT Act -Implications for VAT Administration and Compliance’ https://ng.andersen.com/an-analysis-of-federal-high-court-decision-invalidation-the-vat-act-implications-for-vat-administration-and-compliance/ >accessed 14 September 2021 .ibid .(2018)(36)TLRN1 .CFRN, 1999(as amended)
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