The Federal High Court of Nigeria, sitting at Port Harcourt department administered by His Lordship, Hon. Justice Stephen Dalyop Pam provided a 45- page judgment on the 9th August 2021 in an action set up by the Attorney General of Rivers State versus the Federal Inland Revenue Service and the Attorney General of the Federation as the 2nd accused. In this case, the administering Judge neglected all the recognized concepts of tax and the previous judicial choice which had actually previously laid the constitutionality of the Value Added Tax Act to rest. His Lordship indirectly modified the Constitution of the Federal Republic of Nigeria, 1999 as changed and efficiently put all the tax laws under the control of the complainant, the Rivers State.
The complainant hopes the Court to nullify the Value Added Tax Act, the Tertiary Education Tax Act (mistakenly described as education tax by the complainant) Personal Income Tax, Stamp Duties Act as being unconstitutional null and space. Pages 1 to 33 of the Judgment dealt just with the procedures submitted and exchanged by the celebrations and the initial objection raised by both the 1st and 2nd offenders associating with joinder or misjoinder of celebrations and the problem of jurisdiction of the court to captivate the application. The initial objections were appropriately dealt with in favour of the complainant and for that reason not needed for this evaluation.
The judgement of the Court can be summed up in 2 sentences. (1) The power of the National Assembly to make tax laws is restricted to tax of revenue, earnings and capital gains just as included in product 7 (a) & (b) of Part II of the Second Schedule to the Constitution and (2) the Federal Inland Revenue Service (Establishment) Act, Personal Income Tax Act, Value Added Tax Act, Taxes and Levies (Approved List for collection) Act to name a few are null and space being tax laws not particularly discussed in products 58 and 59 of the Exclusive Legislative List
( ELL) of the Constitution.
There are 5 (5) basic defects in the judgment which are detailed as follows:
( 1) His Lordship mistakenly restricted the powers of the National Assembly to enforce tax laws to products 58 and 59 of the ELL. The powers of the National Assembly to make laws extends beyond the products in the ELL. The ELL consists of 68 products however just 4 (4) products were specifically described as taxes. If this judgment is to be taken seriously, it, for that reason, suggests that all other tax laws (e.g business earnings tax, tertiary education trust fund, keeping tax on business petroleum earnings tax and so on) which were not pointed out in Item 58 & 59 of the ELL are null and space. Once again, His Lordship did rule out product 68 of the ELL which supplies that ‘ Any matter incidental or supplemental to any matter pointed out in other places in this list.’ For example, the Tertiary Education Trust Fund (mistakenly described as ‘education tax by the complainant and His Lordship) is originated from 2%of the assessable revenues of all business running in Nigeria, other than the revenues of business in the petroleum upstream sectors. The concern now is: If product 59 of ELL consists of tax of revenue and 2%of revenues of business is reserved as “education tax”, then why should such law be stated null and space on the flimsiest factor that it was not specifically pointed out in the Constitution?
( 2) Another essential defect when it comes to the complainant which was not observed by His Lordship was that the complainant did not plead any state law comparable to the Value Added Tax Act. Might be, if there were such laws, the problem of double tax would have emerged. Even with such state law, His Lordship choice would not have actually been warranted. His Lordship should have actually thought about the case of AG Lagos State v. Eko Hotels Ltd & Anor ((2018) 36 TLRN 1 where the Supreme Court held that the Value Added Tax Act has actually covered the field and the Sales Tax Law can not be implemented as that will total up to double tax. The Lagos State later on enacted the Hotel and Restaurant Consumption Law and wisely placed a 5%tax on the items consumed in hotels and dining establishments in Lagos State. Even with this law, the Federal High Court in The Registered Trustees of Hotel Owners and Managers Association of Lagos v. Attorney-General of Lagos State & Federal Inland Revenue Service (Suit No: FHC/L/CS/360/2018) did not state the whole Value Added Tax Act null and space however just excused the products taken in within the properties of hotels, dining establishment and occasion centres in Lagos State from the value-added tax on the ground that products consumed in hotels and dining establishments were not covered by VAT Act.
( 3) In this present case, His Lordship likewise did rule out the teaching of covering the field. Area 4( 5) of the Constitution supplies that If any Law enacted by the House of Assembly of a State is irregular with any law validly made by the National Assembly, the law made by the National Assembly will dominate, which other Law shall, to the degree of the disparity, be space. His Lordship must have thrown away the case of the Plaintiff because there was no such State Law in Rivers State in competitors with the VAT Act, Capital Gains Tax Act and Personal Income Tax Act
( 3) The judgment is likewise self-contradictory. In one breath, His Lordship concurred that the power of the National Assembly to make tax laws is restricted to tax of earnings, earnings and capital gains just as consisted of in products 58 & 59 of the ELL and products 7 (a) & (b) of Part II of the Second Schedule to the Constitution. In another breadth, the court made a U-turn and approved all the prayers of the complainant which to name a few consists of a statement that Education Tax and Technology levy (which are taxes from earnings of business bodies signed up under the Corporate and Allied Matters Act, 2020, a federal law, unconstitutional, null and space.
( 4 )Another basic defect discovered in the judgment is the very first prayer of the Plaintiff looking for a statement that the Plaintiff is entitled to be “bestowed” with the power to gather the capital gains tax, earnings, or revenues of individuals in Rivers State. This relief should have actually been struck out too. At this phase, His Lordship should have actually compared the power to enforce a tax and the power to gather tax. Today plan in our tax law is that the individual earnings tax, capital gains tax, and stamp tasks are federal laws enforced by the federal government while the 36 states of the federation are bestowed with the power to gather the taxes in regard of people in their particular jurisdictions and Rivers state is not an exception to this plan. One then questions the requirement for this relief as included in the judgment of the court.
( 5) Also the court did rule out area 25 of the Federal Inland Revenue Service (Establishment) Act 2007 which supplies that the Service will have the power to administer all the enactment noted in the very first schedule to the Act that includes the VAT Act, Capital Gains Tax Act, and Personal Income Tax Act.
Although, the department of taxing powers in the 1999 Constitution does not show the concept of federalism. It is a style that is unsuited for the development of Nigeria. It is safe to conclude that Nigeria is a unitary system in camouflage as federal. This mischief can not be treated by a judicial choice however by a change of the Constitution.
Kolawole Oyekan composes from the University of Warwick, United Kingdom. He can be reached through e-mail at [email protected]