Social commentator and senior advocate of Nigeria Mr. J.S Okutepa SAN has said the ranging controversies as to who has the power to collect VAT are needless political controversies without deep rooted constitutional logic and construction. He stated that the VAT Act is a valid legislation made by the National Assembly.
He expanded on the above position thus:
The ranging controversies as to who has the power to make laws for purposes of VAT collections are needless political controversies without deep rooted in constitutional logic and construction.
In this write up I will demonstrate that the VAT Act 2004 as amended in 2020 is a valid Act of the National Assembly and any law made by any state which is in conflict with th Act is void. But before then the VAT Act or Decree came into being in 1993. Most of the political actors steering the controversies now were either actively involved or were privy to the making of that law. In essence the law has been with us in our federal operations. Then the 1999 came into being and we have been experimenting it since 1999.
We need to appreciate that the 1999 constitution as amended under the Exclusive Legislative List empowers the Federal Government to make law on tax. See Item 59 on the Exclusive Legislative List which provides that the National Assembly has the powers to make laws on: Taxation of incomes, profits, and capital gains, except as otherwise prescribed by this Constitution. 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.
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.
Let us look at what the Constitution says. Under Part II: Concurrent Legislative List
Extent of Federal and State Legislative powers
Part D thereof relating to Collection of Taxes, it is provided in items 7- 10 that:
- In the exercise of its powers to impose any tax or duty on –
(a) capital gains, incomes or profits or 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 any 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.
8.Where an Act of the National Assembly provides for the collection of 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.
- A House of Assembly may, subject to such conditions as it may prescribe, make provisions for the collection of any tax, fee or rate or for the administration of the Law providing for such collection by a local government council.
- Where a Law of a House of Assembly provides for the collection of tax, fee or rate or for the administration of such Law by a local government council in accordance with the provisions hereof it shall regulate the liability of persons to the tax, fee or rate in such manner as to ensure that such tax, fee or rate is not levied on the same person in respect of the same liability by more than one local government council.
Clearly from item 9 hereof, the states can only make laws for local Governments to collect taxes and such law is subject to the law made by the National Assembly.
As 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.
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.
The issue that played out in the case of A.G Lagos State vs. Eko Hotels is garmane here.
In that case what was before the court bothers primarily on double taxation.
The Lagos State Government had in operation the Sales Tax Law otherwise known as the consumption tax which is a tax on goods and services and in the same vein, the VAT being a Federal legislation also applies in Lagos.
Eko Hotels was faced with demand notice from these two agencies of Government both at the Federal and State level. If it goes ahead to honour the notice by paying both VAT and consumption tax, it will amount to double taxation and thereby amounting to double Jeopardy on the part of Eko Hotels.
In that case, the supreme court held that VAT Act, being an Act of the National Assembly had covered the field on the issue of Sales Tax and must prevail over sales tax and a state cannot impose consumption tax in addition to VAT.
I do not agree that VAT is not part of the tax mentioned in the Exclusive Legislative List.
The powers of the Federal Government to make laws on Tax is constitutional and it does not share that powers with the States.
The law therefore is that where any law made by the state is in conflict with the law validly made by the National Assembly, that law by the National Assembly shall prevail.
The 1999 constitution as amended is clear on this. It provides that:
PART II Powers of the Federal Republic of Nigeria
- (1) The legislative powers of the Federal Republic of Nigeria shall be vested in a National Assembly for the Federation, which shall consist of a Senate and a House of Representatives.
(2) The National Assembly shall have power to make laws for the peace, order and good government of the Federation or any part thereof with respect to any matter included in the Exclusive Legislative List set out in Part I of the Second Schedule to this Constitution.
(3) The power of the National Assembly to make laws for the peace, order and good government of the Federation with respect to any matter included in the Exclusive Legislative List shall, save as otherwise provided in this Constitution, be to the exclusion of the Houses of Assembly of States.
(4) In addition and without prejudice to the powers conferred by subsection (2) of this section, the National Assembly shall have power to make laws with respect to the following matters, that is to say:-
(a) any matter 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
(b) any other matter with respect to which it is empowered to make laws in accordance with the provisions of this Constitution.
(5) If any Law enacted by the House of Assembly of a State is inconsistent with any law validly made by the National Assembly, the law made by the National Assembly shall prevail, and that other Law shall, to the extent of the inconsistency, be void.
In the face of these clear provisions of the constitution, the political controversies being generated by the spate of laws on VAT being made by states Houses of Assembly need judicial interpretation of our constitution. While it is true that some parts of Nigeria have lazy governmental structures, we must be careful not to act in violation of Nigerian constitution.
As a lawyer my duty is to look at the law. I cannot in clear conscience fault the validity of the VAT Act which has covered the field. I may be wrong, but I strongly believe the constitution is in favour of the VAT Act.