Nigeria: The tax dispute between the federal and state governments is causing confusion to the tax-payers.

On 6 September, the Federal Inland Revenue Service (FIRS) of Nigeria has failed to obtain a stay-of-execution on the decision of the court whereby it attempted to stop the state government (Rivers State) from collecting VAT within the state. As a result the governor of River States directed state’s tax authority to begin implementing and enforcing the Rivers State value added tax (VAT) law.

Despite the Federal High Court (FHC) having issued an order restraining the FIRS from collecting VAT,  FIRS insists it will collect taxes in anticipation of obtaining a stay of execution in the coming days. The conflicting position of the federal and state governments is causing much confusion to the taxpayers who are expected to file VAT claims by 20 of September. Moreover, it threatens the political and fiscal system of Nigeria whereby taxes are collected nationwide by the FIRS and pooled centrally before being redistributed across all 36 of Nigeria’s states.

Since the court’s Judgement originally stated that FIRS is not entitled to collect VAT in any of the states of Nigeria, other states are mirroring the move of Rivers State. Lagos, the nation’s business hub, asked the FIRS to stop giving demand notices for payment of VAT in the state as it is in the process of passing a state law that would also allow it to collect VAT.

Source: Guardian Nigeria , Reuters