CONSTITUTIONAL SUPREMACY DOCTRINE V. TAX LEGISLATIVE COMPETENCY: COURT OF APPEAL OF NIGERIA NULLIFIES THE TAXES AND LEVIES (APPROVED LIST FOR COLLECTION) ACT

I. Introduction

The Court of Appeal of Nigeria was recently called upon to determine the question of whether the entire provision of the Taxes and Levies (Approved List for Collection) Act 2004 is ultra vires the Constitution and therefore null and void by reason of the ouster clause at the beginning of the said Act.[1] The Court answered in the affirmative - Yes. The Court of Appeal based its decision primarily on the grounds of the tax legislation infringing the Constitutional Supremacy Doctrine as enshrined in Section 1(3) of the Constitution of the Federal Republic of Nigeria 1999 (As amended).

II. Relevant Facts of the Case

The Appellant (Uyo Local Government) approached the High Court of Akwa Ibom State by way of an amended Originating Summon for the determination of the following questions:-

1. Whether by the provisions of the Constitution of the Federal Republic of Nigeria, 1999 (as amended), the Taxes and Levies (Approved List for Collection) Act, 2004, the Road Traffic Law Cap 115 Laws of Akwa Ibom State, Local Government (Administration) Law 2007 (as amended), the defendants herein or any of their agents have the legal right to regulate, charge and collect motor park fees/levies from commercial vehicles in Akwa Ibom State and for their sole benefit.

2. Whether by the provisions of the Constitution of the Federal Republic of Nigeria 1999 (as amended), the Taxes and Levies (Approved List for Collection) Act, 2014 the Road Traffic Law Cap 115 Laws of Akwa Ibom State and the Akwa Ibom State Local Government (Administration) Law, 2007 (as amended), the defendants herein and or any of their agents have the legal right to control and or charge daily park fees/levies from commercial tricycles and other commercial vehicles other than as regulated in the Road Traffic Law Cap 115 Vol. 5 of Akwa Ibom State.

On the premise of the above legal questions, the Appellant sought for certain declaratory and injunctive reliefs. At the completion of the hearing, the High Court of Akwa Ibom State dismissed the Appellant's claims. Dissatisfied, the Appellant appealed to the Court of Appeal of Nigeria. Amongst other legal issues raised by the Appellant, It sought a determination of "whether the entire provision of Taxes and Levies (Approved List for Collection) Act 2004 ultra vires the Constitution and therefore null and void by reason of the ouster clause at the beginning of the said Act?"

III. Decision of the Court of Appeal

The Court of Appeal in reaching its decision considered the introductory sections of the Taxes and Levies (Approved List for Collection) Act Cap T2 of 2004 ("The Taxes and Levies Act"). Section 1(1) of the Taxes and Levies Act states that:- "(1) Notwithstanding anything contained in the Constitution of the Federal Republic of Nigeria, 1979, as amended or in any other enactment or law, the Federal Government, State Government and local Government shall be responsible for collecting taxes and levies listed in part I, Part II and Part III of the schedule to this Act, respectively". The Court of Appeal, opined that when the term "Notwithstanding" is used in a section of the statute, it is meant to exclude an impinging or impending effect of any other provision of the statute or other subordinate legislation so that the said section may fulfill itself.

The Court of Appeal did observe that the appellant, in this case, is not contesting the overriding effect of the phrase "Notwithstanding" as used in the Taxes and Levies Act, but its argument is only on the ouster clause[2] that is a nullity by reason of the provisions of Section 1(3) of the Constitution of the Federal Republic of Nigeria, 1999 (as amended). The Court of Appeal in nullifying the entire legislation held thus, The supremacy of the Constitution is never in doubt and Section 1(3) above is to the effect that if any other law is inconsistent with the provisions of the Constitution, the Constitution shall prevail and that other law shall to the extent of its inconsistency be void. I am also of the view that having commenced its provisions with a clause that undermines the supremacy of the Constitution, there is nothing that can operate to save any part of that law. Thus, the virus in the introductory clause of the Act has infested the entire Act and thereby rendering it unconstitutional."[3]

IV. Comment

The importance of the Taxes and Levies Act, which was amended in 2015 cannot be overemphasized. From a fiscal and taxation perspective, the legislation was aimed at outlining the tax collection powers of the Federal Government, State Government and Local Government, respectively. In Part I, Part II and Part III of the Schedule to the Act, various taxes were assigned to the tiers of government for purposes of collection e,g. Companies Income Tax, Petroleum Profit Tax, Value Added Tax, Education Tax, were assigned to the Federal Government (Part I); personal income tax, withholding tax (individual only), capital gain tax (individual only), stamp duties on instrument executed by individuals, casino taxes, road taxes and business premises registration fee, were assigned to the State Government (Part II); shops and kiosks rates, tenement rates, slaughter slab fees, on and off liquor licence fees, naming of street registration fee, market taxes, motor park levies, merriment and road closure levy, signboard and advertisement permit fees etc., were assigned to the Local Government(Part III)[4].

The implication of the Court of Appeal's nullification pronouncement, in the absence of the Supreme Court of Nigeria upturning the decision is that it is the law. The three tiers of government in Nigeria (Federal, State, and Local Government) would have to return to the Second Schedule (legislative powers) of the Constitution of the Federal Republic of Nigeria 1999 as Amended and importantly the specific provisions of each already existing tax legislations to ascertain their authority to assess or collect the particular type of tax. For instance, Part 1 of the Second Schedule of the Constitution of the Federal Republic of Nigeria 1999, confers the National Assembly with the exclusive power to legislate on taxes such as custom and excise duties, stamp duties, taxation of incomes, profits and capital gains except as otherwise prescribed by the Constitution.

Specifically, the collection of taxes is a matter for the concurrent legislative competence of both the National Assembly and the State House of Assembly. Paragraphs 7 of Part II of the Second Schedule of the Constitution of the Federal Republic of Nigeria 1999, gave legislative authority to the National Assembly in the exercise of its powers to impose tax or duty, to provide for 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. Paragraph 9 of Part II of the Second Schedule of the Constitution of the Federal Republic of Nigeria 1999 further authorizes the House of Assembly to make provisions for the collection of any tax, fee or rate or the administration of the law providing for such collection by a local government council.

A careful consideration of the relevant provisions of the Constitution of the Federal Republic of Nigeria reveals that the National Assembly has the legislative competence to enact the said Taxes and Levies Act. Admittedly, certain provisions of the said legislation are inconsistent with Section 1(3) of the Constitution of the Federal Republic of Nigeria 1999. The author's humble view is that only the offending section(s) of the Taxes and Levies Act ought to have been nullified, to the extent of its inconsistency. The author respectfully submits, that the "Blue Pencil Rule" as recognised by Courts in Nigeria, especially the Supreme Court in a long line of cases, can be applied to sever a part of a legislation that is good in the sense that it is valid, from the part that is bad, in that it is invalid. The blue pencil is applied over the part that is bad. If what remains of the impugned legislation, that is the part that is good, can stand, then it is applied. But if what remains cannot stand on its own, the impugned legislation is declared invalid.[5]

Author: Ikemefuna Stephen Nwoye Esq. LL.B(ESUST) 2010, Qualifying Certificate(NLS, Lagos) 2011, LL.M in International Business Regulation, Litigation and Arbitration(NYU, New York) 2014.  A Barrister and Solicitor of the Supreme Court of Nigeria (2012) with expertise in the areas of finance, capital markets, mergers and acquisitions, and dispute resolution. This paper should not in anyway serve as a substitute for legal advice or opinion. The views expressed are personal to the author and do not necessarily reflect the views of any organisation or person that the author is or might have been affiliated to. 

[1] Uyo Local Government v. Akwa Ibom State Government & Anor Suit No: CA/C/388/2017. The Judgement was delivered on Friday, 22nd May 2020.

[2] Sections 1 and 2 of the Taxes and Levies Act.

[3] (2020) LPELR-49691(CA) Pp. 31-36, paras. D-B. The Court of Appeal further distinguished this case from the earlier case of Eti-osa Local Government v. Jegede (2007) 10 NWLR (Prt 1043) 537. And opined that had the issue of hierarchical positions of the Taxes and Levies (Approved List for Collection) and the 1999 Constitution been canvassed in that case, the Court of Appeal would have arrived at the conclusion that in so far as the provisions of the Constitution are made subordinate to that of the Act, such provisions of the Act are to the extent of its inconsistency be void.

[4] See also the Fourth Schedule of the Constitution of the Federal Republic of Nigeria 1999 (As amended).

[5] AG Abia State & Ors v. AG Federation (2002) 3 SC P.106 or (2002) 6 NWLR Part 763 P. 264; Onifade v. Olayiwola & Ors (1990 ) LPELR - 2680(SC); Stephen & Anor v. Moro & Ors (2019) LPELR-48406 (CA).