Rivers State Governor, Nyesom Wike has been fighting to stop the Federal Inland Revenue Service from collecting Value Added Tax generated by states.
VAT is a consumption tax paid when goods are purchased and services are rendered. It is charged at a rate of 7.5 per cent.
According to Governor Nyesom Wike, Rivers generates an average of N15bn in VAT every month but gets a paltry 25% from the Federal Government as monthly allocation.
Last month, the Federal High Court sitting in Port Harcourt, in a judgment in suit number FHC/PH/CS/149/2020, held that the Rivers State Government had the powers to collect VAT within its territory.
Although the FIRS applied to the court for a stay of execution, Justice Stephen Pam rejected the application, saying granting it would negate the principle of equity.
The FIRS, in a bid to retain the collection of the tax, wrote to the National Assembly to seek the inclusion of VAT collection in the exclusive legislative list.
Speaking at a stakeholders’ meeting on Wednesday in Port Harcourt, the governor ordered companies based in the state to start paying their VAT to the state government beginning this September.
He also insisted that Rivers VAT does not belong to “Abuja people”.
Wike lamented the injustice in the country, saying Rivers State generated N15bn VAT revenue in June this year, but got N4.7bn in return, while Kano generated N2.8bn in the same month and got the same N2.8bn back.
The governor also said N46.4bn was collected from Lagos State in the same month but the Federal Government gave Lagos N9.3bn. “Sometimes, you don’t want to believe these things exist,” he added.
Wike had assented to the Rivers State Value Added Tax Law 2021 in August after it was passed by the state House of Assembly.
Here are things you should know about the 15-page document
1. Section 7 of the law specified that the Rivers State Board of Internal Revenue shall administer and implement the law including the collection of VAT from all taxable persons and companies.
2. Section 8 of the law stated that taxable persons or business entities must register with the Board within six months of the commencement of the law or earlier. Failure to do so attracts N50,000 fine for the first month and N100,000 fine for subsequent months.
3. Section 9 of the law noted that non-resident companies transacting businesses in the state are also required to pay 7.5% VAT on taxable goods and services to the Board.
4. Section 15 of the law stated that taxable persons or companies are required to render an account to the Board on or before 21st day of the succeeding month of the goods and services purchased or supplied in the previous month.
5. Section 22 of the law specified that evasion of tax attracts not more than three years imprisonment or twice the amount of tax evaded.
6. Section 35 clearly stated that the state government will get 70% of the total revenue that accrues from VAT while the local government where the transactions were performed will get 30%.
7. The law exempted VAT collection on goods and services including medical and pharmaceutical products, food items, books and educational materials, baby products, fertilizers and farming equipment, amongst others.