VAT Collection: Preliminary Thoughts on Mr. Okutepa SAN’s Article


By Oladeji Benjami Olalekan

(i) The Learned SAN failed to relate his intervention in his article with the findings of the judgment delivered by Federal High Court, Rivers State. He however dubbed the current legal issue on VAT as “political controversies being generated by the spate of laws on VAT”.

This is strange because a matter decided by a court had left the stable of emotional realm which politics belongs to legal realm where law and logic prevail. Conclusion of Mr. Okutepa SAN bequeaths disturbing questions.

So joining issue with him on the judgment of FHC Rivers would not be relevant since Mr. Okutepa SAN made zero reference to the findings of that court on its merits or demerits.

(ii) Mr. Okutepa, SAN copiously referenced judgment in Eko Hotels Ltd and he concluded that Supreme Court having said that VAT had covered the field, Lagos consumption tax law cannot be imposed. To this end, VAT Act subsists.

While it is conceded that the Supreme Court made such a finding, the Supreme Court did not rule on constitutional validity of Value Added Tax Act. As a matter of the Court’s findings, question of constitutional validity was not before it. Hence the court further held that until Value Added Tax Act is challenged, it remains and subsists as valid law. Mr. Okutepa SAN’s attempt to *extrapolate principle of covering field to justify constitutional validity of VAT Act is a gross error.

(iii) Mr. Okutepa SAN failed to reference any items in either Exclusive Legislative List or Concurrent Legislative List to support his conclusion that “It is doubtful if state governments can make laws to collect VAT and to override the VAT Act made by or deemed to have been made by the National Assembly.” This postulation will be challenged below.


(1) OKUTEPA, SAN: “Again, when we look at the same constitution under the Concurrent Legislative List, we will find that there are no powers in the state to make laws to collect tax”

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RESPONSE: this conclusion is not correct.
In order to determine the scope of the taxing powers of the State, recourse must be made to the provisions of legislative powers of the State.

Taxing powers of a government is determined by express provision and incidental construction of subject matters it can legislate on .

In Attorney General, Ogun State v. Alhaja Ayinke Aberuggba it was the position of the Supreme Court that taxing powers of each tier of government broadly and validly follow the division of legislative powers under the Constitution. Thus each tier of government can exercise taxing powers to the extent of its legislative powers.

While the Constitution specifically mentions taxes that Federal Government can impose in the Second Schedule and item 59 of the Constitution, there is no specific mention of taxes that States can impose. But that does not mean state cannot validly enact tax law, impose and collect taxes as position of Mr. Okutepa SAN appears to portray.

Taxing powers of States are incidental to their powers to their powers under Section 4(7) of the 1999Constitution that provides :

4(7) The House of Assembly of a State shall have power to make laws for the peace, order and good government with respect to the following matters that is to say-

(b) Any matter included in the Concurrent Legislative List set out in the First column of part II of the Second Schedule to this Constitution to the extent prescribed in the second column opposite thereto and

(c) Any other matter with respect to which it is empowered to make laws in accordance with
provisions of this Constitution.

It is expressly clear from the above provisions, that the State Governments have powers to make laws on ny subject matter that is not on either the Exclusive or Concurrent Legislative List. This was the birth of Residual List of which only States can legislate on.

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Invariably, by his method of division of legislative powers between the Federal and he States Governments: while the taxing power of the Federal Government can be specifically enumerated as seen in the Second Schedule, item 59 of the Exclusive Legislative List, taxing powers of the States are left open-ended; leaving room for legislative creativity and ingenuity of States.

2. OKUTEPA SAN: “The states can only make laws for the local governments to collect tax. Again, these laws must be subject to the laws validly made by the National Assembly.”

RESPONSE: this position has been partly addressed above. True, there is no legislative powers for the local governments under the 1999 Constitution. Since tax is rigidly statutory in nature, local governments cannot make tax laws. Thus, State Governments must first enact an enabling law, which will determine the taxable persons, assessment procedure, and method of collection, recovery and penalties for tax failure before local governments can exercise taxing powers.

However Mr Okutepa SAN appears to have erred when he generously concluded that “the states can ONLY make laws for the local governments to collect tax.”

3. OKUTEPA, SAN: “you can see the National Assembly had made or deemed to have made the VAT Act,2004 as amended in 2020, which clearly provides for the administration, management and collection of VAT in Nigeria and vest the responsibility by virtue of section 7 on the FIRS.”

RESPONSE: with respect, there is nothing in Section 7 or Exclusive Legislative List or any other provisions to show that National Assembly which had made or deemed to have made the VAT Act a law that of National Assembly.

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Section 315 of the Constitution determines whether a law made prior to when 1999 Constitution came into operation is valid.

VAT Decree (now Act) must pass constitutional validity test of “Existing Law before it can be said or deemed as an Existing Law.

In view of Section 315(1) (a), can VAT Act be deemed as “an Act of National Assembly to the extent that it is a law with respect to any matter on which National Assembly is empowered by the Constitution to make laws”?

Powers of National Assembly to make laws are itemised in the Exclusive Legislative List and Concurrent Legislative List. But there is none of the items which expressly shows that National Assembly can validly enact VAT Act.

Unfortunately, the Learned SAN equally failed to identify such an item in any of the Lists. As a matter of fact, Mr. Okutepa SAN did not even reference Section 315 of the Constitution to lift our hope to the hill of his intervention.

4. OKUTEPA, SAN: “There is no doubt that the powers to make laws on Taxation or Taxes are vested in the National Assembly. That power was exercised when the VAT Act was made as seen above. It is doubtful if state governments can make laws to collect VAT and to override the VAT Act made by or deemed to have been made by the National Assembly.”

RESPONSE: Mr. Okutepa SAN did not show substance to cast off our doubts and we really think this reduces efficacy of his conclusion. We rely on the preceding arguments.

CONCLUSION: it appears to me that Mr. Okutepa SAN’s attempt seem to have dimmed our hope raised by the heading of his intervention on the current legal debates as the matter must remain a needful controversy till final decision is made.


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