Kudos For Court Judgement On VAT

If the recent judgement of a Federal High Court sitting in Port Harcourt, Rivers State, which held that
the Rivers State Government and not the Federal Inland Revenue Services (FIRS) was the rightful authority to collect Value-Added Tax (VAT) and Personal Income Tax (PIT) in the state is anything to go by, states will soon take charge of the money-spinning VAT and PIT in Nigeria.
That was the judgement of Justice Stephen Pam in a suit filed by the Rivers State Government challenging the right of the Federal Government to demand VAT and PIT. The state had asked the court to declare that the constitutional power of the Federal Government to impose taxes and duties was limited to items listed in items 58 and 59 of Part 1 of the Second Schedule of the 1999 Constitution (as amended).
Likewise, the state government had urged the court to declare that by the provisions of items 7 and 8 of Part II (Concurrent Legislative List) of the Second Schedule of the Constitution, the power of the Federal Government to delegate the collection of taxes can only be exercised by the state government or other authority of the state and no other person.
Also, the court was asked to declare that all statutory provisions made or purportedly made in the exercise of the legislative powers of the Federal Government, containing provisions inconsistent with the powers to impose tax and duties, as prescribed by items 58 and 59 of Part I of the Second Schedule of the 1999 Constitution, or inconsistent with the power to delegate the duty of collection of taxes, as contained in items 7 and 8 of Part II of the Second Schedule of the Constitution, are unconstitutional, null and void.
The court agreed with the state government that it was the state and not FIRS that is constitutionally entitled to impose taxes enforceable or collectable in its territory like consumption or sales tax, VAT, education and other taxes or levies, other than the taxes and duties specifically reserved for the Federal Government by items 58 and 59 of Part 1 of the Second Schedule of the 1999 Constitution as amended.
The implication of the ruling is that it is now illegal for taxes like VAT and PIT to be levied by any Federal Government agency in Rivers State. In other words, the issue of VAT in the territory of Rivers State and PIT should be reserved for the government of Rivers State. This is a welcome judgement. It was least imagined that a state could successfully contest the legality of VAT collection by the federal authorities in court. 
In 2014, the Lagos State Government lost a case filed at the Supreme Court challenging the powers of the Federal Government to collect VAT on goods and services supplied in the state. The state had sued the Federal Government seeking a ruling to repeal the VAT Act on the basis that it was outside the legislative remit of the federal authorities to collect the tax.  
The court, however, ruled in favour of the preliminary objection of the Attorney General of the Federation on behalf of the Federal Government that the Supreme Court lacked original jurisdiction in the matter as it was a dispute between a federal agency and Lagos State, not between the Federal and the Lagos State Governments. This was on the basis that VAT was collected by the FIRS which is a federal agency.
As the court rightly held, there is no law that authorises the Federal Government to demand or collect VAT or PIT in the country. That indicates a lot of illegality being perpetrated by the federal authorities. This should be resisted, in particular by state governors who are often victims of their arbitrariness. Governor Nyesom Wike’s action to seek interpretation of the law in this regard is commendable. These are the things that should have to be tested in the courts to allow Nigerians to know their legal status.
After many years of illegally collecting these taxes, it is comforting to know that states, not the Federal Government, are the legitimate authority to require them. The ruling will certainly address the injustice, anomalies and disparities in the generation and distribution of VAT funds across the 36 states and the Federal Capital Territory (FCT). VAT focuses on goods and services consumed by residents in a state like alcohol.
Most Northern states generate nothing in the sphere of alcohol VAT following existing Sharia laws, which prohibit the consumption of the product in the respective states. Logically, one would think and expect that the affected Northern states would be excluded from the receipts on alcohol VAT since they generate zero revenue from the sale and consumption of liquor and beers. 
But that is not the case. By the irrational suppositions and thoughts of the Federal Government, the Northern states participate in the sharing or distribution of VAT on alcohol. We find this offensive, unreasonable, iniquitous and unjust. Why would the Northern states benefit from the alcohol VAT with zero generation? To begin with, the court’s decision will eliminate the disparities in the country’s VAT administration.
There is a need to understand whether Nigeria is a federal or unitary state. Although the nation operates a federal constitution, in practice it functions as a unitary state, a consequence of the centralist tendencies that have come to characterise the system of government. The way federalism works in this country is not consistent with the basic tenets of the system. However, the judgment of the court shows that we are a federation, not a unitary state; so, the country should be governed as such.
If the court’s decision is upheld by the Supreme Court, it means that more money will accrue to Rivers State. That will equally mean more projects and a better life for people in the state. Consequently, the state government will need to be more accountable. Governor Wike must not let go of his advocacy in favour of the good governance of the country. That depicts him as the conscience of the nation.