On 9th August, 2021, the Federal High Court (FHC or "the Court") sitting in Port Harcourt, Rivers State, Nigeria, delivered a Judgment in the case of Attorney General for Rivers State ("AG Rivers") v Federal Inland Revenue Service (FIRS) & Attorney General of the Federation.  The FHC held that the National Assembly lacks the constitutional powers to enact any law to collect any tax outside of stamp duties, taxation of incomes, profits and capital gains.

Specifically, the Court ruled that the Federal Government is not empowered to impose any form of sales tax including Value Added Tax (VAT). The Court further declared the Taxes and Levies (Approved List for Collection) Act (Taxes and Levies Act) null and void for being inconsistent with the 1999 Constitution.


On 24 September 2020, the Attorney General for Rivers State filed an Originating Summons before the FHC for the interpretation of certain provisions of the law. The crux of the Originating Summons was to challenge the powers of the Federal Government to administer VAT/Sales Tax as well as other taxes not specifically listed under the Exclusive Legislative List in the 1999 Constitution. The Attorney General for Rivers State also sought declaratory reliefs to, inter alia,  uphold the powers of the Rivers State Government to administer VAT and any Sales or Consumption Tax within Rivers State. The Court adopted the following set of issues for determination:

  1. Whether the Federal Republic of Nigeria and the Federal Government of Nigeria are entitled to make laws for the purpose of taxation other than for taxation of incomes, profits and capital gains.  If not, whether the FIRS is entitled to enforce and administer laws inconsistent with, or in excess of the authority of the Federal Republic of Nigeria or the Federal Government of Nigeria to make laws?
  2. Whether the legislative competence of the National Assembly to impose tax or duties on capital gains, incomes or profits of persons and on documents or transactions by way of stamp duties extends to and includes the power to levy or impose any form of Sales Tax including VAT or any other form of Levy.  If so, whether the power of collection of taxes can be exercised for the purpose of delegating the duty to any other person other than the government of a State or other authority of a State?
  3. Whether the Taxes and Levies (Approved List for Collection) Act is constitutional

The Court ruled in favour of the Rivers State Government on all the issues. On the first issue, the Court held that the Federal Government is only empowered to enact tax laws, impose and collect taxes that relate to stamp duties, taxation of incomes, profits and capital gains only as contained in Items 58 and 59 of Part I, Second Schedule, 1999 Constitution. The Court also held that these provisions must be read to exclude other species of taxes like VAT, Withholding Tax, Education Tax and Technology Tax.

On the second issue, the Court held that based on Item 7(a) & (b) of Part II, Second Schedule, 1999 Constitution, the National Assembly may empower the State Government or Authority to collect and administer the tax laws relating to capital gains tax, income tax on persons other than companies or stamp duty on documents or transactions. The Court also held that any delegation of such powers by the National Assembly to any person or entity apart from the State Government or Authority is null and void. In further resolving this issue, the Court held that the provisions of Item 7(a) & (b), Part II, Second Schedule to the 1999 Constitution does not empower the National Assembly to enact any laws to impose any Sales Tax or VAT and any other tax outside those listed in Item 7(a) & (b).

On the issue of the constitutionality of the Taxes and Levies Act, the FHC held that the Taxes and Levies Act is unconstitutional and any tax or levy provided for in the Act is automatically unconstitutional, null and void, except such tax is provided for by the 1999 Constitution or any other law validly made by a competent legislature.  In reaching this decision, the Court aligned itself with the decision of the Court of Appeal in the case of Uyo Local Government Council v Akwa Ibom State Government & Anor, where the Court of Appeal nullified the Taxes and Levies Act for being inconsistent with the provisions of the constitution.

Consequently, the Court granted all the declaratory reliefs sought by the Attorney General of Rivers State declaring the VAT Act unconstitutional and upholding the constitutional powers of the Rivers State Government to impose, collect and administer taxes relating to VAT, Sales and Consumption Tax in Rivers State. The Court also granted an Order of Perpetual Injunction restraining the FIRS from collecting or demanding any unconstitutional taxes or levies.


Based on this decision, the current position of the law is that the National Assembly lacks the power to enact any law relating to VAT or Sales Tax in Nigeria. The decision therefore renders the VAT Act unconstitutional, null and void and has a far reaching effect as it disempowers the FIRS from collecting or administering VAT or any other Sales Tax in Nigeria unless the decision is overturned on appeal or an injunction is granted in favour of the FIRS against the immediate implementation of the judgement.

While this decision has generated significant attention, it should be noted that the earlier decision of the same Federal High Court, Port Harcourt Division in Emmanuel Chukwuka Ukala v FIRS (Ukala's Case) in December 2020 had already ruled that VAT was unconstitutional and that the Federal Government/FIRS did not have the legal right to collect VAT in Rivers State. This decision followed the line of thought in the case of Registered Trustees of Hotel Owners and Managers v. Attorney General of the Federation, which held that the Lagos Hotel Occupancy and Restaurant Consumption law was valid as against the VAT Act and that the consumption tax was a residual matter under the Constitution and thus VAT could not be imposed on goods and services on which the tax had already been imposed.

It should be noted that further to this AG Rivers' Judgment, the Rivers State Government enacted and signed into law the Rivers State Value Added Tax Law, which imposes VAT at 7.5% on all supplies of taxable goods and services within Rivers State. The FIRS on the other hand has issued a public statement stating that it has appealed the Judgment and applied for a stay and thus taxpayers should continue to discharge their VAT obligations and disregard the Judgment. In view of the fact that no injunction has been granted against the implementation of the Judgment, the position of the FIRS is not supported by the law. However, given the FIRS' insistence that it will continue to collect VAT, taxpayers are now faced with two conflicting positions (i.e. the FHC and the FIRS).

Taxpayers who want to be properly guided on how to approach their VAT compliance obligations in view of the current state of the law, should seek specific guidance from their tax advisors. Given the importance of VAT to the revenue of the Federation, it is obvious that only a final decision by the Supreme Court will bring this issue to rest. However, there are strong grounds in the AG Rivers' Judgement upon which it can be concluded that VAT as currently structured and imposed in Nigeria may not be in line with the provisions of the Constitution and that more than a judicial process, there may be need for a constitutional amendment to allow the Federal Government to collect VAT across the country. In the meantime, we will continue to monitor developments and provide updates on the appeal process and the response of other States to the decision of the Federal High Court.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.