Broke FG, States Go To War Over Tax

By Fola James

The once blossoming relationship between the federal and state governments is now being threatened as the later move to assert their powers under the law to collect certain taxes.

Faced by the simmering revenue shortfall, the states are looking for other areas to generate funds and probably plug revenue holes, experts said, adding that the battle for the control of scarce resources is likely to set the two constitutionally recognised levels of government against each other, particularly when the legal battle is bi-partisan in nature.

The federal government on its part is not faring better either as it continues to face revenue shortfall due to the COVID 19 pandemic and dwindling crude oil revenue. As a way out, the Buhari administration has resolved to borrowing from the Central Bank of Nigeria, CBN and international development partners.

“This is not the normal political rivalry between the APC and PDP, it’s the fight for the right thing to be done. As you can see, the 36 states represented in the suit are made up of both parties. At the end of the day, the court will decide on whose side the pendulum of justice will swing, and we really hoped that states will triumph over this matter, because we need funds to provide critical infrastructure for our people,” a Commissioner of Information in one of the state told the magazine, asking that he be made anonymous  because the case is still in court.

36 states in the country, on Wednesday, struck the federal government below the belt after they filed a suit challenging the central government’s power to collect Stamp Duty, they also demanded a refund of N176 billion shortfall to the states.

The development comes amidst the ongoing contest between the two levels of government on the issue of collection of the Value Added Tax, VAT.

Thu, following the ruling by a Federal High court, Port Harcourt last month, that the collection of VAT rests squarely with the state, the Rivers and Lagos state governments have enacted laws that give them powers to collect VAT in their respective states, even as the Federal Inland Revenue Service, FIRS, the agency responsible for the collection of taxes on behalf of the federal government has already filed an appeal over the issue.

In the suit filed by the Attorney General and Minister of Justice of the 36 states against the federal government at the Supreme Court, they contend that the power to collect stamp duties lies squarely with them and not the federal government.

The states also sued the federal government for allegedly refusing to remit funds generated from stamp duties into state governments’ accounts.

In the suit in which the Attorney General of the Federation, Abubakar Malami, is joined the state want the apex court to make an order for the refund of over N176 billion collected as stamp duties on individual persons’ transactions within their respective states for the period of 2015 to 2020.

What State Governments Want

In the case filed at the apex court, dated August 24 and marked SC/CV/690/2021, the plaintiffs urged the court to determine whether or not “having regard to the mandatory provisions of Section 4(2) of the Stamp Duties Act Cap. S8 Laws of the Federation of Nigeria (LFN) the plaintiffs (all the state attorneys) are not the sole authority to administer and collect stamp duties on all transactions involving individuals/persons within their respective states?”

They further prayed the court to determine “whether having regard to the provisions of Section 4(2) of the Stamp Duties Act Cap. S8 of the Laws of the Federation of Nigeria read in conjunction with the provisions of Section 163, items 58 and 59 of the Second Schedule part I and items 7 (a) and (b) of the second Schedule part II and other provisions of the Constitution of the federal republic of Nigeria, 1999 (as amended), the defendant (Malami) could claim, retain, distribute or in any other manner deal with the monies or sums collected as stamp duties on individual persons transactions within the respective states of the plaintiffs without reference to, concurrence of, input or agreement of the plaintiffs?”

The plaintiffs also asked the court to ascertain whether or not they are “entitled to 85% of all stamp duties collected on electronic money transfer levy, on electronic receipts or electronic transfer for money deposited in deposit money banks and financial institutions, on any type of account to be accounted for and expressed to be received by the person to whom the transfer or deposit is made in the plaintiffs’ respective states.”

They also urged the court to declare that they “are the sole authorities entitled to administer and collect stamp duties on all transactions involving individuals within their respective states.”

The plaintiffs also asked the court to issue an order, compelling Mr Malami to account for and refund all monies collected by way of stamp duties on individual persons’ transactions within the respective states of the Plaintiffs from the period 2015-2020 and thereafter till the time of the judgment.

The state government are also demanding a declaration “that the defendant is not entitled to collect, administer, or keep the proceeds of any stamp duties on transactions involving individuals within the respective states of the plaintiffs or any manner interfere with the Plaintiff’s right and authority in the administering the provision of Section 4(2) of the Stamp Duties Act Cap. S8 Laws of the Federation of Nigeria.

“A declaration that the plaintiffs are entitled to all the sums of money collected by the defendant as stamp duties through whatever source or means in their respective states from 2015-2020 and thereafter till the time of the judgment of this honourable court with respect to individual persons’ transactions.

“A declaration that the plaintiffs are entitled to 85% of all stamp duties collected on electronic money transfer levy, on electronic receipts or electronic transfer for money deposited in deposit money banks and financial institutions, on any type of account to be accounted for and expressed to be received by the person to whom the transfer or deposit is made in the plaintiffs’ respective states.”

“An order of perpetual injunction restraining the defendant by himself, privies, agents or any persons by whatever name or how so ever called from appointing anyone for the purpose of collecting Stamp Duties on individual persons’ transactions within the respective states of the plaintiffs henceforth,” plaintiffs prayed the court.”

Meanwhile, the Lagos State House of Assembly, On Thursday, passed the VAT Bill which has now been sent to Governor Babajide Sanwo-Olu for assent.