The Federal High Court (FHC or “the Court”) Port Harcourt Division, recently delivered judgement in the case between the Attorney General for Rivers State (AGRS or “the Plaintiff”) and Federal Inland Revenue Service (FIRS or “1st Defendant”) & Attorney General of the Federation (AGF or “2nd Defendant”) collectively referred to as (the Defendants), stating that the Federal Government of Nigeria (FGN) lacks the power to impose and collect taxes that are not listed under Items 58 and 59 of Part I of the Second Schedule of the Constitution of the Federal Republic of Nigeria 1999 (as amended) (“the Constitution”). Consequently, taxes such as Value Added Tax (VAT), Withholding Tax (WHT), Tertiary Education Tax (TET), the National Information Technology Development Agency (NITDA) Levy, etc., which are not specifically listed under the said Items are outside of the jurisdiction of the FGN.

The Court also noted that the provisions of Item 7(a) and (b) of Part II of the Second Schedule of the Constitution do not extend the legislative competence of the National Assembly beyond capital gains, incomes or profits of persons other than companies, and documents or transactions by way of stamp duties. Therefore, the National Assembly lacks the power to enact any law to impose any form of sales tax, including VAT, and any other tax outside of those specifically mentioned in Item 7(a) and (b) of Part II of the Second Schedule of the Constitution.

Finally, the Court noted that the Taxes and Levies (Approved List of Collection) Act (TLA) is unconstitutional, hence, any tax or levy provided for in the Act is also unconstitutional, null and void, except such tax or levy is provided for in the Constitution or any other law made validly by a competent legislature.

Facts of the Case

We have summarised the arguments of the parties to the case below:

AGRS’ Position

The Plaintiff argued that Items 58 and 59 of the Second Schedule, Part I of the Constitution, limits the powers of the FGN to enact, impose and collect taxes outside stamp duties and taxes on income, profit, and capital gain. Consequently, the imposition of taxes such as VAT, WHT, TET and NITDA Levy by the FGN are ultra vires its constitutional powers, and therefore null and void.

Further, the AGRS argued that the FGN, in exercising its powers to impose any tax or duty on capital gains, incomes or profits of persons other than companies, and on documents or transactions by way of stamp duties, is not permitted to delegate the power to collect any other tax or duty to any other person except the Government of a State or any other State authority. Therefore, the powers of the FGN and/ or its agencies, such as the FIRS, are limited to the administration of only the taxes specifically listed in Items 58 and 59 of the Second Schedule, Part I of the Constitution.

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Wole Obayomi

Partner & Head, Tax, Regulatory & People Services

KPMG in Nigeria

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