NECA Directs Members To Remit August VAT To FIRS Pending Supreme Court Ruling
The Nigeria Employers’ Consultative Association (NECA), has directed its members to make a conditional Value Added Tax (VAT) payment for August to the Federal Inland Revenue Service (FIRS) pending ruling by the Supreme Court on the controversial luxury tax.
The association that is the umbrella organization of employers in the Organised Private Sector (OPS) of Nigeria, also, as a precautionary measure, directs member companies to write the Federal tax agency before or immediately after remitting VAT for August 2021 that the remittance is a conditional payment pending the final determination of the VAT case by the superior court.
It would be recalled that the Federal High Court in Port Harcourt had on August 10 delivered a judgment barring the FIRS from collecting VAT and personal income tax in Rivers State.
Justice Stephen Dalyop Pam, in the ruling, noted that the Rivers state government through the State Assembly has duly enacted Rivers State Value Added Tax No. 4, 2021, which makes it a legitimate right of the state to collect VAT..
The judge held that every court in the country is constitutionally mandated to obey every legislation enacted by both the National and State Assembly, and explained further that the Rivers state government law on VAT remains valid until it is set aside by a court of competent jurisdiction.
Days after, Lagos state enacted the tax law that empowers it to also collect and retain VAT in the state, removing such powers from the federal agency.
On 14 September however, the Court of Appeal in Abuja, ordered the Rivers and Lagos state governments to stay action in their efforts to commence the collection of the Value Added Tax (VAT) pending the resolution of the legal dispute on the matter.
The appellate court ordered that the enforcement of the judgment of the Federal High Court, Port Harcourt, which the states are hinging its decision on be put on hold.
Haruna Tsanami, the lead judge of the panel, also suspended the operation of the law passed by the Rivers State House of Assembly and assented to by Governor Nyesom Wike, for the collection of VAT by the State government.
Amid the controversies and legal tussle, NECA, in a circular on Monday to all its members with Ref: NECA/LRT/B.7, titled “Re: The controversies surrounding the collection of value Added Tax(VAT) in Nigeria”, encouraged member-companies to compute VAT due to each state government that has made a VAT law separate.
The circular signed by Timothy Olawale, Director-General of NECA, read, “Your Association has observed with concerns, the controversies surrounding the collection of Value Added Tax (VAT) in Nigeria, including the judgment of the
Federal High Court and most especially the Order of the Court of Appeal of 14th September 2021.
The said Order stated: “That the status quo ante-bellum SHALL be preserved and/or maintained by the parties pending the hearing and the determination of the pending Motions for stay of execution/injunction and Joinder
of the Attorney-General of Lagos State as a Respondent. That is to say, the parties SHALL refrain from taking any action to give effect to the Judgment
of the Federal High Court in Suit No.: FHC/PH/CS/149/2020: Attorney-General of Rivers State V. Federal Inland Revenue Service & Anor delivered on the 9th day of August, 2021 pending the hearing and determination of the applications alluded to above”.
NECA noted that the VAT Law of Rivers State was enacted on 19th August 2021 while that of Lagos State was enacted on 10th September 2021.
It explained that the VAT to be remitted by the taxpayer on 21st September 2021 is the VAT collected for the month of August 2021, and stating that In view of the fact that taxation is statutory – that is to say that there cannot be tax without legislation, there are two (2) laws on VAT in Nigeria as at August 2021 i.e. VAT Act of 1993 administered by the FIRS and VAT Law of Rivers State, administered by the Rivers Internal Revenue Service – which has been stayed by the Order of the Court of Appeal.
“Consequently, all VAT collected for the month of August 2021 should be remitted to the FIRS based on the Order of the Court of Appeal’, Plawale stated in the circular.
However, as an additional precaution, NECA encouraged its members to write the FIRS before or immediately after remitting VAT for August 2021 that
the VAT remittance is a conditional payment pending the final determination of the VAT case by the superior court.
“If, eventually, the superior court decides that VAT should be collected by States, then the FIRS undertakes to refund the VAT remittance made to the taxpayer, who would thereafter forward it to the appropriate State Inland Revenue Service, failing which the taxpayer would be at liberty to deduct the VAT remittance from future tax liabilities due to the FIRS.
The association therefore, as a way to proactively manage the uncertainty, advised its member-companies to compute VAT due to each State Government that has made a VAT law separately, so that if the superior court rules in their favour in future, it would be easier for the companies to ascertain the amount due to each State and remit.
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