A Senior Advocate of Nigeria (SAN), Chief R.O. Balogun, has approached the Federal High Court in Ilorin, Kwara State, seeking to nullify a provision in the 2020 Value Added Tax (VAT) Modification Order. This provision mandates the collection and remittance of VAT on basic food items sold by restaurants, hotels, and similar establishments.
The VAT Modification Order 2020 initially extended VAT exemptions to agro- and aqua-based staple food items. However, it explicitly excluded basic food items sold in restaurants, hotels, eateries, lounges, and by caterers or contractors. This order, approved by the former Minister of Finance, Budget, and National Planning, Zainab Shamsuna Ahmed, aimed to provide clarity in the interpretation of the VAT Act.
Chief Balogun is seeking a court order to nullify Order 33 of the VAT Modification Order 2020, which imposes VAT on basic food items sold in specific establishments. His arguments are as follows:
The provision contradicts the VAT exemption list outlined in the First Schedule of the VAT Act.
The order is unconstitutional and conflicts with existing tax laws.
The Economic and Financial Crimes Commission (EFCC) and the Attorney General of the Federation have overstepped their legal boundaries by enforcing this provision.
The case also involves a business enterprise, Item 7 Go, owned by Balogun’s client, Ibigbemi Oloruntobi. The EFCC, under the guise of a money laundering investigation, allegedly demanded VAT remittance details from Item 7 Go. Balogun contends that:
Non-collection of VAT is not equivalent to tax evasion under Nigerian law.
The EFCC lacks jurisdiction over tax compliance matters, which should be handled by the Federal Inland Revenue Service (FIRS).
The EFCC’s actions amount to harassment and an abuse of office.
Balogun is requesting a court declaration that the EFCC’s actions violate his client’s rights. He asserts that VAT compliance enforcement falls within the purview of the FIRS, which should pursue civil remedies instead of criminal investigations.
He further argues that even if the Minister’s order were valid, failure to collect VAT has not been criminalized under Nigerian law. The VAT Act penalizes tax evasion but does not impose criminal liability for non-collection of VAT by businesses.
Court documents filed revealed that the EFCC’s Special Control Unit Against Money Laundering (SCUML) is investigating Item 7 Go for alleged non-compliance with the Money Laundering (Prevention and Prohibition) Act. The EFCC had summoned the company’s staff, requesting banking records, statements of account, and BVN details as part of its probe into the business’s financial transactions.
The matter has been fixed for hearing on March 3, 2025, with hearing notices issued to all the parties.
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