The Value Added Tax (VAT) controversy between states and the federal government has taken a new turn. In a ruling on Friday, the Abuja division of the Court of Appeal temporarily suspended the execution of the judgment of the Federal High Court in Port Harcourt, stopping the Federal Inland Revenue Services (FIRS) from collecting VAT and Personal Income Tax (PIT) in Rivers State.
The appellate court specifically ordered parties to the legal dispute to refrain from implementing “the judgment pending the hearing of the motion filed by the FIRS for an order staying the execution of the judgment.
Justice Haruna Tsanami who led the three-member panel ruled that it was for the overriding interest of justice for the parties who submitted themselves before the court not to take further steps that would destroy the res.
Tekedia Mini-MBA edition 16 (Feb 10 – May 3, 2025) opens registrations; register today for early bird discounts.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
“It is hereby ordered that status quo ante belium should be maintained pending the hearing of the motion,” Tsanami said.
Meanwhile, the court has adjourned till September 16 to hear the application by the Lagos state government seeking to be joined in the dispute.
The court also ordered the appellant to file and exchange their processes in the motion for joinder filed by Lagos state just as the respondents were equally given two days to respond.
The ruling came just as Lagos State governor, Babajide Sanwo-Olu, signed the Bill of VAT collection into law to give the State a legal backing in its quest to collect the taxes instead of the federal government.
Meanwhile, the Rivers State governor Nyesom Wike, has inaugurated a four-man tax appeal commission with a mandate to deal with “complaints arising from those who do not want to pay their taxes, while also prevailing on those who believe that the tax body is doing what it is not supposed to do.”
The situation has further compounded the controversy, with no party willing to back down, it’s going to be a long legal battle.
The FIRS had, in a circular distributed during the week, urged taxpayers not to panic over the trial judgment that granted Rivers State the right to collect taxes under its jurisdiction.
“The FIRS having lodged, in the Court of Appeal, both an appeal against the decision of the Federal High Court sitting in Rivers State in Suit No. FHC/PH/CS/149/2020, Attorney General of Rivers State Vs Federal Inland Revenue Service, and an injunction pending appeal of the said judgment, assures taxpayers that there is no cause for alarm.
“The Federal High Court ruling should not breed any confusion as to the obligations of taxpayers. Taxpayers should continue to comply with the Value Added Tax Act pending the final determination of the appeal.
“Tax payers should continue to honour their tax obligations under the VAT Act. Failure to do this would put them on a collision course with the law. The Service is confident that, given the extant laws, the arguments and case put forward, it will earn a favoured judgment at the appellate court,” the Service said.
With all parties laying a claim of being backed by the law, the winner of the tax legal battle will be determined by how the appellate and Supreme Courts interpret the law. The court had earlier dismissed FIRS’ prayer for stay of execution of the trial judgment.
Benue and Oyo States
Meanwhile, Benue and Oyo states are also evaluating the regulation and would likely follow Rivers and Lagos state if the Supreme Court rules for Rivers State. From governor of Benue state, Samuel Ortom.
“I have asked the Attorney-General and Commissioner for Justice to study the law and let me know its implications.
“I don’t think there is anything wrong in embracing the law as long as it conforms with the constitution, whether it affects states positively or negatively.
“I support the governors of Rivers and Lagos States for what they are doing.
“Anything that is in tandem with the rule of law I will accept, but if anyone thinks otherwise the best thing to do is to go to court.
“I heard they are in court and if the case is decided otherwise by the Supreme Court we will accept it,” he said.