The Validity & Constitutionality Of Value Added Tax (VAT) ACT AS Administered By Federal Inland Revenue Service (FIRS)

By Ifeanyi Akubuo Esq

• INTRODUCTION:

It is pertinent to notify and update the knowledge of the Public, Tax practitioners & Stakeholders on the valid positions of various judicial pronouncements on the validity of VAT Act as administered by FIRS.

This review is necessitated by the Judgement delivered by Justice Stephen Pam of the Federal High Court, Port Harcourt Division, Rivers State in the case of Attorney General of Rivers State v. Federal Inland Revenue Service and the Attorney General of the Federation (Suit No: FHC/PH/CS/149/2020) where it was held that the Rivers State Government, and not the Federal Government, is empowered to collect VAT and Personal Income Tax (PIT) in the State, thereby declining the administration of VAT Act by FIRS invalid and unconstitutional.

• ANOTHER JUDGMENT OF FEDERAL HIGH COURT VALIDATING THE VAT ACT.

There are plethora of Court Judgements by the same Courts of coordinate jurisdictions, (Federal High Court), on constitutionality and validity of VAT Act as administered by the FIRS and its validity.  The following cases has upheld the validity and constitutionality of the VAT Act;

One of such case which I was privilege to be the Counsel for the FIRS is the case of Incorporated Trustees of Kogi State Hoteliers Association v. Kogi     State Board of Internal Revenue, FIRS & Another. SUIT NO: FHC/LKJ/CS/58/2018. The Court rightly held thus:

“Value Added Tax Act Cap. IV LFN, 200 was originally Value Added Tax Decree No. 102 of 1993 promulgated by the Federal Military Government and remained in effect with necessary amendments until coming into effect of the 1999 Constitution as canvassed by the 1^st and 2^nd Defendants’ Counsel. The Act is an existing law by virtue of section 315(a) of the 1999 Constitution which provides thus: ‘Subject to the provisions of the Constitution, an existing law shall have effect with such modifications as may be necessary to bring it into conformity with the provision of this Constitution and shall be deemed to be: An Act of National Assembly to the extent that it is a law with respect to any matter on which the National Assembly is empowered by this Constitution to make laws.’

The Court went further to state thus:

“Section 4 of the 1999 Constitution, the National Assembly has power to make laws for the Federal Government for collection of taxes. The Value Added Tax Act is an existing law by virtue of the Constitution. By section 7 of the Value Added Tax Act which provides thus:

• The Tax shall be administered and managed by the Federal Board of Inland Revenue (in the Act referred to as “the Board”).
• The Board may do such thing as it may deem necessary and expedient for the assessment and collection of the tax and shall account for all amounts so collected in accordance with provisions of the Act.”

Thus the body empowered to manage VAT Tax is the Federal Board Inland Revenue which in this case is the 3^rd Respondent. By section 4(5) of the CFRN 1999 (as Amended):

‘If any law enacted by the House of Assembly of a State is inconsistent with any law validly made by the National Assembly the law made by the National Assembly shall prevail and that other law shall to the extent of inconsistency be void’

I agree with learned Counsel of the 3^rd Respondent that in line with this provision since Value Added Tax is tax law of National Assembly, the inconsistent of Kogi State taxation of Consumable Goods and Services (in Hotels, Restaurant, etc.) law 2015 is void to the extent of inconsistency”

The Court concluded by stated thus:

“The conclusion is that the Value Added Tax Act Cap VI LFN 2004 having impose tax on the same goods and service impose in Kogi State Tax on consumable Goods and Services (in Hotels Restaurant etc.) Law, 2015. The Value Added Tax Prevails over the Kogi State Law as the Value Added Tax Act is deemed to have covered the field and I so hold”

• CAN THE JUDGMENT OF FEDERAL HIGH COURT OF PART-HARCOURT DIVISION IN SUIT NO: FHC/PH/CS/149/2020 (INVALIDATE THE VAT ACT) SET ASIDE THE JUDGMENT OF SAME FEDERAL HIGH COURT OF LOKOJA DIVISION IN SUIT NO: FHC/LKJ/CS/58/2018 (VALIDATE THE VAT ACT)?

It is a trite law, that a Judge of a Court cannot by its Judgment set aside or invalidate what another judgment of coordinate jurisdiction has validated. The two judgments will rather stands independent until the appellate Court decide otherwise. Honorable Justice BOLOUKUROMO MOSES UGO, J.C.A. (Delivering the Leading Judgment) in THE ECONOMIC AND FINANCIAL CRIMES COMMISSION v. MR. AYODELE FAYOSE & ANOR (2018) LPELR-44131(CA) held thus:

“First, it must be realized that the jurisdiction of the Court to set aside its judgment or orders or that of a Court of coordinate jurisdiction is, as Nnaemeka-Agu J.S.C. put it in Okoye v. Nigerian Construction & Furniture Co. Ltd (1991) 6 NWLR (PT 199) 501 at 540 paras A-B, ‘not only rare but special’. It has to be so because the right to set aside orders of Court is ordinarily the prerogative of an appellate Court, which itself operates on the well-tested reasoning that two heads (sometimes even more) are better than one when it comes to deciding the wrongness of the decision of a judge. That is why even this Court despite its superiority to the High Court and our assumed superior knowledge to the Judges of High Court, only sits in panels of at least three when hearing appeals from the one-man decisions of High Courts and other subordinate Courts. The same thing applies to our senior brothers upstairs who must also sit in a panel of at least five Justices to hear appeals from our three-man decisions. The exception to this rule, that is, the ‘rare and special jurisdiction’ of a Court to set aside the judgment and orders of a Court of coordinate jurisdiction, rather runs on the footing that where a judgment is patently a nullity, it is as if it never existed in the first place so the same judge or even a brother Judge of the same Court can make a declaration to that effect and an appeal is not necessary.”

• CONCLUSION:

Accordingly, it is evident that there are conflicting Judgements of the Federal High Courts, on the same subject matter of the constitutionality and validity of VAT ACT, as administered by the Federal Inland Revenue Service (FIRS). The latest Rivers State Judgement of Federal High Court Part Harcourt Division IN SUIT NO: FHC/PH/CS/149/2020 did not set aside or nullify the earlier Judgement of the Federal High Court, Kogi Judicial Division IN SUIT NO: FHC/LKJ/CS/58/2018. In my view, this conflict of judgements can only be resolved on Appeal by the Court of Appeal decision on any or both of the judgment. Once the FIRS filed a Notice of Appeal and Stay of Execution on the Judgement and granted by Court. Both parties in the suit will maintain status quo. So it will be advisable for tax payer who are subject to VAT Act to continue paying or collecting VAT until this matter is finally decided upon by the apex Court.

Written By Ifeanyi Akubuo Esq. (LL.B, B.L, MPA & ACTI) E-mail: akubuoifeayi@yahoo.com, Phone: 08033154535