This question is prompted by the news of the huge tax bill (N248 million, reduced from an initial sum of N1.2 billion) recently slammed by the Tax Appeal Tribunal on a former President of the Nigerian Bar Association, Chief J.B. Daudu, SAN. Reportedly made up of arrears of Withholding Tax and Value Added Tax, for the years 2010 – 2017, the said assessment is virtually unprecedented, at least for a professional – let alone a legal practitioner of Chief Daudu’s stature. Accordingly, few would be surprised if he fights it all the way to the Apex Court.
I believe the news brings to the fore, the taxing powers of the National Assembly under the Constitution. This appears to be straight forward enough, at least if the provisions of Item 59 of the Exclusive Legislative List are anything to go by. Read along with Section 4(3) of the Constitution, they simply state that the National Assembly shall have the exclusive power to legislate on “taxation of profits, incomes and capital gains, save as otherwise provided for by the Constitution”. Pursuant to this provision, the Assembly enacted the Federal Inland Revenue Service (Establishment, etc.) Act, 2007, which establishes the Federal Board of Inland Revenue, and empowers it to enforce the provisions of the seven different tax laws, inter alia, listed in the Schedule thereto. These include the Companies Income Tax Act, the Petroleum Profits Tax Act, the Personal Income Tax Act, the Capital Gains Tax Act, the Value Added Tax Act, the Stamp Duty Act, the Taxes and Levies (Approved List for Collection) Act.
So much for the statute law. If this was the end of the matter, case closed. Alas, it is not, as we have to contend with case law or judicial precedent. In this regard, it appears that very few people are aware that, on the 11th of December, 2020, the Federal High Court, sitting in Port-Harcourt, Rivers State (in EMMANUEL UKALA v FEDERAL INLAND REVENUE SERVICE (2021) 56 TLRN 1, held that the taxing powers of the National Assembly were restricted to only those expressly mentioned in the Constitution, i.e., incomes, profits, capital gains and stamp duties on companies – and excludes value added tax, which is not mentioned therein. It is evident that, in arriving at this conclusion, the court placed an unduly restrictive construction on the aforesaid constitutional provisions. This is odd, as it is trite law that the Constitution should be given a broad and liberal interpretation: NAFIU RABIU v THE STATE (1980) 8-11 S.C. (Reprint); BRONIK MOTORS v WEMA BANK (1983) 6 S.C. 158.
Having said this, however, it is entirely plausible that the court was swayed by the established judicial policy to construe tax statutes strictly: 7-UP BOTTLING CO. v LAGOS STATE INTERNAL REVENUE BOARD (2013) 2 NRLR 10-5. This is an extension of the principle that expropriatory statutes should be construed contra proferentum. This means that if is there is any ambiguity therein, it should be resolved in favour of the subject or tax-payer, and against the State: AFOLABI v GOVERNOR OF OYO STATE (1985) 2 NSCC pt. II pg. 1151; EZE v GOVERNOR OF ABIA STATE (2010) 15 NWLR pt. 1216 pg. 3254; OKOTIE-EBOH v MANAGER (2004) 16 NWLR pt. 905 pg. 242. This one is likely to run and run.
Beyond the foregoing, though, I believe that a more fundamental issue is the capacity, vel non, of the National Assembly to tax an activity in respect of which it lacks the power to regulate, substantively. By this, I refer to the on-going practice of the Federal Inland Revenue Service of enforcing the provisions of the aforesaid tax laws in respect of incomes, profits, capital gains and stamp duty which are derived from other incidents of trade and commerce which are not provided for under the Constitution. My position is premised on the fact that the Constitution – in Item 62 of its Exclusive Legislative List – has specified the types of trade and commerce in respect of which the Assembly is competent to legislate. For the avoidance of doubt, they are as follows:
“Trade and commerce, and, in particular:
(a) trade and commerce between Nigeria and other countries, including import of commodities into and export of commodities from Nigeria, and trade and commerce between States;
(b) establishment of a purchasing authority with power to acquire for export or sale in world markets such agricultural produce as may be designated by the National Assembly;
(c) inspection of produce to be exported from Nigeria and the enforcement of grades and standards of quality in respect of produce so inspected;
(d) establishment of a body to prescribe and enforce standards of goods and commodities offered for sale;
(e) control of the prices of goods and commodities designated by the National Assembly as essential goods or commodities; and
(f) registration of business names”.
In ATTORNEY-GENERAL OF OGUN STATE v ABERUAGBA (1985) 1 NWLR pt. 3 pg. 395, the Supreme Court held that identical provisions in Item 61 of the 1979 Constitution were words of limitation, not of emphasis. In other words, the National Assembly was (and is) incompetent to legislate on any incident of trade and commerce, which is not captured within those provisions. This includes, in my view, any law by which the Assembly purports to impose any tax on such activity. I believe that this view is valid, notwithstanding the temptation to construe the provisions of Item 59 as special, whilst those of Item 62 are general. In other words, any such inclination should be rejected as illegitimate, for the simple reason that it is illogical to purport to tax the outcome or product(s) of an activity, which, in itself, the National Assembly is incompetent to regulate. I believe it is either all or nothing, and you can’t have one without the other.
This argument is borne out by the definitions of ‘trade’ and ‘commerce’, as follows, respectively:
‘Trade’ is defined (by Adam Hayes), as:
“A basic economic concept, involving the buying and selling of goods and services with compensation paid by a buyer to a seller, or the exchange of goods and services between parties. Trade broadly refers to transactions ranging in complexity from the collectors, to multinational policies to set protocols for imports and exports between countries. Almost every kind product can be found on the international market, including currencies. Services are also traded: banking, tourism, consulting and transportation. A product that is sold to the global market is an export, and a product that is bought from the global market is an import.”
As for ‘Commerce’, it is defined (by James Chen), as “Generally (referring) to the exchange of goods, services or something of value between businesses or entities. It refers to the macro-economic purchases and sales of goods and services by organisations. Commerce is a subset of business that focuses on the distribution aspect of business, as opposed to the production side. The buying or selling of a single item is known as a transaction, whereas all the transactions of that item in an economy are known as commerce. E-commerce is a variant of commerce, in which goods are sold electronically on the internet. Most commerce is conducted internationally, and represents the buying and selling of goods between nations”.
I believe that the foregoing definitions put it beyond doubt, that the case of ABERUAGBA applies to foreclose any possibility that the National Assembly is competent to regulate (or tax) any trade or commerce which is not specified in Item 62 of the Exclusive Legislative List of the Constitution. This is all the more so, I believe, because the Constitution has spelt out the plenitude of the powers which it confers on the National Assembly. In this regard, in ATTORNEY-GENERAL OF BENDEL STATE v ATTORNEY-GENERAL OF THE FEDERATION (1981) 10 S.C. 131, the Apex Court held, inter alia, that “under a Constitution conferring specific powers, a particular power must be granted, or it cannot be exercised”. This means that, to the extent that the Constitution does not empower the National Assembly to regulate non-International/non-Inter-State trade and commerce, the Assembly cannot impose any tax on the incidents/constituents of such transactions.
Conclusion
The on-going public hearings into the reform of the 1999 Constitution, are a rare opportunity to correct some of the glaring anomalies in that important document. Nowhere is this intervention more urgently needed than in its, frankly, sketchy provisions dealing with the taxing powers of the National Assembly. Given the established judicial policy (right up to the Apex Court) of construing tax provisions strictly, it is an obvious policy imperative to put the constitutional powers of the Assembly beyond conjecture by stating them explicitly ex abundantia cautella – out of an excess of caution. Otherwise, no one should blame any court which is seised with a tax recovery claim, if it seemingly lets a defendant ‘off the hook’ or otherwise gives him or her a so-called ‘soft-landing’ based on the present anomalous state of our tax laws – including, worryingly, in the Constitution.
