Court Verdict Slashes VAT Allocation To North

A Federal High Court siting in Port Harcourt has ruled that Value Added Tax and Personal Income Tax collected in the state should go to the state purse.

Prior to the judgement, the VAT and PIT are collected by the Federal Inland Revenue Service.

The Federal Government charges 7.5 per cent as VAT on goods.

The judgement which was passed by Justice Stephen Dalyop Pam also issued an order of perpetual injunction stopping the FIRS and the Attorney-General of the Federation from collecting and demanding VAT and PIT from residents of the state according to the Nation.

In the suit, the FIRS was the first defendant, while the Attorney-General of the Federation is the second defendant.

According to the verdict, the constitutional powers and competence of the Federal Government was limited to taxation of incomes, profits and capital gains including VAT.

It also include species of sales, or levy except those specifically mentioned in items 58 and 59 of the Exclusive Legislative List.

In 2020, the National Bureau of Statistics said N59.69n was generated in VAT from Breweries, Bottling and Beverages.

VAT from breweries account for a huge per cent of the total which is shared among states of the Federation.

But the South houses the countries breweries and have the largest share of sales of alcohol, while the North have religious bias for alcohol.

Hisbah, an Islamic police in the North destroyed alcohol drinks worth over N200m in Kano in 2020.

In 2019, 196,400 bottles of alcohol drinks were also destroyed in the state.

Hisbah also destroyed 588 bottles of beer in Jigawa in 2020 and 2,061 bottles of beer in Bauchi this year.

These are few cases of the loss induced by the Sharia sect on Nigerian alcohol dealers, on a goods the government charge 7.5 per cent in VAT.

“They will be losers although their religion is against the consumption of alcohol or liquor,” said Peter Njiforte, a business analyst and a Professor of economics at the Ahmadu Bello University, Zaria.

“The concept of the federation we are talking about is actually misapplied. Federated states are actually supposed to raise money to mange the state and then give a share to the centre, not that the states will go to the centre to collect.

“For a state to exist, it means that the state has the potential to survive on its own. It is making some states to be lazy and others are a burden to other states.”

Njiforte said it is like punishing some states to pay the states with deficit.