The Federal Court of Justice of Nigeria, located in the Port Harcourt Division, presided over by His Lordship the Hon. Judge Stephen Dalyop Pam, issued a 45-page judgment on August 9, 2021 in a case brought by the Rivers State Attorney General against the Federal Inland Revenue Service and the Federation Attorney General second defendant. In this case, the chairman ignored all known taxation principles and the earlier court decision that had previously overruled the constitutionality of the Sales Tax Act. His lordship indirectly amended the 1999 Constitution of the Federal Republic of Nigeria, as amended, effectively placing all tax laws under the control of the plaintiff, the Rivers State.
The plaintiff is asking the court to repeal the Value Added Tax Act, the Tertiary Education Tax Act (incorrectly referred to as the Education Tax by the plaintiff), Income Tax, the Stamp Duty Act as unconstitutional null and void. Pages 1 through 33 of the judgment dealt only with the proceedings filed and exchanged by the parties and the preliminary objection raised by both the first and second defendants regarding the association or misrelation of parties and the question of the court's jurisdiction over have raised the handling of the application. The preliminary objections were rightly decided in favor of the plaintiff and are therefore not required for this examination.
The judgment of the Court of Justice can be summed up in two sentences. (1) The power of the National Assembly to enact tax laws is limited to the taxation of profits, income and capital gains, as in item 7 (a) and (b) of Part II of the Second Annex to the Constitution and (2) the Federal Tax Act, the Income Tax Act, the Value Added Tax Act, the Taxes and Duties Act (Approved Collection List), among others, are null and void as the tax laws are not expressly mentioned in Articles 58 and 59 of the Exclusive Legislative List
(ELL) of the Constitution.
The judgment has five (5) fundamental shortcomings, outlined as follows:
(1) His Lordship has wrongly limited the powers of the National Assembly to make tax laws to Articles 58 and 59 of the ELL. The powers of the National Assembly to legislate go beyond the points in the ELL. The ELL contains 68 elements, but only four (4) elements are specifically identified as taxes. Therefore, if this judgment is to be taken seriously, it means that all other tax laws (z ELL are null and void. Again, His Lordship did not consider item 68 of the ELL, which provides: “All matters elsewhere in this list For example, the Tertiary Education Trust Fund (erroneously referred to as “Education Tax” and His Lordship) is derived from 2% of the chargeable profits of all companies operating in Nigeria, with the exception of those of companies in upstream companies The question now is, if item 59 of the ELL includes taxation of profits and 2% of corporate profits are set aside as "education tax", why should such a law, for the flimsy reason not specifically mentioned, be for to be annulled? in the constitution?
(2) Another fundamental flaw in the Plaintiff's case, which was not noticed by His Lordship, was that the Plaintiff was not invoking any state law similar to the Value Added Tax Act. If such laws had existed, the problem of double taxation might have arisen. Even with such state law, his lordship's decision would not have been justified. His lordship would have the case AG Lagos State v. Eko Hotels Ltd & Anor ((2018) 36 TLRN 1, in which the Supreme Court ruled that the VAT Act covers the area and the VAT Act cannot be enforced as that will lead to double taxation, although the State of Lagos later enacted the Hotel and Restaurant Consumption Act and cleverly imposed a 5% tax on goods consumed in hotels and restaurants in Lagos State. Even with this act, the Federal Court of Justice 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) have not declared the entire VAT law null and void, but only exempted those consumed in the premises of hotels, restaurants and event centers in the state of Lagos Goods from VAT on the grounds that items consumed in hotels and restaurants are not included in the value added tax tax law fell.
(3) In this case, His Lordship did not consider the teaching to cover the field either. Section 4 (5) of the Constitution provides that if a law passed by the House of Assembly of a state is inconsistent with a law in force by the National Assembly, the law passed by the National Assembly takes precedence and that other laws, to the extent of the inconsistency, are void . His lordship should have dismissed the plaintiff's case as there was no such state law in Rivers State to compete with the Sales Tax Act, the Capital Gains Tax Act, and the Income Tax Act
(3) The judgment is also contradicting itself. In one breath, His Lordship agreed that the National Assembly's power to make tax laws is limited to the taxation of profits, income and capital gains as set out in items 58 and 59 of the ELL and items 7 (a) and (b ) are included. of Part II of the second appendix to the Constitution. On a different scale, the court made a U-turn and granted all of the plaintiff's prayers, including a statement that education taxes and technology taxes (that is, taxes on profits made by corporations registered under the Corporate and Allied Matters Act, 2020.) Will be levied are, a federal law, unconstitutional, null and void.
(4) Another fundamental flaw identified in the judgment is the plaintiff's first prayer for a declaration that the plaintiff is entitled to the authority to collect capital gains tax, income, or profits from any person in the state Rivers to get. This relief should also have been deleted. At that point, His Lordship should have distinguished between the authority to collect a tax and the authority to collect taxes. The current provision in our tax law states that personal income tax, capital gains taxes, and stamp duties are federal laws imposed by the federal government, while the 36 states have the power to collect taxes on individuals in their respective jurisdictions and the State of Rivers is no exception to this agreement wondering whether this relief included in the court's judgment is necessary.
(5) The court also did not take into account Section 25 of the Federal Tax Act of 2007, which provides that the service is authorized to administer all ordinances listed in the first annex of the Act that contain the Value Added Tax Act, the Capital Gains Tax Act and the Income Tax Act.
However, the division of taxation powers in the 1999 Constitution does not reflect the principle of federalism. It is a design that is unsuitable for Nigeria's growth. From this it can be concluded with certainty that Nigeria is a unified system disguised as federalist. However, this nonsense cannot be cured by a judicial decision, but by a constitutional amendment.
Kolawole Oyekan writes from the University of Warwick, UK. He can be reached by email at (email protected)