The VAT controversy between the Federal Inland Revenue Service (FIRS) and Rivers State, which is increasingly escalating to involve other states, keeps introducing new episodes as Governors make decisions on which side of the matter they stand.
Ebonyi State Governor David Umahi has charted a path away from the perceived desire of Southern governors to support Rivers State Governor, Nyesom Wike’s struggle to stop the FIRS from collecting VAT from businesses under states’ jurisdiction. Umahi has said he is not in support of the legal tussle which has been backed by Lagos State, and Ogun State, reportedly working on a bill to give VAT collection by the state government, a legal backing.
“Ebonyi state is not in support of any state collecting VAT. We are in support that FIRS should continue to collect tax and share,” Mr Umahi was quoted as saying at a dinner in honour of a former Chief of Army Staff Tukur Buratai.
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Following a Federal High Court ruling last month, which declared the collection of Value Added Tax in states by the federal government illegal, some states in southern Nigeria have been trying to use the opportunity to break away from the tax marriage with Abuja, which has been described as ‘unjust.’
The Rivers and Lagos state governments were swift to enact a law that will empower their states to take charge of VAT collection, and other states, including Akwa Ibom are following their steps.
However, breaking ranks with his southern counterparts, Umahi, who has been a vocal supporter of the federal government’s initiatives, said he doesn’t support the idea.
The outlet reported the governor strongly opposing the move in his address during an event held at the Governor’s Lodge, Centenary City, Abakaliki. He was quoted as saying that “evil will continue to thrive if good people keep quiet.”
“We must make Ebonyi state very exceptional by rising to the challenges. When we shout true federalism, I say, I agree. But it should be administrative restructuring,” he said.
“People are taking special interest in Ebonyi state and her governor, positively and negatively. But it is very important to be in the news than for you to say there are 36 states. You will name 35 and say, ‘what is the other state?’ We have aborted it. We are now a state to reckon with, and we have no apologies.”
Umahi’s decision to stick with the federal government is believed to emanate from Ebonyi State’s total dependence on federal allocation. The southeastern state’s 2020 internal generated revenue (IGR) of about N13 billion is among the poorest in Nigeria, and it’s the only southern state ranked among top-10 poorest states in the country.
While the Federal High Court’s VAT judgment has been hailed as a bold step to fiscal federalism, many states will not survive if it’s nationally implemented. Against this backdrop, many states, especially in the north, are rallying around the FIRS, while others in the south, who have enough IGR numbers to survive without federal allocation, are standing firm in their opposition to the tax agency.
For instance, Lagos and Rivers states have both ignored the ruling of the Appeal Court, which ordered all parties in the VAT case to maintain the status quo. While the Lagos State Government proceeds with all moves to collect VAT, the Rivers State Government has taken the FIRS to the Supreme Court, challenging the appellate court order.
Rivers State wants the Supreme Court to order that the substantive appeal by FIRS be heard and determined by a fresh panel of the Court of Appeal.
Rivers is also requesting the apex court to set aside the ruling made by the appellate court, which ordered the state to stop VAT collection pending the determination of an appeal filed by the FIRS.