By Opatola Victor Esq
The recent judgement by Justice Stephen Dalyop Pam in the matter between Rivers State Government V. Federal Inland Revenue and the Attorney General of Federation has generated heated comments in many quarters. A lot of persons has commented and picked sides on the issue without benefit of the arguments canvassed by the parties and reading the judgment and reason of the Court.
One thing is certain, the issues canvassed in the matter goes beyond the implication of the popular issue of who is entitled to VAT and who is entitled to collect VAT, to which body can collect (not which body owns it) Incomes, profits and capital gains Tax in Nigeria; to whether or not the Tax and Levies Act is valid and Constitutional.
- Whether Federal Government and Federal Republic of Nigeria ( yes, there is a difference between both) have the powers to make laws for taxation only on item 58 & 59 of the second schedule of the Constitution. ( Item 58 provides for taxation of Stamp Duties & 59 provides for the taxation of Incomes, profits, capital gains, except as otherwise provided by the Constitution. )
- That FIRS has no powers to enforce the collection of any tax other than those in item 58 & 59.
- Whether the Powers of the National Assembly to make Laws on taxation applies to anything outside Incomes, profits, capital gains.
- Whether the collection of taxes in item 58 & 59 (stated above) and item 7 & 8 of the part II of the Second Schedule to the Constitution the Federal Government can delegate the collection of Taxes to any other body or person other than the State Government or any authority of the State Government.
- Whether Taxes and Levies Act, as far as it legislate for collection of taxes other than those listed in item 58 & 59 (stated above) and item 7 & 8 of the part II of the Second Schedule to the Constitution, is unconstitutional.
( Taxes and Levies Act empowers the Federal Government to collect Withholding Tax, Value Added Tax, Education Tax, Capital Gains Tax on non residents of FCT, Pools Betting, lotteries Gaming and Casinos, Road Tax, business Premise Registration Tax e.t.c)
- Plaintiff Argument ( Rivers State)
The Federal Government to impose and collect tax is expressly limited to those species of tax stated in item 58 & 59 (stated above). It further argued that taxes like VAT, Withholding Tax, Tertiary Education Tax and Technology Tax are beyond the scope and Constitutional contemplation of item 58 & 59 (stated above) and is therefore unconstitutional.
Defendant argument ( FIRS and A.G Federation)
FIRS argued that by section 4 ( boarders on the Powers of the National assembly to make Laws for the Federation, also that it can make Laws for items on exclusive list and concurrent list to the exclusion of the State House of Assembly) , 315( provides that Laws, decree, enactments made before the 1999 Constitution will automatically valid and subsisting as an existing Law or Act so far it is that in which National Assembly can make Laws, 318, item 58 & 59 (stated above) and section 1 and 2 of part III of the Constitution; the National Assembly has all the needed Powers to enact Legislations to cover all the above referenced taxes.
The AGF argued that the fact that the National Assembly has enacted Laws on the taxations provided for in the concurrent legislative list automatically precludes the State House of Assembly from doing same that is inconsistent with the Laws enacted by the National Assembly.
Courts Decision (paraphrasing)
- First, the argument of the AGF is blank. As at the time of the filing and decision on this matter the Rivers State Government has not made any Laws that contradicts the Laws enacted by the National Assembly on the issues at hand. Rivers State Government has only challenged the Powers of the Federal Government to impose and collect taxes outside of the express provisions of item 58 & 59 (stated above).
On FIRS argument, the Court held that upon careful perusal of section 4, 315, 318, item 58 & 59 and section 1 and 2 of part III of the Constitution ( all stated above), the Court cannot see anywhere the Federal Government is given the express powers to make Tax Laws beyond Constitutional Limit of item 58 & 59 of the second schedule of the Constitution.
The Law is trite that Statutes should be given their ordinary and literal meaning, where they are clear and unambiguous. Provision of item 58 & 59 of the second schedule of the Constitution is clear and unambiguous, it relates only and expressly to stamp duties, faction of incomes, profit and capital gains only. This interpretation does not lead to absurdity and doesn’t contradict other parts of the Constitution.
Furthermore, Tax Laws are interpreted strictly. In interpretation of Tax Laws, there are no presumption or intendment. There is also no Equity in the matters of tax.
Also, it is trite Law that when a Statute expressly mentions a thing among other alternatives, it is taken that those not mentioned are to be excluded. I’d the Constitution wanted VAT, Education Tax, Technology Tax etc. to be Taxed by the Federal Government it would have expressly included it among the ones it stated, but it didn’t.
- On Whether the collection of taxes in item 58 & 59 (stated above), by item 7 & 8 of the part II of the Schedule to the Constitution the Federal Government can delegate the collection of Taxes to any other body or person other than the State Government or any authority of the State Government.
Item 7 & 8 of the part II of the Schedule to the Constitution provides that
- In exercise of it’s powers to impose any tax or duty on
(a) Capital gains, incomes or profit of persons other than companies; and
(b) documents or transactions by way of stamp Duties, the National Assembly may subject to such conditions as it may prescribe, provide that the collection of such tax or duty or the administration of the Law imposing it shall be carried out by the Government of a State or other authority of a State.
- Where an Act of National Assembly provides for collection not Tax or Duty on Capital Gains, incomes or profit or the administration of any Law by an authority of a State in accordance with paragraph 7 hereof, it shall regulate the liability of persons to such tax or duty in such manner as to ensure that such tax or duty is not levied on the same person by more than one State.
The above provision is express and unambiguous. The collection of the above taxes are to be done by the State or State Authority, subject to the condition the National Assembly may dictate. Item 7 & 8 of the part II of the Constitution expressly limits the body that can collect such Taxes listed in item 58 & 59 to the State or a State Authority and nothing more.
- Whether Taxes and Levies Act, as far as it legislates for collection of taxes other than those listed in item 58 & 59 (stated above) and item 7 & 8 of the part II of the Second Schedule to the Constitution, is unconstitutional.
The Court held that per the decision of a Superior Court, Court of Appeals, in the case Uyo Local Government Council v. Akwa Ibom State Government & Anor. the Court held that it nullified the Taxes and Levies Act for being inconsistent with the provisions of the 1999 Constitution. The Court followed the principles of judicial precedent by so holding that the Act is null and void, mad any tax so provided for in the Act is unconstitutional.
The Court so held in favour of Rivers State.