CITN studying Court judgement on VAT ruling, collection

The Chartered Institute of Taxation of Nigeria (CITN) has restricted itself to the vexed issue of the constitutionality of the Value Added Tax (VAT), while it is still studying the court judgement that invalidated the collection of VAT and personal income tax (PIT) by the Federal Inland Revenue Service (FIRS) in Rivers state.

This was owing to the fact that a federal high court in Port Harcourt issued an order restraining the FIRS from collecting VAT and PIT in the state.

A statement signed by Mr Adefisayo Awogbade, the registrar/chief executive of CITN, said that the professional body would take its position on the matter after studying the certified true copy of the judgement.

The statement cited two court cases where courts had declared some provisions of the VAT Act unconstitutional.

In Emmanuel Chukwuka Ukala v. FIRS & A.G. Federation in Suit No. FHC/PH/CS/30/2020, Hon. Justice I. O. Oshomah sitting at the Portharcourt Division of the Federal High Court, on Dec. 11, 2020, expressly held that the National Assembly had no power to enact the VAT Act.

“Similarly, in October 2019, the Federal High Court, Lagos Division, in the Registered Trustees of Hotel Owners and Managers Association of Lagos v. A. G. Federation & Others while considering the validity of the Hotel Occupancy and Restaurants Consumption Law of Lagos State upheld the powers of the Lagos State Government to charge and collect Consumption Tax from hotels, restaurants and event centres within the State.

The Court held that based on the Constitution and the Taxes and Levies (Approved List for Collection) Act, the power to impose consumption tax was a residual power within the exclusive competence of States.

To this end, it restrained the FIRS from imposing VAT on goods and services consumed in hotels, restaurants and event centres as this was already covered by the Lagos State Law.

The court proceeded to declare section”s” 1,2,4,5 and 12 of the VAT Act as being inconsistent with section 4(2),(4) (a) & (b), (7)(a) & (b) of the Constitution and consequently unconstitutional and invalid. The court granted perpetual injunction against FIRS from collecting VAT from hotels, restaurants and event centres in Lagos.

According to the statement, in the Registered Trustees of Hotel Owners and Managers Association of Lagos v. A. G. Federation, the court invalidated some of the provisions of the VAT Act. In Ukala v. FIRS, the court nullified the VAT Act. In A.G. Rivers v. F.I.R.S., it has been reported that the court has nullified the VAT Act and empowered the States to impose, demand and collect VAT within their States.

“While the Institute is in possession of the first and second cases mentioned, we are making efforts to get a certified true copy of the third and current case.

“From the foregoing decisions, it is evident that this is not the first time that the VAT Act has been declared unconstitutional.

“Therefore, for the purpose of this Press Release, the Institute is restricting itself to the vexed issue of the constitutionality of the VAT. And as soon as we receive the certified true copy of the judgement, our legal advisers will study it and advise us accordingly. When that is done in the next few weeks, the Institute will take an informed position and the public will be duly communicated,” the statement said.