Logic And Philosophy Of The Hot Cake Called VAT

By Stanley Maduabuchi Ofoegbu

But what is the argument of the other side? That most of the parties crying blood about the collection of VAT contributed in making the law directly or indirectly. That the said law has also been in operation for ages and all of a sudden, a state is seeking to upturn the law. The other side is also of the view that the federal government has the exclusive powers to make law on taxes by virtue of part 1 item 59 of the second schedule of the constitution of Nigeria. The other side argued further that the even the concurrent legislative list, did not empower states to collect VAT rather, it only empowers them to make laws subject to the powers of the National Assembly regarding the collection of tax by local governments. Unfortunately, the other side did not state the type of taxes states can legislate on neither did he state the provision of the law that made the laws enacted by states house of Assembly on taxation subject to that  made by the National Assembly. In further support of the argument, the case of A.G Lagos state v Eko hotels was cited.

It is firmly settled in A.G Abia state and Ors v A.G.F among other decided line of authorities that the constitution is the numero Uno of all laws. It is the litmus paper upon which all laws are tested. All laws draw their inspiration from it such that any other law inconsistent with it shall pursuant to section 1(3) of the constitution be void to the extent of its inconsistency. Accordingly, it is immaterial who is or was instrumental to the making of the law. It is also immaterial who spearheaded the making of the law. What matters is the constitutionality of the law and nothing more. Once it is established to be inconsistent with the mother law being the constitution, it must give way irrespective of how long it has been in operation. In this regard, the argument of the other side is likened to water in a basket.

In Elelu-Habeeb v A.G.F (2012) 13 NWLR (PT) 1318, the Supreme Court held among others that a particular section of the constitution should not be interpreted in isolation with other provisions. In other words, the law should be read holistically to arrive at a proper interpretation devoid of absurdities.  Item 59 of the second schedule of the Constitution that provides for the exclusive legislative list mentioned specifically the types of taxes the federal government can legislate upon. Income taxes, profit and capital gain tax, stamp duties as contained in item 58 except as otherwise prescribed by the constitution.

Question

Where the hell is value added tax VAT? Why was it omitted? Were the framers of the constitution not aware that such taxes do exist?

The law is firmly settled in lines of authority that the express mention of one thing is the implied exclusion of that not mentioned. See Ogbuinya v Okudo (1976)6-9 SC, Osahon v FRN (2003)16 NWLR (845)87. On this, failure to include VAT in the items as provided in item 59 is a clear indication that the National Assembly lack powers to legislate on it. Interestingly, neither item 7 of the concurrent legislative list nor part 9 of the legislative list mentioned value added tax VAT. However, item 9 of the legislative list provides that a house of Assembly may, subject to such conditions as it may prescribe, make provisions for the collection of any tax, fee or rate or for the administration of the law providing for such collection by a local government council. A careful reading of the section shows that the law to be made by a state on taxation is not subject to the laws to be made by the National Assembly provided they are made on issues to which they are constitutionally entitled to make. Having excluded VAT from the exclusive legislative list, the only interpretation that can be inferred from item 59 of the exclusive list and item 7 and 9 of the concurrent list is that the VAT falls under ‘any tax ’as used in item 9 of the concurrent legislative list to which the state government can make laws empowering the local government to collect. By this, is of no man’s business how the state will want to be collecting its tax including VAT. At this point, it is submitted that the argument from the other side is misconceived for concurrent legislative list, must be interpreted alongside the exclusive legislative list being part of the same constitution. Also, the fact that an item appears in the concurrent legislative list, does not mean that at all time, the Federal government will always have its way because it has taken steps already states. Such interpretation will mean turning the law on its head. See the rationale in habib’s case above.

Question

What about the case of A.G Lagos v Eko hotels limited (2017) 12 SC (part1)107 cited by the other side in the support of the ideology that the federal government should collect VAT?

Our legal system is guided by principles and laws. The hallowed principles of judicial precedence have been part of law for ages. According to the said principle, when a matter is before the court, the decision handed down by the court over similar issues in the past is to be followed by that court and other courts when faced with similar issues and fact. Accordingly a party is not allowed to cite any case of his choice irrespective of whether the case support his opinion or not or whether the case was decided by a superior court of record. Doing that will amount to wasting the judicious time of the court, misleading the court and stressing unnecessarily, parties on the other side of the divide. The issue before the court in A.G Lagos v Eko hotels was primarily about double taxation saga. The government of Lagos state was bent on collecting tax from Eko hotels for good and services pursuant to the consumption law of the state while the federal inland revenue service still collect the value added tax from the same body. The hotel got agitated and argued that it amounted to paying same tax twice on same services which is against the intendment of the law. The supreme held that by the provisions of VAT, the state government were not competent to make another law for the collection of VAT as that made by the federal government already covered the field.

Question

How is the above case relevant to the agitating issue? The current issue is on the constitutionality of the value added tax and nothing more. The question before the court in the above cited case was not on the constitutionality of the VAT Act 2004 now amended. What the court was called upon to determine was on whether there was indeed the issue of double taxation as claimed by Eko hotels. No doubt, the case above would have led to rest this burning issue if it had form part of the complaint from the beginning. In our adversarial system of fact finding, the court must at all times be an unbiased arbiter. The duty of the court is to decide on the issue presented before it and nothing more. A court has no power to make a case for a party even where the court is of the opinion that the case is or was wrongly framed. Doing other wise, will mean taking over the case of the parties which will surely render its decision a nullity. In Eko hotels case, the court was never called upon to determine whether the VAT Act was in line with constitutional provisions. Accordingly the mere fact that the apex court held that the federal government by virtue of the VAT Act covered the field cannot in any means be extended to mean that the law is valid until such issue falls for determination. Hence, the case as cited by the other side over this burning issue of VAT is totally irrelevant and academic.

While the heat continues, another school of legal thought has opined that the mere fact that the VAT Act was in operation even before the constitution, is of no moment. According to the school, though the Act appeared to be reserved by section 315 of the constitution, the Act can only be valid with respect to issues that the National Assembly can competently legislate on and not otherwise. These opinions appear sound and I agree with them. The school is also of the opinion that the issue of VAT is neither in the exclusive legislative list nor on the concurrent legislative list and in the absence of that, the only reasonable interpretation is that it falls under the administration of the local government which enables states to control. This argument is also sound. Adopting it as mine, I am in addition, of the firm view that section 315 (1) is relevant in the determination of this issue. The section provides as follows:

‘ subject to the provisions of this constitution, an existing law shall have effect with such modifications as may be necessary to bring it into conformity with the provisions of this constitution and shall be deemed to be

• an Act of the National Assembly to the extent that it is a law with respect to any matter on which the National Assembly is empowered by this constitution to make laws; and
• a Law made by a house of Assembly to the extent that it is a law with respect to any matter on which the house of Assembly is empowered to make laws’.

A careful reading of the above section shows that the mere fact that a law or an Act appears to exist before the operation of the Constitution, is not enough to make such Act or Law valid if it goes against the provisions of the constitution. In other words, such law exists subject to the approval of the Constitution being the mother of all laws. In addition, an important word as used in section 315 (1) to denote the status of all existing law is the word ‘modifications’.  Modification as used in the said section has been interpreted by the Constitution in section 315 (4) to include addition, alteration, omission or repeal. By this, any law existing before the constitution is subject to be altered or even repealed should it provisions be inconsistent with the provisions of the constitution by virtue of section 1 (3) of this constitution. Upon this ground, the provisions of the VAT Act is liable to be altered or repealed if the court found it to be offensive to the constitution of Nigeria and the mere fact that it existed before Abraham of the old will be of no moment. Accordingly, all arguments hinged upon the existence and seniority of the Act is merely academic and wasted.

Question

Will the answer remain the same if the VAT Act was specifically listed in the constitution?

To further show and demonstrate the fact that the constitution never supported the provisions of VAT despite being in existence before the coming of the constitution, the constitution deliberately omitted it in section 315 (5). The said section provide as follows;

Nothing in this constitution shall invalidate the following enactments, that is to say-

1. the National Youth service Corps decree 1993
2. the public complaint commission Act
3. the National security agencies Act
4. the Land use Act.

The above enactments have been interpreted by the court to mean an extension of the constitution. In other words, they are seen as forming part of the constitution. According to the proviso to the above enactments, the enactments shall not be altered or repealed except in accordance with section 9 (2) of the Constitution of Nigeria see the case of Oluwole Aluko v president and commander in chief of the armed forces of Nigeria and anor (2019) LCN 12939 (CA). Similarly, subsection 6 of section 315 of the Constitution of Nigeria 2011 as amended, provides as follows;

‘without prejudice to subsection (5) of this section, the enactments mentioned in the said subsection shall hereafter continue to have effects as a federal enactments and as if they related to matters included in the exclusive legislative list set out in part 1 of the second schedule to this constitution’. The proper question to be asked here is why VAT Act was omitted in subsection 5?  The VAT Act or decree came into being in 1993 just like the NYSC corps decree. Why did the constitution preserve others and elevated them to the status of the constitution leaving aside the VAT decree? What sin did the VAT decree commit to suffer neglect despite all constitutional amendments? Is this not an indication that the constitution never supported VAT Act to operate as a law of the National Assembly? Clearly, this underscores the decision of the apex court in Elelu Habib’s case that the Constitution should be read and interpreted holistically to form a better meaning. Accordingly, the further enactment and amendment of the VAT Act by the National Assembly is nothing but an act of Constitutional busy body. They were wastefully overzealous.

Furthermore on the issue of VAT, the federal Inland Revenue service in a publication stated that there are three main reasons why states cannot collect VAT. According to them, there are three main avenues for collecting VAT. The first is on imported items which are collected at the port of entry. The second is the one gotten when goods and services are sold and the third is the one from MDAs when contract are awarded either contract for construction or supplies of service. According to FIRS, no state government controls any port in Nigeria and therefore, it is difficult for state to collect the tax. This argument holds no water. All ports in Nigeria are located within different states of the federation. Value added taxes are being collected by human being not spirits or ghosts. There is no state in Nigeria called the federal government beside Abuja being the capital and the seat of government. What stops state from sending their men to different port location to collect the said taxes? What is so special about the mode of collection that cannot be managed by states? Unless there is a confession the federal inland revenue service are yet to make, this argument from them is class room based and of no moment. If it gets too bad, federal government should be made to collect VAT only on goods and services awarded and carried out by them only. It is totally against equity for a state that attaches too much holiness to it its affairs including business life to be benefiting from a state that is regarded as a sinful. He, who is sinning, should be allowed to reap the fruits of his sins alone. Even the Bible supports it. He, who builds a house, should live in it and children should be made to answer their father’s name. Peter ought not to rob Paul.

In conclusion, while we wait on the court to do justice by repealing the VAT Act, states that are against the move for collection of VAT by states should look inward and see how to generate revenue. They should make make their state conducive and attractive to attract investors instead of waiting to feed from National cake. Kano, kogi, Ebonyi among others should look inward. We what? We move.

Written By Stanley Maduabuchi Ofoegbu Esq, Phone: 08068515340, Email:ofoegbustanley72@gmail.com, Abuja