By Akinyele Oladeji
This judgment, with respect, does not accurately capture the intendment behind the ease in the efficacy, or in giving effect to the otherwise black letter law in operation. It, inevitably, will also lead to chaos in practice. The learned judge erred in the ruling perhaps due to lack of appreciation of the background facts and the complexities that compelled the states to cede their rights of collection of Value Added Tax (VAT) to the Federal Government through the instrumentality/offices of the Federal Inland Revenue Service (FIRS) ab initio. I will explain.
Even though it is incontrovertible that VAT being a consumption tax is in the residual list constitutionally and thus under the line of sight and collection right of the States, however- to make for ease of monitoring and compliance- it is not unusual for a taxing authority to appoint another as ‘an agent’ of collection. This is usually done for exigency, effectiveness, and efficacy of collection. I must be quick to underscore here that I said ‘appoint as an agent’ advisedly. This is because you cannot legally cede a constitutionally guaranteed right but you can legally appoint an agent to exercise that right on your behalf. When the VAT law was introduced in Nigeria during the military era, it was soon realised if practised (in monitoring, compliance and enforcement) stricto senso, it will be cumbersome and visit untold hardship on consumers, hence the MILADs ( military administrators) agreed to appoint FIRS as an agent of collection. For simple illustration to demonstrate the underpinning reason for this arrangement, imagine rice cleared at the Lagos Port liable to VAT, but offloaded and sold at Agbeni market in Ibadan, liable to OYSG for another VAT, then the purchaser being a Hausa trader who finally transports same to Kano to sell to final consumers in his shop in Kano ( liable to Kano State Government for VAT) as well. The level of inflation can only be imagined! Claiming back as input will be cumbersome as which state will the final consumer claim back from? The duplicity must necessarily be avoided! It is therefore exigent and expedient for the states to appoint FIRS as the agent of collection. And that’s why FIRS only keeps 4% of total collection as cost of collection and distributes the balance to the states based on agreed metrics such as population, size of IGR etc.
Lagos State ingeniously came up with ‘Hotel Occupancy and Consumption Tax’ to tax those goods and services that are consumed in Lagos and cannot reasonably be said to be susceptible to any form of movement. The 5% Tax applies to residency in hotels in Lagos, use of event centres, and consumption in eateries and hotels. The law was challenged in court in the case of the Attorney-General of the Federation v. Honorable Attorney-General of Lagos State (2013) LPELR 20974 SC vide an originating summons taken by the Federal Government as Plaintiff against Lagos State. The Supreme Court declared that it is only a State House of Assembly that can make laws on tourism, licensing and grading of hotels, restaurants, fast food outlets and other hospitability establishments in the country and it dismissed the case filed by the Attorney General of the Federation.
Successful examples of arrangements where one taxing authority appoints another as agent of collection abound in Lagos- Land Use Charge which is an aggregate a combination of Tenement rate, Ground rent, Neighbourhood Improvement Charge. Tenement rate belongs to the Local Governments but is collected by the State and distributed to the Local Governments. Remember how cumbersome it used to be when LG agents will serve you tenement rate in the morning and State officials will harass you for ground rent in the afternoon! Another example is Signage fees which is payable to LGs. It should be recalled the predicament one suffered for having any kind of logo on his/her vehicle moving from one local government to the other. Ikeja will hold or distrain you for mobile advert and once you drive into Oshodi, you are again liable and so on and so forth. Lagos State Signage & Advertisement Agency (LASAA) a statutory body, now collects and distributes amongst the local governments.
In conclusion, the learned trial Judge, to my mind, erred by recognizing the collection rights of Rivers State without putting the exigencies that led to the appointment of FIRS as agent of collection of VAT into consideration in his ruling.
Taking all the foregoing into keen consideration, I am fortified in my view that this decision stands a good prospect of been overturned on appeal. As to avert any possible disorder or temporary setback in the practice as highlighted above, I am sure that once the Federal Government files an appeal, and an application for injunction pending appeal- in effect to restrain the judgment from been given effect to pending the resolution of the appeal, it will operate as an injunction to maintain status quo antebellum.
Akinyele Oladeji B.SC, MBA, LL. B, FCTI, FCNA
MD
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