THE ORGANISED PRIVATE SECTOR AND VAT

The OPS should continue to remit their VAT to the FIRS until the issues are resolved

Whenever there is doubt on an issue, and an appellate court intervenes and rules that the status quo should be maintained, it is the position before the trial that stands. But since nothing is ever certain in Nigeria, manufacturers, and service providers under the Organised Private Sector of Nigeria (OPSN) have expressed concerns over how to pay the Value Added Tax (VAT) and to where the proceeds should go. “We are aware that by September 21 we will get penalised if we do not pay or remit the VAT for the month of August…The confusion in the public space is the reason we are calling on the government to come to our aid as we want to pay,” said OPSN Chairman, Taiwo Adeniyi.

We understand the concerns of the OPSN as a critical sector of the Nigerian economy. It comprises the Manufacturers Association of Nigeria (MAN), the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Nigerian Employers Consultative Association (NECA), Nigerian Association of Small-Scale Industries and the Nigerian Association of Small and Medium Enterprises.

In the difficult times that we are in, government, at all levels, should make deliberate efforts to ensure businesses are not sadled with multiple taxations. Going by the judgement of the Federal High Court sitting in Port Harcourt on 8th August this year, the Federal Inland Revenue Service (FIRS) “has no constitutional authority to enforce and administer taxes not expressly stipulated under Items 58 and 59, Part I, Second Schedule to the 1999 Constitution of the Federal Republic of Nigeria.” Following that decision, the Rivers State House of Assembly quickly enacted VAT Law No. 4 of 2021 to end the authority of the FIRS to administer, collect and enforce the VAT Act, 2007 in Rivers State. Lagos State followed by passing a similar law while the Southern states, at their meeting last week endorsed the judgement.

However, the order by the Court of Appeal effectively halts the implementation and enforcement of the laws passed by both the Rivers and Lagos State Houses of Assembly on VAT, pending the decision of the appeal. Both the Attorney-General of the Federation and Minister of Justice, Abubakar Malami and Finance Minister, Zainab Ahmed, have waded into the controversy by reaffirming that the FIRS remains the recognised revenue for VAT collection in the country. Members of the OPSN should therefore continue to file and remit their VAT payable to the FIRS pending the final resolution of the appeal by the Court of Appeal. As we stated recently, we implore the states that have passed the VAT law to await the outcome of the cases in court before enforcement to avoid confusion. Besides, the federal government should put law enforcement agencies on notice to respect the rights of the OPSN members and avoid abuse of their fundamental right.

Meanwhile, the tax authorities must come up with clever ideas to address declining revenues. Real efforts must be made to expand the tax base while keeping the rates low. Our tax regime should meet the twin requirements of efficiency and equity, while adequate sensitisation and incentives should be provided to ensure voluntary compliance. And perhaps most importantly, the tax authorities must simplify the process of payments to meet with global best practices while tax expenditure must be transparently governed. The bottom-line is that many people would gladly pay their taxes if “their money” is seen to be appropriately spent.

Ultimately, President Muhammadu Buhari and the 36 governors would have to arrive at an acceptable way forward on this VAT controversy. It is obvious that the status quo has become a problem for the peace and progress of the country.