By A. S. Gidan-Wankey, Esq.

Value Added Tax (hereinafter called VAT) is a tax that is levied on a product repeatedly at every point of sale at which value has been added. That is, the tax is added when the raw materials producer sells product to a factory, when the factory sells the finished product to a wholesaler, when the wholesaler sells it onto a retailer, and, finally, when the retailer sells it to the consumer who will use it. VAT in Nigeria “is the tax payable on goods and services consumed by any person, whether government agencies, business organizations or individuals. It can also be said to be “a tax on spending or consumption levied at every stage of transaction” The buyer in each earlier stage of the product’s production is reimbursed for the VAT by subsequent buyer in the chain. Ultimately, the retail consumer pays the VAT.

It bears repetition tax being a pecuniary burden requires a valid tax regime for it to be imposed on a people. That is to say, there must be a valid law creating such tax, the tax authority (for instance, Federal Inland Revenue Service (FIRS) and States Board of Internal Revenue Service, as the case may be) who will have the power to asses, levy and administer the tax. This presupposes that the law must be “validly” enacted and by power duly derived to make such law i.e. the National Assembly (hereinafter called NASS) or State House of Assembly (hereinafter called HoA). The nagging question is: who has which power between the Federal Government and State Governments to collect VAT in Nigeria? Putting it in better perspective, which of the law-making body in Nigeria has the power to legislate on VAT; i.e between the NASS) and State HoA? Sure, for this question to be addressed effectively, mention must be on section 4 of the 1999 Constitution of the Federal of Nigeria which preaches thus:

Section 4

  • The legislative powers of the Federal Republic of Nigeria shall be vested in a National Assembly for the Federation, which consist a Senate and House of Representatives
  • The National Assembly shall have power to make laws for the peace, order and good governance 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
  • The power of the National Assembly to make laws for the peace, order and good governance of the Federation with respect to any matter included in the Exclusive List, shall save as otherwise provided in this Constitution, be to the exclusion of the Houses of Assembly of States
  • In addition, and without prejudice to the powers conferred by subsection (2) of this section, the National Assembly shall have the power to make laws with respect to the following matters, that is to say:
  • 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 extend prescribed in the second column opposite thereto and;
  • Any other matter with respect to which it is empowered to make laws in accordance with the provision of this constitution
  • 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
  • The House of Assembly of a state shall have power to make laws for peace, order and good governance of the state or any part thereof with respect to the following matter, that is to say;
  • Any matter not included in the Exclusive Legislative List set out in Part I of the Second Schedule to this Constitution
  • Any matter included 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
  • Any other matter with respect to which it is empowered to make laws in accordance with the provisions of this constitution”(underline mine for emphasis)

Judging from the constitutional delineation of legislative powers elegantly stated above, the legislative power of the Federal Republic of Nigeria is vested in the NASS, comprising the Senate and House of Representatives. Whereas, the legislative power of the states is borne in the State House of Assembly of each state being the component units of the federation. This position find anchorage in the case of Gadi V Male (2010) 7 NWLR Prt. (1193) P. 225. Most importantly and quiet telling, the power of NASS to make law is limited to the items mentioned in part I of the Exclusive Legislative List. The House of Assembly on the other hand, has the power ad infinitum to legislate on “any matter” not “expressly mentioned” in Part I of the Second schedule. As a point of reference, section 4 (6) (a) is reproduced hereunder:

  • The House of Assembly of a state shall have power to make laws for peace, order and good governance of the state or any part thereof with respect to the following matter, that is to say;
  • Any matter not included in the Exclusive Legislative List set out in Part I of the Second Schedule to this Constitution” (emphasis mine)

Additionally, it is deeply rooted on constitutional basis that the state is empowered to make law on any item mentioned in the Concurrent Legislative List except where the NASS “validly” enacted a law on such matter. At this juncture, I seek to highlight the relevant items relative to tax under both the Exclusive Legislative List and Concurrent Legislative List with a view to x-raying what tier of government has the power levy VAT. Part I of the Second Schedule to the Constitution exclusively empowered the NASS to legislate on the following items:

  1. Stamp duties (item 58)
  1. Taxation of incomes, profits and capital gains, except as otherwise prescribed by this constitution (item 59)

In the same footing, Part II of the Second Schedule of to the Constitution donates to the House of Assembly the power to legislate on item 7 which preaches thus:

In the exercise of its powers to impose any tax or duty on-

  1. Capital gains incomes or profits of persons other than companies;
  2. Documents or transactions by way of stamp duties

A prudent perusal of the simplistic content of item 59 of Part I of the Second Schedule reveals that, the only taxes donate to the Federal Government are “Taxation of incomes, profits and capital gains, except as otherwise prescribed by this constitution”. Paradoxically however, a graphical examination of item 7 of Part II leaves no one in doubt that, state has the power to legislate, levy and administer VAT. My authority is section 4 (6) (b) referenced above. The governing consideration here, is, items 58 and 59 underscores the only taxable areas assigned to NASS to legislate which covers taxes such as: stamp duties tax of incomes, profits and capital gains and do not mention VAT. In AG Federation F V AG Lagos State (SC. 340/2010) the SC held that the FG lacks the constitutional powers to legislate upon matters that are on residual legislative list, and are the responsibilities of the state.

A mindful point painted by the well-known principle of statutory interpretation “expressio unius est exclusion alterius is applicable in the circumstance. That is, “where one or more things of a class are expressly mention, others of the same class are excluded’ I submit that, it is obvious from the constitutional provision that VAT is excluded from the items 58 and 59 of the Exclusive Legislative List. Thus, a State HoA has the power to legislate on VAT same having not mentioned in the Exclusive Legislative List. And, item 7 therefore does not come under the Federal Govwernment’s control. Ergo It is residual matter, falling squarely under the purview of the states alone. Item 59 of the Second Schedule is unambiguous in that, it is specific about the class of taxes Federal Government can exclusively levy. While item 7 of part II is also unequivocal on the taxes the HoA can legislate upon. Nothing in that item suggests any concurrent power let alone to call the application of doctrine of covering the field. Thus, nothing is ambiguous in these provisions as the literal rule of interpretation as settled in the case of Abacha V FRN (2014) 6 NWLR (Prt 1402) P.43 preaches.

Far more injurious, the power of NASS to legislate is not open-ended. The legislative mandate does not travel beyond the confine of the Exclusive Legislative List. Thus, NASS cannot swim legislate beyond the purview of the powers given to it by the Constitution. The doctrine of “covering the field” operates only where both the NASS and State HoA possess the power to legislate for. The doctrine has a legal efficacy only where the FG made a law on such item. Therefore the NASS cannot enact any law on any items belonging to the state. Even if it makes that law, such law could not be considered valid within the meaning of section 4 (5) which stipulate that the law must be “validly made by the National Assembly”. Therefore, the VAT Act, 2004 enacted by NASS stands to collapse altogether. It is an ultra vires act of the NASS.

To drive my point back home, the operative VAT Act, 2004 passed by the NASS is completely starved of a constitutional basis, notwithstanding the quantum of diligence, dexterity, artistry, and sophistry injected in that piece of legislation by NASS. This is because; the power to legislate on VAT is clinically and exclusively donated to the State House of Assembly pure and simple. As a consequence, VAT Act, 2004 is undoubtedly marooned in an intractable web of nullity and unconstitutionality. My authority is the case of FRN V CHIEF ADEBIYI OLAFISOYE (2004-2007)3 LLRN P. 1011AT P. 1058 par45 where the court held that “an Act is ultra vires the National Assembly when is enacted outside the legislative powers of the National Assembly”

Therefore, time has come for a complete turn-around unless the States Government signed a pact with the devil and sentenced themselves to perpetual servitude and financial stress. The states Government must wake up from their self-immolating slumber and chart a new course and direction given to them under the Constitution by immolating from the almighty Rivers State Government thereby sponsoring executive bill to the State House of Assemblies to legislate on VAT. It is the down of the new morning for the States Government.