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Federal High Court rules that State Governments are empowered to administer VAT and other taxes not exclusively allocated to the Federal Government


The Federal High Court (FHC) in Port Harcourt recently ruled that only the Rivers State Government (RSG), and not the Federal Government (FG),is empowered to collect value-added tax (VAT) within Rivers State.

Specifically, the FHC held that the RSG  is constitutionally entitled to impose taxes within Rivers State, in the nature of consumption or sales tax, VAT, education tax and other taxes, charges, rates or levies, not specifically reserved for FG in the Exclusive Legislative List (ELL) in the Constitution of the Federal Republic of Nigeria, 1999 (as amended) (“the Constitution”). 

The FHC also held that the FG must delegate the administration and collection of any tax relating to capital gains, income, or profit and dutiable instruments ofpersons other than companies, to the State Governments (SGs).


The Attorney General (AG) of RSG had filed a suit in 2020 seeking eleven (11) reliefs to the effect that there is no constitutional basis for the Federal Inland Revenue Service (FIRS) to demand and collect VAT, withholding tax, education tax and technology levy in Rivers State or any other State of the Federal Republic of Nigeria (“the FRN”). In the suit, the RSG’s AG noted that the Constitution empowers the FG to legislate only taxes specifically mentioned in items 58 and 59 of the ELL.

The FHC granted all reliefs sort by the AG of the RSG. Consequently, FHC granted a perpetual injunction restraining the FIRS and the Attorney General of the Federal Republic of Nigeria, from collecting, demanding, threatening and intimidating residents of Rivers State to pay VAT to FIRS.

Fallout of the Ruling

We expect that the ruling will be appealed by the FIRS and the AG of the FRN at the Court of Appeal as this will significantly impact compliance, administration and potentially pose the risk of double taxation across Nigeria.

Until that happens, there are a couple of questions that are begging answers:

  • Is there merit in the ruling of FHC? While the decision of the court may seem controversial from a tax administration standpoint, if the decision is upheld by the higher courts, it would imply that VAT is not one of the taxes exclusively allocated to the FG.
  •  Should taxpayers cease to comply with the provisions of the VAT Act? Pending a contrary ruling from a court of higher jurisdiction, it appears taxpayers may no longer be obligated to comply with the provisions of the VAT Act since the legislation has been declared unconstitutional by restraining the FIRS from administering the tax. We expect a quick reaction from FIRS and the AG of the FRN, as any seeming non-compliance by taxpayers operating in Rivers State – and other states who seek to adopt the position of Rivers State – will not be the fault of such taxpayers.
  • Should State Governments enact tax laws relating to education tax, technology tax, and other taxes that FHC has devolved responsibility to Rivers State? Pending a contrary ruling from a Court of higher jurisdiction, it would appear that SGs can enact tax laws to administer the impacted taxes. If this is the case, then there is a possibility that laws enacted by each state of the FRN will create incidences of double taxation, especially for taxpayers that have operations across several states.

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