Rivers State Attorney General v. FIRS & Anor: a wrong decision by Kola Oyekan
The Federal High Court of Nigeria, sitting in Port Harcourt Division, presided over by His Lordship, the Hon. Judge Stephen Dalyop Pam delivered a 45-page judgment on August 9, 2021 in a lawsuit brought by the Rivers State Attorney General against the Federal Inland Revenue Service and the Federation Attorney General as the second defendant. In this case, the president of the court ignored all known principles of taxation and the previous court ruling which had previously terminated the constitutionality of the law on value added tax. His Lordship indirectly amended the Constitution of the Federal Republic of Nigeria, 1999 as amended and effectively placed all tax laws under the control of the Applicant, Rivers State.
The plaintiff asks the court to set aside the law on value added tax, the law on the tax on higher education (wrongly called school tax by the plaintiff), the personal income tax and the stamp duty law as unconstitutional null and void. Pages 1 to 33 of the judgment dealt only with the proceedings filed and exchanged by the parties and the preliminary objection raised by the 1st and 2nd defendants concerning the joinder or severance of the parties and the question of the court’s jurisdiction to know the demand. The preliminary objections were properly resolved in favor of the applicant and therefore were not necessary for this review.
The Court’s judgment can be summed up in two sentences. (1) The power of the National Assembly to pass tax laws is limited to the taxation of profits, income and capital gains only, in accordance with Articles 7 (a) and (b) of part II of the Second Schedule of the Constitution and (2) the Federal Tax Service (Establishment) Act, the Personal Income Tax Act, the Value Added Tax Act, Taxes and levies (list approved for collection), among others, are null and void as tax laws not specifically mentioned in Articles 58 and 59 of the Law Exclusive legislative list
(ELL) of the Constitution.
There are five (5) fundamental flaws in the judgment which are described as follows:
(1) His Lordship wrongly limited the powers of the National Assembly to impose tax laws to Articles 58 and 59 of the ELL. The powers of the National Assembly to make laws extend beyond the elements of the ELL. The ELL contains 68 items but only four (4) items have been expressly designated as taxes. If this judgment is to be taken seriously, then it means that all other tax laws (e.g. corporate income tax, higher education trust fund, corporate withholding tax, petroleum profits tax , etc.) ELL are null and void. Again, His Lordship did not consider Article 68 of the ELL which provides that “any matter incidental or complementary to any matter mentioned elsewhere in this list”. For example, the Tertiary Education Trust Fund (erroneously referred to as’ school tax by the applicant and His Lordship) is derived from 2% of the taxable profits of all companies operating in Nigeria, with the exception of the profits of companies in the petroleum sectors in Nigeria. upstream. The question now is: if Article 59 of the ELL includes the taxation of profits and 2% of corporate profits are set aside as “school tax”, then why should such a law be declared void and void for the most fragile reason that it was not expressly mentioned? in the Constitution?
(2) Another fundamental flaw in the plaintiff’s case which was not noticed by His Lordship was that the plaintiff did not invoke any state law similar to the Value Added Tax Act. Perhaps, if there had been such laws, the question of double taxation would have arisen. Even with such state law, His Lordship’s decision would not have been justified. His Lordship should have considered AG Lagos State v. Eko Hotels Ltd & Anor ((2018) 36 TLRN 1 where the Supreme Court ruled that the value added tax law covers the area and the sales tax law cannot be applied as this will amount to a Double Taxation Although Lagos State subsequently enacted the Hotel and Restaurant Consumption Law and smartly inserted a 5% tax on products consumed in Lagos State hotels and restaurants. Even with this law, the State Federal High Court registered Trustees of Hotel Owners and Managers Association of Lagos v. Attorney-General of Lagos State & Federal Inland Revenue Service (follows No: FHC / L / CS / 360/2018) did not declare the entire Value Added Tax Act null and void, but only exempt from value added tax goods consumed on the premises of hotels, restaurants and state event centers of Lagos on the grounds that items consumed in hotels e t restaurants were not covered by the VAT law.
(3) In this case, His Lordship also ignored the field cover doctrine. Article 4 (5) of the Constitution provides that if a law promulgated by the House of Assembly of a State is incompatible with a law validly adopted by the National Assembly, the law adopted by the National Assembly shall prevail, and this other law must, to the extent of the inconsistency, be null. His Lordship should have dismissed the plaintiff’s case since there was no such state law in Rivers State competing with the VAT law, the Capital Gains Tax law and the Personal Income Tax Law.
(3) The judgment is also contradictory. Suddenly, His Excellency agreed that the power of the National Assembly to make tax laws is limited to the taxation of profits, income and capital gains only, as stated in Articles 58 and 59 of the ELL and in Articles 7 (a) and (b) of Part II of the Second Annex of the Constitution. On another scale, the court turned around and granted all of the plaintiff’s prayers which, among other things, include a statement that the education and technology tax levies (which are taxes on corporate profits). legal persons registered under the Companies and Allied Affairs Act, 2020, a federal law, unconstitutional, null and void.
(4) Another fundamental flaw noticed in the judgment is the plaintiff’s first prayer requesting a declaration that the plaintiff has the right to be “conferred” with the power to collect capital gains, income or tax. the benefits of people in Rivers State. This relief should also have been written off. At this point, His Lordship should have distinguished between the power to impose tax and the power to collect tax. The current provision of our tax law is that the personal income tax, capital gains tax and stamp duty are federal laws imposed by the federal government while the 36 states of the federation have the power to collect taxes from individuals in their respective jurisdictions and Rivers State is no exception to this arrangement. wonders about the need for this compensation as it is contained in the court judgment.
(5) In addition, the court did not take into account Article 25 of the Federal Tax Service (Establishment) Act 2007 which provides that the service has the power to administer all the provisions listed in the first schedule of the law which includes the VAT law, the capital gains tax law and the personal income tax law.
However, the division of taxing powers in the 1999 Constitution does not reflect the principle of federalism. It is a conception which is not adapted to the growth of Nigeria. It is safe to conclude that Nigeria is a unitary system disguised as federal. However, this evil cannot be remedied by a judicial decision but by an amendment of the Constitution.
Kolawole Oyekan writes from the University of Warwick, UK. He can be contacted by email at [email protected]