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THE FUTURE OF TAX LEGISLATION IN NIGERIA: A REVIEW OF THE COURT OF APPEAL DECISION IN UYO LOCAL GOVERNMENT V. AKWA IBOM STATE GOVERNMENT & ANOR, NULLIFYING THE TAXES AND LEVIES APPROVED LIST FOR COLLECTION ACT

By Francis Igho Erhiakporeh1

Introduction

On May 22, 2020, the Calabar Division of the Court of Appeal delivered what, arguably, is the most far-reaching decision relating to tax legislation in Nigeria in recent times. By its decision in the case of Uyo Local Government v. Akwa Ibom State Government & Anor2, the Court of Appeal nullified the Taxes and Levies Approved List for Collection Act, Cap T2, LFN, 2004 (“The Taxes and Levies Act”), for being inconsistent with the provision of the Constitution of the Federal Republic of Nigeria, 1999 as amended (“the Constitution”). 

This decision of the Court of Appeal came days after the Federal High Court sitting in Lagos in the case of the Registered Trustees of Hotel Owners and Managers Association of Lagos (“HOMAL”) v. Attorney-General of the Federation & Anor.3, declared the Taxes and Levies (Approved List for Collection) Act (Amendment) Order, 2015 (“ the Amendment Order”) null and void, on the ground that the powers of the Minister of Finance under the Taxes and Levies Act to amend the Schedule to the Act amounts to a usurpation of the powers of the National Assembly (“NASS’) to make laws and is therefore unconstitutional.

Prior to the decision of the Court of Appeal4, the Taxes and Levies Act was somewhat the litmus test for determining the validity of tax laws enacted by both the NASS and States’ House of Assembly (“House of Assembly”).5    

This article seeks to appraise the said decision of the Court of Appeal6 whilst postulating other reasons why the decision should be affirmed by the Apex Court, if there is an appeal. The article will conclude with a forecast on the future of tax legislation in Nigeria, if the Apex Court affirms the decision under review.

The Decision in Uyo Local Government v. Akwa Ibom State Government & Anor.

By an amended originating summons filed at the High Court of Uyo on October 12, 2015, the Claimant ( now Appellant) sought the determination of the following questions to wit:  (i) Whether by the provisions of the Constitution of the Federal Republic of Nigeria, 1999 (as amended), the Taxes and Levies (Approved List for Collection) Act, 2004, the Road Traffic Law Cap 115 Laws of Akwa Ibom State, Local Government (Administration) Law 2007 (as amended), the Defendants ( now Respondents) or any of their agents has the legal right to regulate, charge and collect motor park fees/levies from commercial vehicles in Akwa Ibom State and for their sole benefit? (ii) Whether by the provisions of the Constitution of the Federal Republic of Nigeria 1999 (as amended), the Taxes and Levies (Approved List for Collection) Act, 2014, the Road Traffic Law Cap 115 Laws of Akwa Ibom State and the Akwa Ibom State Local Government (Administration) Law, 2007 (as amended), the Defendants and/or any of their agents has the legal right to control and or charge daily park fees/levies from commercial tricycles and other commercial vehicles other than as regulated in the Road Traffic Law Cap 115 Vol. 5 of Akwa Ibom State?

The Respondent on the other hand contended inter alia that the Taxies and Levies Act is unconstitutional.  At the conclusion of the hearing, the trial Judge dismissed the Appellant’s claims and nullified the Taxes and Levies Act for being unconstitutional. Dissatisfied, the Appellant appealed to the Court of Appeal and formulated 8 issues. Particularly, by its Issue 3, the Appellant sought the verdict of the Court of Appeal on whether the entire provisions of the Taxes and Levies (Approved List for Collection) Act 2004, were ultra vires the Constitution and therefore null and void by reason of the ouster clause at the beginning of the said Taxes and Levies Act.

In dismissing the Appeal in its entirety and affirming the decision of the lower Court, the Court of Appeal per Muhammed Lawal Shuaibu ,J.C.A @ 31-36, Paras. D-B, held resolving the Appellant’s Issue 3:

“The gravamen of the appellant’s complaint on issues 3 and 5 are that the trial Court lacked jurisdiction to have considered the issue relating to the constitutionality of the Taxes and Levies (Approved List for Collection) Act for failure to specifically raise the objection in their pleadings (counter affidavit). The appellant also contended that the entire provision of the Taxes and Levies (Approved List for Collection) Act is not null and void by reason of the ouster clause at the beginning of the Act. I need to stress that the appellant had approached the trial Court by means of originating summons for the interpretation of certain sections of the Taxes and Levies (Approved List for Collection) Act wherein issue on it was joined by the parties. In particular, the respondents’ position was that the commencement clause to wit – “Notwithstanding anything contained in the Constitution of the Federal Republic of Nigeria, 1979” undermines the supremacy of the Constitution. That being the case, the respondents have submitted and I entirely agree with the said submission that they do not require any filing of an objection in a formal way to raise such an issue. Turning back to the issue of the constitutionality of the said Taxes and Levies (Approved List for Collection) Act Cap. T2 of 2004, Section 1(1) of the law provides as follows:- “(1) Notwithstanding anything contained in the Constitution of the Federal Republic of Nigeria, 1979, as amended or in any other enactment or law, the Federal Government, State Government and Local Government shall be responsible for collecting taxes and levies listed in Part I, Part II and Part III of the Schedule to this Act, respectively.” When the term “Notwithstanding” is used in a section of a statute, it is meant to exclude an impinging or impending effect of any other provision of the statute or other subordinate legislation so that the said section may fulfil itself. The Supreme Court in the case of NDIC vs Okem Enterprises Ltd also reported in (2004) 4 SC (Prt 11) 77 at 111 interpreted Section 251 (1) of the 1999 Constitution which begins with the same phrase “Notwithstanding anything contained in this Constitution” and held that the use of the word “Notwithstanding” means that no provision of that Constitution shall be capable of undermining the said Section. In Fescum & Co Ltd Vs F.A.A.N (2015) 14 NWLR (Pt 1480) 491 at 506-507 the apex Court also held that the opening phrase “Notwithstanding anything in any other enactment” in Section 20 of the FAAN Act is a phrase of exclusion which accords the said statutory provision pre-eminence and having precedence over and above other provisions of any other enactments. ?The appellant in this case is not contesting the overriding effect of the phrase “Notwithstanding” but argued that it is only the ouster clause that is a nullity by reason of the provisions of Section 1(3) of the Constitution of the Federal Republic of Nigeria, 1999 (as amended). The supremacy of the Constitution is never in doubt and Section 1(3) above is to the effect that if any other law is inconsistent with the provisions of the Constitution, the Constitution shall prevail and that other law shall to the extent of its inconsistency be void. I am also of the view that having commenced its provisions with a clause that undermines the supremacy of the Constitution, there is nothing that can operate to save any part of that law. Thus, the virus in the introductory clause of the Act has infested the entire Act and thereby rendering it unconstitutional. I have considered the decision of this Court in Eti-osa Local Government Vs Jegede (supra) being relied by the Learned Counsel for the appellant. The crux of the matter, in that case, is whether the appellant has the authority to impose corporate outfit Bye-laws outside the provisions of Part III of the Taxes and Levies (Approved List for Collection) Decree No. 21 of 1998 and without reference to the Joint Tax Board provided for in Section 1(2) of Decree No. 21 of 1998. In affirming the ruling of the trial Court, this Court per Dongban – Mensen, JCA (as he then was) agreed that the powers of the Local Government to make Bye-laws are subject to the enabling law which gives the Local government power to collect taxes. In other words, the Local Government has no inherent powers to legislate nor create and impose taxes outside the scope of Decree No. 21 of 1998 nor the 4th Schedule of the 1999 Constitution. That being the case, this Court held that there is nothing unconstitutional with the requirement of the Local Government, the third tier of Government to root its taxes through the Joint Tax Board. The issue in contention here is not that of rooting the taxes of Uyo Local Government through the Joint Tax Board, but whether in view of the supremacy of the Constitution, the provision of Taxes and Levies (Approved List for Collection) Act which commenced with the phrase “Notwithstanding” anything contained in the Constitution is void by reason of Section 1(3) of the 1999 Constitution. I dare say that the facts and circumstances of the two cases are not mutually the same. Had the issue of hierarchical positions of the Taxes and Levies (Approved List for Collection) and the 1999 Constitution been canvassed in the case of Eti-Osa Local Government Vs Jegede (Supra), this Court would have arrived at the conclusion that in so far as the provisions of the Constitution are made subordinate to that of the Act, such provisions of the Act are to the extent of its inconsistency be void.”

From the reasoning of the Court reproduced above, it is evident that the Court nullified the Taxies and Levies Act on the ground that Section 1(1) of the Act is ultra vires the Constitution For ease of reference, the provision of Section 1(1) of the Taxies and Levies Act and Section 1(1) & (3) of the Constitution is reproduced below:

Section 1(1) of Taxies & Levies Act

Notwithstanding anything contained in the Constitution of the Federal Republic of Nigeria, 1979, (now 1999) as amended, or in any other enactment or law, the Federal Government and local Government shall be responsible for collecting the taxes and levies listed in Part I, Part Ii and Part II of the Schedule to this Act, respectively.7

Section 1(1) & (3) of the Constitution

  1. This Constitution is supreme and its provisions shall have binding force on all authorities and persons throughout the Federal Republic of Nigeria.
  2. If any law is inconsistent with the provisions of this Constitution, this Constitution shall prevail, and that other law shall to the extent of the inconsistency be void.

Juxtaposing the said Section 1 (1) of the Taxies and Levies Act with Section 1 (1) & (3) of the Constitution, it is difficult if not impossible, to arrive at a conclusion different from that reached by the Court of Appeal.

Why the Decision should be upheld by the Supreme Court

Other than the reasons adduced by the Court of Appeal, it is argued that the decision ought to be affirmed by the Supreme Court on the following grounds.

  1. The Taxes and Levies Act did not pass the test of Section 315 of the Constitution and cannot continue to be relevant as an existing law.

The Taxies and Levies Act (then Decree No. 21 of 1998) was promulgated in 1998 by the then Federal Military Government in response to the complaints of “multiple taxations” by taxpayers, especially businesses. The complaints ranged from the numbers, types, and rates of taxes and levies imposed by states and local government councils, to the manner of collection of these taxes. At the material time, the aim of the Act was to restrain the perceived excesses of state governments and local government councils in the exercise of their taxing powers. The Taxies and Levies Act then specifically allocated the power to collect specified taxes among the federal government, the state governments and the local government councils; and, in some cases, went further to fix the amount of tax to be collected.8

Upon the coming into effect of 1999 Constitution, the Act was deemed to have survived as an existing law by virtue of Section 315 of the Constitution and became the Taxes and Levies (Approved List for Collection) Act without compliance with the provisions of the said section which prescribes the necessary “rituals” and conditions for the continued existence of such law an existing law.

For ease of reference, the relevant subsection of Section 315 of the Constitution is reproduced below:

Section 315

(1)- Subject to the provisions of this Constitution, an existing law shall have effect with such modifications as may be necessary to bring it in conformity with the provisions of the Constitution and shall be deemed to be-

  • an Act of the National Assembly to the extent that it is a law with respect to any matter on which the National Assembly is empowered by this Constitution to make laws; and
  • a Law made by a House of Assembly to the extent that it is a law with respect to any matter on which a House of Assembly is empowered by this Constitution to make laws.

(2)- The appropriate authority may at any time by order make such modifications in the text of any existing law as the appropriate authority considers necessary or expedient to bring that law in conformity with the provisions of this Constitution.

(3)- Nothing in this Constitution shall be considered as affecting the power of a court of law or any tribunal established by law to declare invalid and provision of an existing law on the ground of inconsistency with the provision of any other law that is to say-

(d) any provision of the Constitution.

(4)- In this section, the following expressions have the meaning assigned to them, respectively-

(b) ‘existing law” means any law and includes any rule of law or any enactment or instrument whatsoever which is in force immediately before the date when this section comes into force or which having been passed or made before that date come into force after that date; and

(c) “modification” includes addition, omission or repeal.

From the provision of the Constitution reproduced above, it is clear that the continuous existence of existing law is dependent on whether it qualifies as an Act of the NASS or a Law of the House of Assembly. However, the Taxes and Levies Act does not qualify either as an Act of the NASS or a Law of the House of Assembly because neither have the sole power to legislate on all heads of tax contained in the Act. The Constitution does not contemplate a hybrid legislative power wherein a law can be enacted by both the NASS and the House of Assembly. To put things in perspective, the following are true of the Taxes and Levies Act:

  1. The Taxes and Levies Act is an existing Law having been promulgated and in force prior to the effective date of the 1999 constitution;
  • The Taxes and Levies Act can neither be deemed as an Act of the NASS nor a Law of a House of Assembly. This is because neither the NASS nor the State House of Assembly has the power to legislate on sundry taxies (all forms of taxies) which is the subject matter of the taxies and Levies Act, since the power of both Houses to legislate on tax matters are prescribed in the Constitution. In effect, the subject, objective and entire provisions of the Taxies and Levies Act as it were, cannot be conveniently situated under the Exclusive Legislative List or Concurrent Legislative List.9
  • The appropriate authority has failed to modify the Taxes and Levies Act for the purpose of bringing same in conformity with the Constitution.

Consequently, the Taxes and Levies Act ought not to be accorded the force of law in view of the clear and unambiguous provision of the Constitution.

  • The 1999 Constitution has covered the Field

Assuming but without conceding that the Taxes and Levies Act indeed passed the test of Section 315 of the Constitution and can therefore continue to have the force of law as existing law, a careful perusal of the entire provisions of the Taxes and Levies Act will reveal that the powers sought to be allocated to the different levels of government therein have been adequately addressed by the Constitution. 

In Attorney-General Lagos State v. Eko Hotels Limited & Anor10, the circumstances in which the doctrine of covering the field might arise were explained by the Apex Court thus: “The doctrine of covering the field can arise in two distinct situations. First, wherein the purported exercise of the legislative powers of the National Assembly or a State House of Assembly, a law is enacted in which the Constitution has already made provisions covering the subject matter of the Federal Act or the State law. Second, where a State House of Assembly, by the purported exercise of its legislative powers, enacted a law which an Act of the National Assembly, has already made provisions covering the subject matter of the State law. In both situations, the doctrine of covering the field will apply because of the “Federal might” which relevantly are the Constitution and the Act”.11

In the instant case, the subject matter of the Taxies and Levies Act and indeed the heads of tax prescribed in Part I & II therein12 as collectable by the Federal and State Government, have been adequately addressed by Section 4 of the Constitution and Part I & II of the Second Schedule to the 1999 Constitution. Also, the heads of tax prescribed in Part III in the Schedule to the Taxes and Levies Act13 have all been addressed by Section 7 of the Constitution, Items 9 & 10 of the Concurrent Legislative List and the Fourth Schedule to the Constitution. Consequently, the NASS, as well as the House of Assembly, can enact laws subject to the provisions of the Constitution, imposing taxies and/or for the collection of taxies without recourse to the Taxes and Levies Act.

The implication of the foregoing is that, since the Constitution has made copious provisions addressing the subject matter of the Taxes and Levies Act, the doctrine of covering the field will ordinarily operate to render the Constitution predominant, being the paramount legislation, while the Taxes and Levies Act, being the subordinate legislation, remains inoperative so long as the Constitution remains operative. However, in view of its palpable inconsistencies with the provisions of the Constitution, the Taxes and Levies Act ought to be declared void.14

Conclusion

Extrapolating from the foregoing, it would appear that the Constitution has finally caught up with the Taxes and Levies Act. Indeed, it has been suggested and I agree, that the Taxes and Levies Act should not have survived to date, but should have been (i) actively abrogated as part of the undertaking that gave rise to the 2004 edition of the Laws of the Federation of Nigeria, (ii) ignored as having impliedly ceased to have any force or effect upon the coming into force of the Constitution, or (iii) struck down as unconstitutional by the courts on the occasions that they were invited to pronounce upon the constitutionality of the Act.15 It would appear the third option has finally prevailed.

However, one cannot shy away from the likely consequences of this decision on the future of tax legislation in Nigeria, in the event that same is not appealed against or where the decision is affirmed by the Supreme Court on appeal. Paramount amongst the conceivable consequences is the fact that all Tax Legislations enacted pursuant to the Taxes and Levies Act, have all been rendered otiose and no demand for a tax can be founded on same.16 The Law is trite that one cannot place something on nothing and expect it to stand.17 The Taxes and Levies Act having been declared unconstitutional and voided by the Court, it invariably implies that all legislations that draw breathe therefrom have ceased to have any force of law. 

Also, there is the likelihood that taxpayers will be inundated with series of tax legislation especially from the States Houses of Assembly whose powers to impose tax now appear unrestricted. There is also the possibility of double taxation arising from the seeming unrestricted power to impose tax and the consequent litigation that will ensue, in the event that taxpayers decide to challenge such legislation in Court.

Until then, the pertinent question is, will the Supreme Court affirm the decision of the Court of Appeal which will result in the entombment of the Taxes and Levies Act, or breathe life to its dry bones that it may rise again? Fingers crossed.     

Endnote

1. Francis Igho Erhiakporeh is an Associate with Solola & Akpana.

2.  (2020) LPELR-49691(CA)

3. Suit No: FHC/L/CS/1082/2019, delivered on May 8, 2020.

4. As well as the decision of the Federal High Court

5. See the cases of Abuja Electricity Distribution Company v. Abuja Municipal Area Council (2018) 35 TLRN 35.

6Without prejudice to the two school of thoughts that emerged thereafter. On the one hand, is the school of thought applauding the decision and commending the Court of Appeal for “taken the bull by the horn”. On the other hand, however, is the school of thought who believes that the Court should have merely nullified the section of the Act which contravenes the provision of the Constitution, rather than “throwing the baby away with the bathwater”.

7. Similar provision is contained in Section 2 of the Taxies and Levies Act.

8. N. Ikeyi & S. Orji “How Much Force is Still Left in the Taxes and Levies Approved List for Collection) Act?” – The Nigerian Juridical Review Vol. 10 (2011 – 2012).

9For instance, the NASS lacks the legislative competence to legislate for a Local Government as contained in Part III of the Act and the House of Assembly lacks the competence to legislate for the whole Nation. 

10.  (2017) LPELR-43713(SC)

 11. See also INEC v. Musa (2003) 3 NWLR (Pt.806) 72 @ 204 – 205, Para. H –B.

12. E.g. Stamp Duties, Valued Added Tax, Personal Income Tax, Companies Income Tax etc.

13. E.g. Shops and kiosk rates, Tenement rates, Motor park levels, Radio & Television licence, etc

14. See A. G Abia v. A. G, Federation (2002) 6 NWLR (Pt. 763) 264 at 435

15. See N. Ikeyi & S. Orji, note 8

16. This does not affect any legislation that draws breath directly from the Constitution as such enactment will still be valid whether or not same deals with taxies enumerated in the Taxies and Levies Act.

17. UAC v Macfoy (1961) 3 All ER 1169; Re: Apeh & Ors v. PDP & Ors (2017) LPELR-42035(SC); Mohammed v. Gbugbu & Ors (2018) LPELR-44494(CA)

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