VAT Controversy Affected Tax Collection In 2021 — FIRS

The Federal Inland Revenue Service (FIRS) yesterday said that the controversy that trailed a court ruling on who collects Value Added Tax (VAT) affected its overall tax collections last year.

FIRS said even though VAT yielded N2.07 trillion to the Federal Account in the outgone year as against N1.53 trillion in 2020, it had expected a higher total tax yield if not for the VAT dispute.

The Service however said it was able to exceed its overall 2021 target of N6.04 trillion by hitting N6.405 trillion.

It also disclosed that the Federal Government granted N369 billion in waivers to support some businesses operating in selected sectors like manufacturing, agriculture, etcetera.

These were contained in FIRS 2021 performance update released in Abuja.

VAT controversy started in August 2021 when a Federal High Court(FHC) in Port Harcourt, Rivers State ruled that states and not the Federal Government had the right to collect VAT from businesses within their territories.

Rivers State Government which instituted the suit did not only enact a law empowering its revenue board to begin VAT collection, it threatened to seal companies that defaulted.

Lagos State Government also enacted its own VAT law but could not commence implementation because an Appeal Court ruled that the status quo before the FHC judgment be maintained.

Rivers State government appealed to the Supreme Court to set aside the order of the Appeal Court. Its Lagos counterpart joined as a respondent.

In the performance update, FIRS said: “A major setback faced by the service, and which negatively affected the full implementation of its reforms, efficiency and achievements, was the very strong opposition mounted against its statutory mandate by certain interests.

The controversies, the FIRS said, “created dilemmas for many taxpayers as regards the competent authority for tax payment and compliance”.

The service said even though 2021 was very challenging, “it opened a new vista of opportunities, leading to very encouraging results.”

It gave the breakdown of the N369 billion waivers as N1billion for pioneer companies; N3 billion for tax on interest on loans for Agriculture; N6 billion for COVID-19; N67 billion on interest on bond and N291 billion on interest on treasury bills.

FIRS said it collected the N6.405 trillion from the oil sector (N2.008 trillion) and non-oil (N4.396 trillion). It had targeted N6.401 trillion from the sector.

Companies Income Tax contributed N1.896 trillion; VAT, N2.07 trillion; Electronic Money Transfer Levy, N114 billion and Earmarked Taxes, N208.8 billion.

The service said it issued certificates for N147.8 billion tax credit to private investors and the Nigerian National Petroleum Corporation (NNPC) for road infrastructure under the Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme.