By Success Gilbert, Esq, MCIArb
INTRODUCTION
The Federal High Court sitting in Port Harcourt on Monday August 9, 2021, delivered a judgement in suit No: PHC/PH/CS/149/2020,filed by the Attorney General of Rivers State against the Federal Inland Revenue Service (FIRS) and Attorney General of the Federation, challenging the power of the Federal Government of Nigeria to impose and collect taxes outside the scope of items listed in 58 and 59 of Part 1 of the Second schedule of the constitution of the Federal Republic of Nigeria 1999 as (amended).
The court presided over by His Lordship, Hon. Justice Stephen Dalyop Pam, resolved in favour of the plaintiff and against the defendants that only the Rivers State Government and not the Federal Government of Nigeria is constitutionally entitled to impose Value Added Tax (VAT), enforceable or collectable in the territory of Rivers State.
Consequent upon this judgment, the Governor of Rivers State, His Excellency, Nyesom Ezenwo Wike, on Thursday August 19, 2021, signed the Rivers State Value Added Tax Bill into Law, following its passage by the Rivers State House of Assembly. This article briefly highlights the key provisions in the Rivers State Value Added Tax Law No.4 of 2021.
HIGHLIGHTS OF THE VAT LAWAdministration of Tax: The law provides that the Rivers State Board of Internal Revenue Service should administer and implement this law. Section 7(a).
Taxable Goods and Services: The tax shall be imposed and charged on the supply of taxable goods and services. Section 2
Goods and Services Exempt: The list of exempt items in the schedule are as follows:
All medical and pharmaceutical products
Basic food items
Books and educational materials
Baby products
Fertilizers, locally produced agricultural and veterinary medicine, farming machinery and farming transportation equipment.
All exports
Plant, machinery and goods imported for use of the company are for export, otherwise tax shall accrue proportionately on the profits of the company.
Plant, machinery and equipment purchased for the utilization of gas in down-stream petroleum operations
Tractors, ploughs and agricultural equipment and implements purchased for agricultural purposes.
Medical services
Services rendered by the Community Banks, Micro Finance Banks and Mortgage Institutions.
Plays and performance conducted by educational institutions as part of learning.
All exported services. Section 3.
Tax Rate: The rate of tax shall be computed at 5%. Section 4.
Registration: For the purpose of tax, Section 8(1), requires all taxable persons to register with the Rivers State Board of Internal Revenue Service, within 6 months of the commencement of this law or within 6 months of commencement of the business, whichever is earlier.
Contractor: A contractor transacting business with a government ministry, statutory body or any other agency of the State or Local Government shall produce evidence of registration with the Rivers State Board of Internal Revenue Service as a condition for obtaining a contract. Section 8(2).
Registration by Non-resident Companies: A non-resident company that carries on business in the state are to register with the Rivers State Board of Internal Revenue Service, using the address of the person with whom it has a subsisting contract. Section 9
Failure to Register: A taxable person who fails to register or refuses to register with the Rivers State Board of Internal Revenue Service within the specified time commits an offence. Section 8(3) (a) & (b) and Section 27 (1)(a) & (b) and (2).
Remittance and Returns: Monthly remittance and returns is due on or before the 21st day of the succeeding month in a manner specified by the Rivers State Board of Internal Revenue Service. Section 15(1).
Importer of Taxable Goods: An importer of taxable goods shall pay tax on goods to the Rivers State Board of Internal Revenue Services before clearing the goods. Section 16 (2).
Effects of Non-Remittance of Tax: Where a taxable person does not remit the tax within the time specified, a sum equal to 5% per annum, plus interest at the commercial rate, of the amount remittable shall be added to the tax. Section 18
Recovery of Tax: A taxable person aggrieved by an assessment may file an objection to the Rivers State Board of Internal Revenue Service, and they shall determine the objection filled within 30 days. Section 20(1) & (2).
Appeal against the Decision of Board: Where a taxable person is dissatisfied with the decision of the Rivers State Board of Internal Revenue Service, he shall appeal to the Tax Appeal Commission, and any further appeal on the decision of the Tax Appeal Commission shall be made to the Rivers State High Court. Section 20 (3)- (5)
Furnishing of False Document or Statement: Any person who produces, furnishes a false document or statement commits an offence and is liable on conviction to a fine of twice the amount under declared. Section 21(a)&(b).
Evasion of tax: A person who participates in or takes steps to evade tax for himself or any other person commits an offence and liable on conviction to twice the amount of the tax evaded or to imprisonment for a term not exceeding 3 years. Section 22
Failure to Notify Change of Address: A person who fails to notify the Rivers State Board of Internal Revenue Service in writing of any change of address within one month of the change, is liable to pay a penalty of N5,000. Section 23.
Offences by Corporate Bodies: Where an offence is committed by a corporate body or firm, every director, manager, secretary, partner or officer of the firm; commits that offence and is liable as if he had himself committed that offence, unless he proves that the act or omission constituting the offence took place without his knowledge. Section 31 (1) (a) – (d).
Aiding and abetting the commission of an offence: An officer of the Rivers state Board of internal Revenue or any other person who aids or abets the commission of any offence under this law, commits an offence. Section 32.
Powers of the Governor to vary Schedule: The Governor may subject to the approval of the Rivers State House of Assembly amend the rate of tax chargeable and list set out in the Schedule. Section 33 (a) & (b)
Distribution of revenue: The revenue accruing shall be distributed, 70% to the State and 30% to the Local Government. Section 35 (a) & (b).
CONCLUSION
The main objective of taxation is to generate revenue for a state. There is no doubt therefore, that the enforcement and full implementation of this law will further boost the internally generated revenue of Rivers state to meet her ever-growing financial obligations and also fund other critical programs.
