Federal government looks to resolve Vat spat by reaching out-of-court settlement with governors

NIGERIA'S finance minister Zainab Ahmed has announced plans to enter into an out-of-court settlement with Nigeria's 36 states over the vexed issue of value added tax (Vat) that is currently turning into a fierce legal battle.

In a recent landmark judgment, a federal high court in Rivers State, ruled that it was unconstitutional for the Federal Inland Revenue Service (Firs) to collect Vat. As a result, the Rivers and Lagos State governments began collecting Vat locally and other states across the federation initiated plans to follow suit.

Afraid that this will impact federal government finances and also hurt several non-productive states, Mrs Ahmed said there is now a need to reach an out-of-court settlement. She added that the ongoing litigation cannot resolve the disagreement, hence the need for a political solution between the centre and the states.

Rivers and Lagos States have both signed separate laws that empower them to collect Vat but on September 10, a three-member panel of the Court of Appeal headed by Justice Haruna Tsammani, issued orders that all parties should maintain status quo. Rivers State government is currently challenging the Court of Appeal ruling at the Supreme Court

At a recent meeting of the Southern Governors Forum in Enugu, the 17 governors expressed support for the collection of Vat by state governments. To get round the matter, Firs is reportedly seeking a constitutional amendment that will list Vat in the exclusive legislative list.

However, Mrs Ahmed said the court will not bring a solution, as rather, parties sitting around the table will resolve the issue. Despite the raging controversy and litigation, Nigeria's federal government is targeting N2.2trn from Vat next year to help fund the 2022 budget.

Mrs Ahmed said: “I have to do this carefully because they are issues in court and I am not supposed to be talking about issues in court. However, I do hope that this problem can be solved by sitting on the table, not on the pages of newspapers, not disagreements in court because it is possible to solve it on the table.

“Yes, there will be a positive political solution. We are working towards an out-of-court solution.”