NECA Red Flag

NECA Red Flag Vol. 1, Issue 1.

Dear Members,

We welcome you to the first edition of our new online publication: NECA’s Red Flag. This initiative is borne out of the need to dedicate a platform, in addition to existing means of  regular communication with members, to alert members on dangerous policy, law making and regulatory initiatives by government that portend grave danger for business. There will be no pre-determined frequency for the release of the publication because we will want to be time efficient in alerting members on such grievous developments. Besides the knowledge and information benefits of this platform, we will also want to utilise it to encourage members to provide on line their perspectives on expected lines of action by the Association to protect the interest of business.

In this maiden edition, we will be sharing with you  recent unhealthy trend by State Governments to embrace multiple taxation for the purpose of shoring up their revenues, without sparing a thought for the constitutionality of such taxes and the destructive  effects on business and promotion of entrepreneurship. A case in point is the newly enacted Kano State Revenue Administration (Amendment) Law 2017. We will also explore the Taxes and Levies (Approved List for Collection) Act as amended by the Amendment Order of 2015 which provides a list of additional taxes collectible by the States.

Have a pleasant reading, while we look forward to your suggestions on way forward in tackling these disturbing developments.

Thank you

Timothy Olawale

Editor

1.Kano State Revenue Administration (Amendment) Law, 2017

Kano State Government recently passed a law requiring hotels, shopping malls, stores, suya spots, eateries, bakeries and supermarkets to charge a tax of 5% on goods and services sold/provided within the State.

It is on record that the Taxes and Levies (Approved List for Collection) Act as amended by the Amendment Order of 2015 provided for a list of additional taxes collectible by the States. However, the closest to consumption tax of the Kano State law is Hotel, Restaurant or Event Centre Consumption tax.

Although the Amendment Order did not define any of the taxes, it is clear that Hotel, Restaurant or Event Centre Consumption Tax should ordinarily apply to tax payable in relation to services rendered by hotels, restaurants and event centres, and not on products or goods sold and purchase in shopping malls, stores, bakeries, etc.

 It should be noted that the act does not by any punctuation separate consumption tax; the consumption tax should only be payable in relation to services rendered by hotels, restaurants or event centre and not on consumable goods sold at malls and supermarkets. Hence, the tax is christened by the Amendment Order as “hotel, restaurant or event centre consumption tax”. Consequently, Kano State Government may only collect consumption tax on services rendered by hotels, restaurants or event centres in addition to other taxes allowed by the Act, without even passing any other law in the respect.

The above not being the case, irrespective of the provisions of 2nd Schedule (Part II) paragraphs 9, 18 and 19, of the 1999 Constitution (as amended) which authorise a State House of Assembly to make laws for the collection of any tax, fee or rate, or to make laws for the industrial, commercial or agricultural development of a State, Kano State does not have the power to impose consumption tax, irrespective of the toga ascribed to it, on sale of goods and provision of services within the state. This is because VAT is a consumption tax and same is collectible by the Federal Government (and shared among the states) in respect of sale of goods and provision of services within the federation.

Therefore, by implication of the doctrine of covering the field as held by the Supreme Court in the case of Attorney General of Ogun State v. Alhaja Ayinke Aberuagba, where identical legislations are made by a State and by the Federal Government, the State Law must give way to the Federal legislation. Kano State cannot, therefore, impose consumption tax which has been covered by the VAT Act and is being paid to the Federal Government. It should be noted that the tax, being a consumption tax amounts to another VAT already levied on the sale of goods and provision of services by the VAT Act. Definitely, the intention of the Amendment Order cannot be to duplicate VAT.

 In conclusion, the consumption tax imposed by the law, same already covered by the VAT Act, is unconstitutional and cannot be collected by Kano State.

2.The Taxes and Levies (Approved List for Collection) Act (Amendment) Order 2015 and its implications

The Taxes and Levies (Approved list for collection) Act of 1998 was amended on 26^th May 2015 by the Taxes and Levies (Approved list for collection) Act (Amendment) Order 2015. The amendment introduced the following 14 new levies /taxes to be collected by each state:

• Land Use Charge
• Hotel, Restaurant or Event Centre Consumption Tax
• Entertainment Tax
• Environmental (Ecological) Fee or Levy
• Mining, Milling and Quarrying Fee
• Animal Trade Tax
• Produce Sales Tax
• Slaughter or Abattoir Fees, where State Finance is involved
• Infrastructure Maintenance Charge or Levy
• Fire Service Charge
• Property Tax
• Economic Development Levy
• Social Services Contribution Levy
• Signages and Mobile Advertisement, Jointly collected by States & Local Government

In addition, Business Premises registration fee was entirely left to individual States to determine the rates to be imposed as registration and renewal instead of the usual annual flat rate of N10, 000 for registration and N5, 000 for renewal. Furthermore, States and Local government can collect Haulage Fee at the point of loading and point of discharge, and the States are expected to set up structure for collection of these taxes and levies.

Other taxes/levies or charges mentioned in the Order include:

• A single Inter-State Road Taxes Sticker for any vehicle within Nigeria
• Wharf Landing Charge, where there are facilities to administer such fees
• A single parking permit sticker designed by the JTB and issued by the operators of the parks where vehicles are parked in the course of their journey
• Road Worthiness Certificate fee – collected by the States in which the vehicle operates

It should be noted that some of these items are already in existence in some States: such as Land Use Charge, etc. However, their implementation would increase the burden of doing business by companies having operations in many states.

Furthermore, the amendment did not state the amount to be collected by each State or tier of Government. Ordinarily, it would have been expected that there should be a law, on the fees, rates to be paid, from the Lawmakers on the items before collection by Government Officials.

The 2015 Order of the Federal Government calls for concerns, as it appears to have given an approval to Laws passed by States prior to its existence, such as the Hotel Occupancy and Restaurant Consumption Law 2009 of Lagos State, the Ogun State Commercial Vehicle (Haulage) Fees (Amendment) Law 2013, etc.

Furthermore, following the Taxes and Levies (Approved List for Collection) (Act Amendment) Order 2015, some State Governments had passed Laws empowering them to impose taxes and levies on companies, such as:

• Kano State Revenue Administration (Amendment) Law 2017, which imposed a 5% Consumption Tax on goods and services sold/purchased or consumed in any Hotel, Restaurant, Eatery, Bakery, Takeaway, Suya spot, Shopping mall, Store, Event centre and other similar business.
• Kogi State Board Of Internal Revenue, Administration, Harmonization Of Taxes, Duties, Levies, Rates, Fees And Charges Due To The State And Revenue Appeal Tribunal Law 2017, which, among others, imposed a Development Levy of up to N50million on Cement Manufacturers, N60million on Telecommunications, and different amounts on other Businesses. It also imposes a Hotel, Restaurant or Event Centre Consumption tax of 5% excluding those liable to Sales tax also collected by the Internal Revenue Service of the States.

It should be noted that our Laws are expressly against double / multiple taxation as stated by the Supreme Court in Attorney General of Ogun State vs. Aberuagba and Ors.  Other Authorities are: Attorney General of Lagos State vs. Eko Hotel & Or; Nigeria Soft Drinks vs. Attorney General of Lagos State.

We note that irrespective of the provisions of 2nd Schedule (Part II) paragraphs 9, 18 and 19, of the 1999 Constitution (as amended) which authorise a State House of Assembly to make laws for the collection of any tax, fee or rate, or to make laws for the industrial, commercial or agricultural development of a State, the various States in Nigeria do not have the power to impose consumption tax or sales tax, irrespective of the toga ascribed to it, on sale of goods and provision of services within the state. This is because VAT is a consumption tax and same is collectible by the Federal Government (and shared among the states) in respect of sale of goods and provision of services within the federation.

Therefore, by implication of the doctrine of covering the field as held by the Supreme Court in the case of Attorney General of Ogun State v. Aberuagba, where identical legislations are made by a State and by the Federal Government, the State Law must give way to the Federal legislation. Definitely, the intention of the Amendment Order cannot be to duplicate VAT. The consumption tax imposed by the law, same already covered by the VAT Act, is unconstitutional and cannot be collected by any State in Nigeria.

In conclusion, there is the need for a review of the Taxes and Levies (Approved list for collection) Act (Amendment) Order of 2015 or the Court should be invited to consider the following, among others:

• Whether an Order of the Federal Government, not being an Act of the National Assembly, can overrule the position of the law as stated in the Supreme Court in the case of Attorney General of Ogun State v. Aberuagba?
• Whether multiple taxes, in whatever name or toga i.e. VAT, Sales tax, Consumption tax, can and should be imposed by Government on the same produce, goods and services?
• Whether a State in Nigeria cannot impose consumption tax or any other tax which has been covered by the VAT Act or any other Act and is being paid to the Federal Government?
• Whether the Laws of the States can override Federal Enactments and judgments of the Supreme Court?