By Sam Omotoso Esq

INTRODUCTION

The Appeal court sat on the 10th of September 2021and gave a ruling that has been misconstrued by several persons. This is due to the fact that the Appeal Court sitting in Abuja stated that the status quo be maintained. The genesis of the confusion arose as a result of the lack of understanding of the status quo the court was referring to. Did the status quo mean the decision of the Federal High Court which is ordinarily supposed to subsist except the decision of a higher court sets it aside? Or did the status quo mean the position of things before the decision of the Federal High Court?. Before I distinguish both positions, it is expedient that I lay a proper foundation.

Status Quo (in ordinary parlance means leave things the way they are). VAT means Value added Tax is a type of tax that is levied on the price of a product or service at each stage of production, distribution, or sale to the end consumer. Eg. At production James Bond bread is valued at N20. When it moves to the Wholesaler it becomes N30, when it moves to the retailer it becomes N40 and when it moves to the final consumer it becomes N50. The Tax on the increase in value from 20 to 30 till it becomes 50 is the Value added tax. To be pellucid, Value Added Tax (hereinafter referred to as VAT) is not expressly mentioned in the constitution. However, tax is mentioned in the exclusive and the concurrent list.

The position of things before the Federal High Court decision

The Federal Inland Revenue Service (hereinafter referred to as FIRS) as an agency of the Federal Government has been solely responsible for the administration and management of VAT. In other words, VAT generated from each state goes to the Federal Government. The Federal Government in turn redistributes it to states. The outcry from states like Rivers and Lagos is the so called redistribution. This is because in June for instance, it was said that Rivers state generated 15 Billion Naira as VAT and by the time the said amount went through the redistributing process only 4.7 Billion Naira successfully came back alive to Rivers State. However, Kano State generated N2.8 Billion, by the time the said amount went through the same redistributing process, the entire N2.8 Billion made it alive. So while Kano gets 100 percent of what they generated, states like Rivers get 31 percent of what they generated or less. While some persons insist that “we should be our brother’s keeper”, Rivers State insists it is unfair, inequitable, preferential and … well you can continue with the synonyms.

In a nutshell, the position of things before the FHC decision is that VAT generated from each state goes to the Federal Government who redistributes “accordingly”.

The Judgment of the Federal High Court and its implications – AG Rivers State v. FIRS & AG Federation

I earlier mentioned that VAT was not expressly mentioned in the Constitution. The Federal High Court (hereinafter referred to as FHC) held that the FIRS or any of its agencies lacks the powers to impose and collect VAT, or any other tax not specifically provided for in the constitution. Furthermore, the judgment empowered states to enact laws for the administration of VAT .The ultimate effect is that –

Every state can enact a VAT law that will govern the state, and states will be entitled to the revenue accruing from the VAT collected by it and VAT from each state will no longer be pooled into the Federation Account.

The question that begs for an answer now is; what exactly is the position of the Court of Appeal which sat on the 10th of September 2021?. Did the Court hold in favour of the Federal Govt (FIRS) or in favour of the FHC or if you like “Rivers State”?.

Due to several preliminary issues, the court was not able to hear the appeal. However, The Appeal court in its affluence and opulence of wisdom perspicaciously sat on the fence. The court simply in the words of A.M Aliyu (SAN) (in his interview with the press immediately after the case) stopped the effect of the FHC decision till the Appeal be heard and fully dispensed with”. In other words, the effect of the ruling pending when the appeal will be heard is that all parties hands off until after all sides is heard and decision is given.

CONCLUSION

Hence the status quo in this instance is the position before the FHC decision. Which is that VAT generated from each state goes to the Federal Government pending the determination of the Appeal currently at the Appeal Court.

Written By Sam Omotoso Esq, ACrb