The Federal High Court of Nigeria, sitting at Port Harcourt division presided by His Lordship, Hon. Justice Stephen Dalyop Pam delivered a 45- net web page judgment on the ninth August 2021 in an movement instituted by the Attorney General of Rivers State in opposition to the Federal Inland Revenue Service and the Attorney General of the Federation as a result of the 2nd defendant. In this case, the presiding Judge ignored all of the acknowledged concepts of taxation and the sooner judicial decision which had earlier laid the constitutionality of the Value Added Tax Act to leisure. His Lordship in a roundabout way amended the Constitution of the Federal Republic of Nigeria, 1999 as amended and efficiently put all of the tax authorized tips beneath the administration of the plaintiff, the Rivers State.
The plaintiff prays the Court to nullify the Value Added Tax Act, the Tertiary Education Tax Act (erroneously referred to as coaching tax by the plaintiff) Personal Income Tax, Stamp Duties Act as being unconstitutional null and void. Pages 1 to 33 of the Judgment dealt solely with the processes filed and exchanged by the occasions and the preliminary objection raised by every the primary and 2nd defendants referring to joinder or misjoinder of occasions and the problem of jurisdiction of the courtroom to entertain the making use of. The preliminary objections had been rightly resolved in favour of the plaintiff and as a result of this truth not important for this evaluation.
The judgement of the Court could possibly be summarized in two sentences. (1) The vitality of the National Assembly to make tax authorized tips is restricted to taxation of income, income and capital options solely as contained in merchandise 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 assortment) Act amongst others are null and void being tax authorized tips not notably talked about in devices 58 and 59 of the Exclusive Legislative List
(ELL) of the Constitution.
There are 5 (5) basic flaws inside the judgment which can be outlined as follows:
(1) His Lordship erroneously restricted the powers of the National Assembly to impose tax authorized tips to devices 58 and 59 of the ELL. The powers of the National Assembly to make authorized tips extends previous the devices inside the ELL. The ELL incorporates 68 devices nevertheless solely 4 (4) devices had been expressly referred to as taxes. If this judgment is to be taken critically, it, as a result of this truth, implies that each one totally different tax authorized tips (e.g firms income tax, tertiary coaching perception fund, withholding tax on firms petroleum income tax and plenty of others) which weren’t talked about in Item 58 & 59 of the ELL are null and void. Again, His Lordship did not ponder merchandise 68 of the ELL which provides that ‘ Any matter incidental or supplementary to any matter talked about elsewhere on this document.’ For occasion, the Tertiary Education Trust Fund ( erroneously referred to as ‘coaching tax by the plaintiff and His Lordship) is derived from 2% of the assessable earnings of all firms working in Nigeria, apart from the earnings of firms inside the petroleum upstream sectors. The question now could possibly be: If merchandise 59 of ELL consists of taxation of income and a pair of% of earnings of firms is put apart as “coaching tax”, then why should such regulation be declared null and void on the flimsiest function that it was not expressly talked about inside the Constitution?
(2) Another basic flaw inside the case of the plaintiff which was not seen by His Lordship was that the plaintiff did not plead any state regulation similar to the Value Added Tax Act. May be, if there have been such authorized tips, the problem of double taxation would have arisen. Even with such state regulation, His Lordship decision would not have been justified. His Lordship ought to have thought of the case of AG Lagos State v. Eko Hotels Ltd & Anor ((2018) 36 TLRN 1 the place the Supreme Court held that the Value Added Tax Act has lined the sector and the Sales Tax Law cannot be enforced as that may amount to double taxation. Although the Lagos State later enacted the Hotel and Restaurant Consumption Law and effectively inserted a 5% tax on the merchandise consumed in lodging and consuming locations in Lagos State. Even with this regulation, 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 declare all of the Value Added Tax Act null and void nevertheless solely exempted the merchandise consumed contained in the premises of lodging, restaurant and event centres in Lagos State from the value-added tax on the underside that devices consumed in lodging and consuming locations weren’t lined by VAT Act.
(3) In this present case, His Lordship moreover did not ponder the doctrine of overlaying the sector. Section 4(5) of the Constitution provides that If any Law enacted by the House of Assembly of a State is inconsistent with any regulation validly made by the National Assembly, the regulation made by the National Assembly shall prevail, and that totally different Law shall, to the extent of the inconsistency, be void. His Lordship should have thrown out the case of the Plaintiff since there was no such State Law in Rivers State in opponents with the VAT Act, Capital Gains Tax Act and Personal Income Tax Act
(3) The judgment might be self-contradictory. In one breath, His Lordship agreed that the ability of the National Assembly to make tax authorized tips is restricted to taxation of income, income and capital options solely as contained in devices 58 & 59 of the ELL and devices 7 (a) & (b) of Part II of the Second Schedule to the Constitution. In one different breadth, the courtroom made a U-turn and granted all of the prayers of the plaintiff which amongst others encompasses a declaration that Education Tax and Technology levy (which can be taxes from earnings of firm our our bodies registered beneath the Corporate and Allied Matters Act, 2020, a federal regulation, unconstitutional, null and void.
(4)Another basic flaw seen inside the judgment is the first prayer of the Plaintiff in search of a declaration that the Plaintiff is entitled to be “bestowed” with the ability to assemble the capital options tax, income, or earnings of people in Rivers State. This help ought to have been struck out too. At this stage, His Lordship ought to have distinguished between the ability to impose a tax and the ability to assemble tax. The present affiliation in our tax regulation is that the personal income tax, capital options tax, and stamp duties are federal authorized tips imposed by the federal authorities whereas the 36 states of the federation are bestowed with the ability to assemble the taxes in respect of individuals of their respective jurisdictions and Rivers state won’t be an exception to this affiliation. One then wonders the need for this help as contained inside the judgment of the courtroom.
(5) Also the courtroom did not ponder half 25 of the Federal Inland Revenue Service (Establishment ) Act 2007 which provides that the Service shall have the ability to handle all of the enactment listed inside the first schedule to the Act which includes the VAT Act, Capital Gains Tax Act, and Personal Income Tax Act.
Although, the division of taxing powers inside the 1999 Constitution would not replicate the principle of federalism. It is a design that is unfit for the growth of Nigeria. It is safe to conclude that Nigeria is a unitary system in disguise as federal. However, this mischief cannot be cured by a judicial decision nevertheless by an modification of the Constitution.
Kolawole Oyekan writes from the University of Warwick, United Kingdom. He could possibly be reached by electronic message at [email protected]