Fear grips govts as businesses move to withold August VAT over FIRS, states ‘war’

The Nigerian Organized Private Sector (OPS) has requested clarification on who should get the August Value Added Tax (VAT) collected by businesses, which is due for remittance tomorrow, September 21.

The OPS which comprise Manufacturers Association of Nigeria (MAN) Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) Nigeria Employers Consultative Association (NECA) Nigeria Association of Small-Scale Industries (NASSI) and Nigeria Association of Small and Medium Enterprises (NASME) argued that if the confusion remains, they may be obliged to go to court for clarity and keep the VAT collected in August until appropriate instruction.

Should the companies get their way, it may have a big impact on the September monthly allocation, which is expected to be given to the 36 states in two weeks.

The concerns for states is even compounded when taken into account that the Nigerian National Petroleum Corporation (NNPC) had earlier announced it will deduct a total sum of N215.32 billion from its remittance to the Federation Account and Allocation Committee (FAAC) in September 2021.

At a joint news conference in Lagos on Friday, the OPS, led by their chairman, Taiwo Adeniyi, said the consequences of the current VAT ‘war’ between the Federal Inland Revenue Service (FIRS) and some state governments, portends grave danger for the business community and the fragile economic recovery being witnessed in Nigeria.

The OPS noted that although the FIRS is relying on the VAT Act, 1993 to collect VAT throughout the country, the judgment in August 2021 delivered by a Federal High Court in Port Harcourt and the subsequent pronouncement by the Appeal Court asking the parties involved to maintain the status quo has put businesses in a state of confusion.

“Rivers State has since enacted a VAT law which mandates all VAT paying entities within Rivers State to deduct, collect and remit VAT within the state to the River State government through the River State Inland Revenue Service.

“In a similar trend, Lagos State government also enacted a VAT law for the state, and there are indications that other state governments might also enact VAT laws in their respective states.

“It is also public knowledge that the Appeal Court sitting in Abuja has made further pronouncements to the effect that the status quo be maintained. And Rivers State has appealed against this at the Supreme Court.

“In all of these, there is heightened uncertainty as to where all of these will end.

“As the umbrella bodies representing the interests of organised businesses in Nigeria, we are seriously concerned at the consequences of the on-going controversy. While organised businesses have remained law-abiding, fulfilling their tax obligations to both the federal and state government, it would be an aberration to punish businesses or make them suffer from the proverbial two elephants fighting. It is, in our opinion, that the conundrum be addressed timely as delay can fester negative effect on businesses, most especially in collection and remittance of VAT to relevant authority,” the OPS stated.

Speaking further on the issue, Adeniyi who doubles as president of NECA, said the OPS was not against payment of taxes and levies in the country, but pointed out that the ongoing situation creates an environment of uncertainty.

This, he argued, not only affects business competitiveness but also its sustainability. “We are merely collecting agents in this matter and should not suffer while offering this pro-bono service,” he contended.

He described as unfortunate, that, at a time businesses are clamouring for streamlining and reduction of tax burdens, the ongoing challenge has the potential to make businesses pay double-VAT in view of the demands of the FIRS and state governments for remittance of VAT, even as the deadline for remittance of VAT falls due on 21st of every month.

He added: “Without a clear path, this would further aggravate the pain on businesses. We, therefore, appeal that the FIRS and the states should engage in the interest of enterprise competitiveness and national development. We appeal that while the issue remains in the legal quarters, FIRS and the states should not throw organised businesses under the bus, the OPS submitted.

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