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HomeBanking & FinanceVAT Act  ruling has legal precedent, says CITN 

VAT Act  ruling has legal precedent, says CITN 

The Chartered Institute of Taxation of Nigeria (CITN) has said court ruling stopping the Federal Government from collecting Value Added Tax (VAT) and Personal Income Tax (PIT) in Rivers State has legal precedence in Nigeria.

In a statement, CITN Registrar/Chief Executive, Adefisayo Awogbade, explained that the Rivers State case was not the  first time that the VAT Act has been declared unconstitutional.

Awogbade, said CITN was mindful of its statutory mandate as a tax regulatory professional Institute and will not shirk its responsibility to the public in all matters relating to taxation in Nigeria.

In a judgment delivered by Justice Stephen Pam of the Federal High Court, Port Harcourt Division, Rivers State,  it was held, that the Rivers State Government, and not the Federal Government, is empowered to collect VAT and PIT in the state. 

The court held that there was no constitutional provision backing the collection of VAT, Withholding Tax, Education Tax and Technology Levy in Rivers State or any other state of the Federation by the Federal Inland Revenue Service (FIRS) owing to the fact that the Federal Government is restricted by the Constitution of the Federal Republic of Nigeria, 1999 to taxation of incomes, profits and capital gains.

These  do not in any way include VAT or any other levy other than those specifically mentioned in Items 58 and 59 of the Exclusive Legislative List of the Constitution. For the purpose of this Press Release, the Institute is restricting itself to the vexed issue of the constitutionality of the Value Added Tax.

Awogbade, listed previous decisions nullifying VAT Act or parts thereof. 

For instance, in the Registered Trustees of Hotel Owners and Managers Association of Lagos v. A. G. Federation, the court invalidated some of the provisions of the VAT Act. In Ukala v. FIRS, the court nullified the VAT Act. In A.G. Rivers v. F.I.R.S., it has been reported that the court has nullified the VAT Act and empowered the States to impose, demand and collect VAT within their States. 

Also, in October 2019, the Federal High Court, Lagos Division, in the Registered Trustees of Hotel Owners and Managers Association of Lagos v. A. G. Federation & Others while considering the validity of the Hotel Occupancy and Restaurants Consumption Law of Lagos State upheld the powers of the Lagos State Government to charge and collect Consumption Tax from hotels, restaurants and event centres within the State. 

The Court held that based on the Constitution and the Taxes and Levies (Approved List for Collection) Act, the power to impose consumption tax was a residual power within the exclusive competence of States. It restrained the FIRS from imposing VAT on goods and services consumed in hotels, restaurants and event centres as this was already covered by the Lagos State Law.

The court proceeded to declare section”s” 1,2,4,5 and 12 of the VAT Act as being inconsistent with section 4(2),(4) (a) & (b), (7)(a) & (b) of the Constitution and consequently unconstitutional and invalid. The court granted perpetual injunction against FIRS from collecting VAT from hotels, restaurants and event centres in Lagos.

In Emmanuel Chukwuka Ukala v. FIRS & A.G. FEDERATION in Suit No. FHC/PH/CS/30/2020, Hon.  Justice I. O. Oshomah sitting at the Portharcourt Division of the Federal High Court, on 11th December, 2020, expressly held that the National Assembly had no power to enact the VAT Act. 

The plaintiff had asked the court to declare that there was no constitutional basis for the imposition, demand and collection of VAT by FIRS from him since the constitutional powers and competence of the National Assembly were limited to those specifically listed in Item 59, which did not include VAT or any other species of sales tax. The court, therefore, declared the VAT Act a nullity.

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