NASS retains VAT on Concurrent Legislative List
By Jeph Ajobaju, Chief Copy Editor
Both Chambers of the National Assembly (NASS) have voted to retain Value Added Tax (VAT) collection on the Concurrent List, rejecting plans by the federal government for it to be on the Exclusive List. The Supreme Court case is now moot.
A total 95 senators registered to vote on Tuesday and 85 did. A total 44 voted against the bill, 41 for it. A minimum 73 votes were required to make the change.
In the House of Representatives, 209 voted against it, 91 in favour.
The bill had sought to “Alter Part I of the Second Schedule to the Constitution of the Federal Republic of Nigeria, 1999 to include Value Added Tax on the Exclusive Legislative List; and for Related Matters.”
FIRS admits lack of constitutional powers to collect VAT
A Federal High Court in Port Harcourt ruled on 10 August 2021 that only Rivers and other states have the constitutional powers to collect VAT and Personal Income Tax (PIT), not the Federal Inland Revenue Service (FIRS).
The FIRS appealed to the Federal Court of Appeal, where Lagos joined Rivers in the suit. The Appeal Court ruled that the status quo be maintained whereby the FIRS continues to collect VAT pending the determination of the appeal.
Rivers object and appealed to the Supreme Court, which has since sat on the case.
Three weeks before the court judgment in Port Harcourt was delivered, FIRS Chairman Muhammad Nami wrote to the NASS on 1 July 2021 admitting that the FIRS does not have the constitutional powers to collect VAT.
Nami wrote to House of Representatives Constitution Review Committee Chairman Idris Wase, who is also House Deputy Speaker, and he received it on 2 July, five weeks before the court ruled the FIRS indeed lacks VAT powers.
Percentage of VAT collection by states
VAT is a consumption tax on goods and services. The current rate is 7.5 per cent, a huge tax net that fetched more than N1 trillion into the federal treasury in the first half of 2021 (H1 2021), according to National Bureau of Statistics (NBS) data.
Lagos alone generates N500 billion VAT yearly (55 per cent of the total), the remaining five South West States (N300 billion), and Rivers N150 billion.
Former Finance Minister Kemi Adeosun disclosed in Abuja on 10 February 2018 that four states and the Federal Capital Territory (FCT) generate 87 per cent of total VAT yearly as follows:
- Lagos – 55 per cent
- FCT – 20 per cent
- Rivers – 6 per cent
- Kano – 5 per cent
- Kaduna – 1 per cent
The letter Name wrote to lawmakers proposed the insertion of VAT immediately after Stamp Duties under item 58 part II of the Second Schedule of the Constitution.
But the proposal negates Part II of the Concurrent Legislative List of the Second Schedule delegating the collection of such taxes to state governments or other authorities of states.
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Related articles:
States, FCT share N1.84tr VAT haul in 3 years. Lagos generates 55%, gets 8.9% back
FIRS set to lose N2.44tr VAT as states claw back constitutional right to collect it
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Lagos says NASS decision promotes true federalism
Lagos Information Gbenga Omotoso commended the NASS for retaining VAT on the Concurrent List, saying it promotes true federalism.
“I think the lawmakers have done well.
“If they have said now that the states have the right to collect VAT, it is good because that has been the question the judiciary has been asked to answer, and if the Lagos State Government and some other state governments are pushing for this, at the National Assembly it is wisdom,” he told The PUNCH.
“It is the right way to go. I think they deserve kudos; they deserve applause because in my own view, it is a ‘no victor, no vanquished’ situation.
“It is good for democracy. It is a victory for the rule of law. It is a victory for equity, for justice. It is a victory for what is right as against what is not right.”
It facilitates true federalism, says Akwa Ibom
Akwa Ibom Information Commissioner Ini Ememobong said the decision of the NASS is in the right direction.
His words: “The state government, like other forward looking private and corporate citizens, is supportive of every attempt to increase the speed of our travel to true federalism. This act by the National Assembly is a march in the right direction.
“The government of Akwa Ibom State led by Governor Udom Emmanuel has been at the lead of this advocacy and therefore welcomes this development.”
Gombe says VAT needs further review
Gombe had previously kicked against states collecting VAT, and on Tuesday Information Commissioner Julius Ishaya insisted the latest development is more complex than people understand.
“For us aside from passing it as a law, there will be a need for states to sit down and sort out things.
“For instance VAT is value added tax on goods and services. If you buy airtime, instead of it being done at the organisation’s head office, it is meant for them to separate it to know cards used around the Gombe area and remit the VAT to the state unlike what was obtained in the recent past,” he told The PUNCH.
“That is the complicated issue, there is more than meets the eye but it is not a simple thing as people expect. We will increase our productivity and other economic activities to make sure we attract value addition.”