Lagos state has vowed to go ahead with collection of Value Added Tax (VAT) in the country’s commercial capital even after the Federal Inland Revenue Service (FIRS) insists that it remains its sole responsibility to collect the taxes across the country.
Lagos has the backing of law to collect VAT in the state following a landmark court ruling in Rivers state which paved way for state governments to begin collection of VAT and Personal Income Tax (PIT) in their respective states.
The FIRS has appealed the court ruling and advised the public to maintain a status-quo on the payment of the taxes.
Under the Court of Appeal Act, an appeal does not operate as a stay of execution, which means states have the right to act on the court ruling to collect the specified taxes.
Gbenga Omotosho, commissioner for information and strategy, however, told BusinessDay on Monday that since the FIRS’ appeal on the case to the Appeal Court does not translate to stay of execution on the judgment of the Federal High Court, Lagos will push ahead in VAT collection.
“An appeal is not stay of execution. For us in Lagos, therefore, our position is that we will be demanding and collecting VAT.
“The court has ruled and we’re following the judgment of the court,” said Omotosho.
“We believe it is good for fiscal and true federalism, we believe it is good progress that we have been clamouring for,” Omotosho added.
Muhammed Nami, executive chairman of FIRS, had in a letter dated August 24 and addressed to Moyosore Onigbanjo, the attorney general and commissioner for justice in Lagos state, that the FIRS will continue collecting VAT from businesses in the state.
This came after the Lagos state government had directed the FIRS to stop issuing demand notices for payment of VAT in the state and to render accounts, within seven days, of all sums collected as VAT in the current accounting circle in the state.
In the letter addressed to the Lagos commissioner, Nami said since the Rivers court decision has been appealed, “the law does not allow a party to a suit to carry out an action to forestall the decision of the appellate court once an appeal has been entered”.
It added that there were contrary rulings by similar courts on the same matter.
FIRS added that parties must maintain the status quo until the decision of the appeal court.
“The instant judgement of the Federal High Court, Rivers State, is in conflict with the extant judgement of the Federal High Court, Kogi State on the same subject matter i.e. the validity of VAT Act as administered by the Service,” the letter reads.
“The conflict created by the later judgement can only be resolved by the appellate court; and the right of the appellate court in this wise should not be compromised.
“In view of the foregoing, parties have to maintain the status quo ante (i.e. their positions before the instant judgement of the Federal High Court, Rivers State).
“The FIRS shall continue to collect VAT and administer the VAT Act until the final resolution of the legal dispute by the relevant appellate court.”