Taxing Powers under Nigeria's Federalism

1.0.?????????? INTRODUCTION

?The tax system in Nigeria is shaped by the constitutional framework which delineates legislative powers into the Exclusive and Concurrent Lists.[1] The Exclusive Legislative List generally grants to the National Assembly of Nigeria the power to legislate on customs and excise duties, export duties, stamp duties, incomes, profits, and capital gains, and trade and commerce.[2] The Concurrent Legislative List empowers the National Assembly, by a law, ?to delegate the collection of certain taxes to the States.[3] The Concurrent List also covers the authority of State Houses of Assembly to establish laws that allow local government councils to collect taxes, fees, or rates.[4] Pursuant to these powers, several tax laws have been enacted by both the National Assembly and State Houses of Assembly in relation to tax-related matters in the country.[5]

?As noted in the previous article, taxing powers are intertwined with legislative competence under the Nigerian constitution. It is therefore apposite to have some basic understanding of the concept of federalism, what it is and how it operates or should operate and its impact on taxing powers, before discussing the question of taxing powers.

?From the outset, it should be appreciated that the Nigerian federalism has some unique features. Traditionally, federalism presupposes a structure of governance involving sharing of power between the central government and the federating units. According to the Black’s Law Dictionary, federalism is the legal relationship and distribution of power between the national and regional governments within a federal system of government.[6]

?However, in Nigeria this relationship is among three tiers of government, namely, the national government, state governments and the local government councils,[7] although the Constitution of the Federal Republic of Nigeria 1999 (1999 Constitution) describes Nigeria as a federation of States and the federal capital territory (representing the central government). In this regard, section 2 of the 1999 Constitution provides that:

"?(1) Nigeria is one indivisible and indissoluble sovereign state to be known by the name of the Federal Republic of Nigeria.

(2) Nigeria shall be a Federation consisting of States and a Federal Capital Territory."

?By section 7(1) of the 1999 Constitution, the system of local government by democratically elected local government councils is under the Constitution guaranteed and the Government of every State is to ensure their existence under a Law which provides for the establishment, structure, composition, finance and functions of such councils.

?The Constitution bestows certain functions upon local government councils in the context of the Fourth Schedule to this Constitution.[8] The National Assembly is to make provisions for statutory allocation of public revenue to local government councils in the Federation; and the House of Assembly of a State is to make provisions for statutory allocation of public revenue to local government councils within the State.[9]?

2.0.?????????? THE CONCEPT OF FEDERALISM

?Mowoe, recognising that definitions are often fraught with pitfalls because of their inability to encompass all forms of the particular concept or idea sought to be defined, nevertheless asserts that the concept of federalism relates to the division of power of between a national government and other regional or state governments and sometimes, local government.[10] According to the learned author, such power may be shared in various ways, sometimes with a stronger centre (like Nigeria) or with a weaker centre which is often referred to as confederation.[11]

?In Nwabueze’s view, federalism as an arrangement whereby the powers of government within a nation or country are divided between a national, country-wide government, and number of regionalised governments in such a way that each exists as an entity separately and independently of the other, and operate directly on the persons and property within its territorial area, possessing a will of its own and apparatus for conducting its affairs, sometimes on matters exclusive to it.[12]

?Nwabueze believes that the actuality of a federalism is a function of certain factors/principles, to wit:

?

????????????????????????????????????????????? i.??????????? a supreme Constitution,

??????????????????????????????????????????? ii.???????????? techniques for division of powers,

????????????????????????????????????????? iii.??????????? equality between the various regional governments,

????????????????????????????????????????? iv.??????????? separateness and independence of each government,

??????????????????????????????????????????? v.???????????? mutual non-interference, and

????????????????????????????????????????? vi.??????????? an appreciable number of regional governments between whom the power will be shared.[13]

?This definition is said to be defective because it fails to recognise variations of a federalist state by insisting on the existence of certain basic defining principles of a true federalism.

?According to Ojo, federalism is capable of different meanings and conceptions, depending on the perspective and background of the perceiver. He claims that there are writers who emphasise the form of the Constitution and certain institutions the absence of which makes any discussion on federalism futile. On the other divide, is another school of thought which holds that federalism is a product of social forces and that the ultimate political structure is dependent on those forces.[14] The learned writer also identifies a third school of opinion of federalism. This school believes that party system is a crucial federal variable while another is that inter-governmental institutions and arrangements are critical for structuring political and social interaction. He concludes that with the nebulous and uncertain form and content of federalism, it is better to avoid argument about definition until theory and practice could be harmonised satisfactorily especially in developing countries which are presently laboratories of political and constitutional activities.[15]

?The American writer, William Livingstone opines that:

?"The essential nature of federalism is to be sough not in the shading of legal and Constitutional terminology, but in the forces – economic, social, political, cultural – that made the outward forms of federalism necessary…. The essence of federalism lies not in the Constitutional or institutional structure but in the society itself. Federal Government is a device by which the federal qualities of the society are articulated and protected."[16]

?So, in Livingstone’s view, it is the factors that impel the formation of a federation that determines its nature. Reacting to this assertion, Mowoe states that the implication is that since various factors necessitate the formation of federations in various nations, their nature, form and scope must differ necessarily. Niki Jobi, JSC (of blessed memory) seems to agree with this view when he stated in the case of Federal Republic of Nigeria v Anache,[17] that there is no universal agreement as to what federalism is. According to the learned justice, a federal government is what the Constitution says it is, noting that the word federalism may be knit in theories of political science, it conveys different meanings in different Constitutions, as the constitutional arrangements show, particularly in the legislative lists.

?The conclusion therefore is that federalism is not amenable to a universal definition but must be situated within the socio-political as well as the economical arrangements and realities of a defined territory or nation. Notwithstanding, there are salient features of federalism which include the existence of at least dual government at the central and state level, separation of powers, a written constitution, supremacy of the constitution, and independence of judiciary.

?The lesson here is that the definition of federalism is not closed like most legal concepts. For that reason, Nigeria practices a version of federalism suitable to its environment and realities, each tier of governments has its legislative competence. There is no monopoly of legislative competence in a federalist system.

3.0.?????????? TAXING POWERS IN NIGERIA

?Nigeria is governed by a federal system, hence its fiscal operations also adhere to the same principle, a fact which has serious implications on how the tax system is managed. The importance of taxes for any tier of government (including local governments) was reiterated in the case of Nichols v Ames[18] when the court stated that taxation is necessary to the existence of and prosperity of a nation.

?Taxing powers denote the power to impose and collect tax(es) from targeted taxpayers. This definition implies that taxing powers operate at two levels: first, the power to impose tax; and secondly, the power to collect tax. Though the two powers are often confusingly or interchangeably used in our tax laws, technically, they are not the same thing. The power to ‘impose’, ‘charge’, and ‘levy’ taxes is different from the power to ‘collect’, ‘assess’, and administer taxes. Though these separate taxing powers have not been, unambiguously, defined by either the Constitution or any tax legislation in Nigeria, the power to ‘impose’, ‘charge’ or ‘levy’ taxes relates to the power to determine the rate at which tax is chargeable; while the power to ‘collect’, ‘assess’, and ‘administer’ is merely administrative. [19] Mustapha, JCA in Nigerian Agricultural & Co-Operative Bank v Jigawa Board of Internal Revenue,[20] stated that in the context of the taxing provisions, the words to ‘impose’ was active and connoted legislative authority while to collect was passive and merely administrative.

?In Nigeria, taxing power is intertwined with legislative power under the Constitution. A detailed examination of the 1999 Constitution will reveal that the Constitution is quiet on the question of taxing powers. Unlike what obtains in other Constitutions, there is no provision in the 1999 Constitution directly empowering the Legislatures to impose tax in Nigeria. Thus, the reasonable conclusion is to imply that taxing powers must extend from the legislative competence of each tier of government as provided under the Constitution. So, to understand taxing powers in Nigeria, it is necessary to understand the division of legislative powers under the Constitution.

?A Constitution has been defined as ‘the fundamental and organic law of a nation or state that establishes the institutions and apparatus of government, defines the scope of governmental sovereign powers, and guarantees individual civil rights and civil liberties’.[21]The Constitution can also be seen as a written instrument embodying the fundamental and organic laws of the state, together with any formal amendments. The Constitution squarely fits into the two definitions when combined.

?The 1999 Constitution, although it is christened by its framers and promulgators as the ‘Constitution of the Federal Republic of Nigeria’ has been described as bequeathing on Nigeria a highly centralised system of government.[22] The centralised nature of the Constitution can be seen in the fact that the federal government has power to legislate exclusively on 68 matters. This is in addition to 30 items under the concurrent legislative list[23] on which both the National and State Houses of Assembly may legislate subject to the principle of covering the field.[24]

?Generally, the 1999 Constitution as it relates to fiscal[25] matters, may be broadly divided into tax and non-tax provisions. The tax provisions are those that are directly related to and provides for taxation while the non-tax provisions relate generally to matters of public finance. The focus here is on the former.

3.1.?????????? Division of Taxing Powers

By section 4(1) of the Constitution, the legislative powers of the Federal Government is vested in the National Assembly made up of a Senate and a House of Representatives with power to make laws for the peace, order and good government 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 the Constitution to the exclusion of the Houses of Assembly of States.[26] In addition and without prejudice to the powers conferred by section 4(2) the National Assembly has power to make laws with respect to:

"(a) 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 extent prescribed in the second column opposite thereto; and

(b) any other matter with respect to which it is empowered to make laws in accordance with the provisions of this Constitution."

?On the other hand, the Constitution in section 4(6) prescribes the legislative competence of the State as follows:

?"The legislative powers of a State of the Federation shall be vested in the House of Assembly of the State.

?The State House of Assembly is empowered to make laws for the peace, order and good

government of the State or any part thereof in respect of

(a) any matter not included in the Exclusive Legislative List set out in Part I of the Second Schedule to this Constitution.

(b) 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

(c) any other matter with respect to which it is empowered to make laws in accordance with the provisions of this Constitution."

?With regards to local government councils, section 7(5) prescribes certain minimum functions which each House of Assembly must confer on them. These include ‘assessment of privately owned houses or tenements for the purpose of levying such rates.’ This does not, in any guise, amount to legislative competence. In other words, the 1999 Constitution does not provide for the legislative power of the local government councils. The Constitution only guaranteed their existence by a democratic system under a Law which provides for the establishment, structure, composition, finance and functions of such councils.[27] In Esin v Attorney-General, Cross River State,[28] the court observed that the provision of section 7(1) of the Constitution made it a compulsory non-discretionary obligation on the part of the States to establish local government councils under a Law.

3.2.?????????? Taxing Powers of the Local Government Councils

The functions conferred on local government councils are inclusive of those set out in the Fourth Schedule to the Constitution. The State governments are not expected to encroach on such constitutionally delimited spheres.[29] It should be iterated that in the realm of tax, local governments’ assessment of tenements is as prescribed in a State law. They do not have legislative and taxing power. They can only administer tenements but the imposition is done by the State. ?

?In Eti-Osa Local Government v Rufus Jegede & Anor,[30] the Court of Appeal, while interpreting the taxing powers of a local government under the Taxes and Levies (Approved List for Collection) Act 2004, upheld the decision of the High Court that a local government did not have the power to enact a bylaw ‘imposing’ any type of tax that was outside the powers granted to them (local governments) by the Taxes and Levies (Approved List for Collection) Act 2004 Act in Part III of its Schedule. Similarly,? the Court of Appeal in Peace Mass Transit Limited v FCT & Ors[31] declared the FCT imposition of an N50 insurance levy on every passenger taking off from Abuja illegal because there was no such authorisation in Part II of the Schedule to the Taxes and Levies (Approved List for Collection) Act 2004 or any other act enacted by the National Assembly.

?On the other hand, in Knight Frank & Rutley (Nig.) v Kano State[32] both the Supreme Court and the Court of Appeal held that on the authority of paragraph 1(b) and (i) of the Fourth Schedule and section 7(5) of the Constitution, only a local government had the power to assess, collect, and impose the rates – a property tax – on privately owned properties.

?The importance of taxes to any tier of government cannot be over-emphasised. However, the situation of the Local Government in Nigeria has remained quite abysmal despite the constitutional guarantee of their existence. The implication of section 7(3) & (5) and the Fourth Schedule of the 1999 Constitution is that the local government councils have no power to impose taxes. What they have are delegated powers to collect taxes stipulated in the Fourth Schedule of the Constitution resulting in some states usurping the constitutionally stipulated fiscal functions of the local governments rather than making the necessary laws delegating the tax powers to the local governments as stipulated under the Constitution. A good example is found in the case of Attorney-General of Cross River State & Another v Matthew Ojua[33] where the Cross River State Government enacted the Urban Development Law and sought to assess and collect rates which, under the Constitution, was specifically reserved for the local government. The Court of Appeal held that:

?"……A close look at the Urban Development Law(of Cross River State) shows that it show that it is the function assigned to the Local Government Council in paragraph 1(j) of the Fourth Schedule to the Constitution that is being usurped by the State Government which deals the assessment of privately owned houses or tenements for the purpose of levying the rates and the collection of same by the Commissioner of Finance in order to carry out the functions entrusted to the Urban Development Authority. In KNIGHT FRANK v. RUTLEY (Nig) v. A-G, KANO STATE (1998) 7 NWLR (Pt.556) 1, the Supreme Court had to consider whether the Kano State Government was competent to enter into contract for valuation and collection of tenement rates. The court held by a majority of 4-1 that by virtue of Section 7(5) of the Constitution of the Federal Republic of Nigeria 1979 the functions which can be conferred by law on Local Government Councils are intended by the Constitution to include the function set out in the 4th Schedule to the Constitution. Paragraph 1(b) and (j) of the 4th Schedule states that the main functions of a Local Government Council are collection of rates, radio and television, assessment of privately owned houses or tenements for the purpose of levying such rates as may be prescribed by the House of Assembly of a State from the foregoing the collection of rates on rateable hereditaments and the assessment of rates on privately owned houses are subjects within the responsibilities of Local Government Councils. In the lead judgment delivered by Uwais CJN he held at page 18 as follows: 'It is clear from the foregoing that the collection of rates on rateable hereditaments and the assessment of rates on privately owned houses are subjects within the responsibilities of Local Government Councils'".

3.3.?????????? Taxing Powers of the Federal Government and State Governments

To determine the taxing powers of the National Assembly and the State Houses of Assembly, recourse must be had to the exclusive list, the concurrent list and specific provisions in the Constitution. Powers of the National Assembly to legislate over tax matters are confined to matters specified in the exclusive legislative list. These powers are contained in items 16 (customs and excise duties), 25 (export duties), 58 (stamp duties), and 59 (taxation of incomes, profits and capital gains).

Meanwhile, a calm examination will reveal that none of items 7, 8 and 9 in the concurrent legislative list allocates any power to impose tax to either of the legislative bodies. Rather, in item 7 the Constitution gives power to the National Assembly to make laws to empower the states to collect the taxes set out therein; and in item 9 the Constitution gives power to the House of Assembly of a State to make laws enabling local government councils within the relevant state to collect any tax which the House of Assembly has power to impose.

?Powers set out in the concurrent list are not in addition to the taxing powers of the National Assembly as set out in the exclusive list. The listing of taxing powers of the National Assembly in the concurrent list is intended merely to provide guides or direction on how the substantive taxing powers of the National Assembly as contained in items 58 and 59 of the exclusive list may be exercised with regard to the collection of taxes created in the exclusive list.

?In fact, the concurrent list has not provided for a co-existence of taxing powers between the National Assembly and the House of Assembly. On this point Professor Nwabueze, stated:

?"Perhaps the most remarkable feature of the concurrent legislative list is that there is no co-existence of power at all in respect of four of the five ... matters included therein – allocation of revenue (item A), antiquities and monuments (item B), archives (item C) and collection of taxes (item D). The delimitation in the schedule restricts the federal and state governments to specific aspects of the matters, thus making those aspects exclusive to the one or the other. The result is that, while these matters are dealt with under the concurrent legislative list, their inclusion therein in no way implies that the power of the federal and state governments to act over any aspect of them co-exist together."

?Thus, the powers of the National Assembly to impose taxes (or to make laws for the imposition of taxes) is limited to items 16, 25, 58 and 59 of the exclusive list presently contained in the exclusive legislative list since the concurrent list confers no additional power to impose tax on the National Assembly.

?At most, the legislative powers of the National Assembly to impose taxes may be stretched under item 68 of the exclusive legislative list. This particular item empowers the National Assembly to legislate on ‘any matter incidental or supplementary to any matter mentioned elsewhere in the list’. The power under this item is however circumscribed by and limited to items in the exclusive list. The power to legislate on incidental and supplementary matters cannot go outside the specific items within the list.

?For the avoidance of doubt, under the Part II of the Second Schedule titled “Concurrent Legislative List”, the following fiscal provisions can be found:

?"Paragraph 1 and 2 of the Part II provides that the National Assembly and State House of Assembly may by an Act or law make provisions for division of public revenue grant of loans and imposition of charges upon the Consolidated Revenue Fund of the Federation or that of the State or any other public fund of the Federation or the state respectively."

"Paragraph 7 provides that the National Assembly may in exercise of its power to impose any tax or duty authorize or delegate to the states power to collect those taxes."?

It is clear that there is no express provision in the 1999 Constitution directly granting States powers to impose taxes and there is no tax specifically reserved for the State Governments. To decipher the taxes which the States are empowered to impose, regard would have to be had to screening of the exclusive and concurrent legislative lists under the Second Schedule of the Constitution. While the States do not have the power to make laws with respect to items listed under the exclusive legislative list, they can make laws with respect to items not listed in the exclusive legislative list, on matters listed under the concurrent legislative list and matters omitted in both legislative lists.

?With regard to taxing powers, section 4 must be regarded as the basic taxing provision and the root of the taxing powers of the governments in Nigeria. This is because the taxing powers of the Federal, State and Local Government are generally determined by their respective legislative powers under the Constitution. In other words, to impose tax on any matter, that tier of government must be competent to make law on the particular matter or item under the Constitution.

3.4.?????????? Enumerated Power to Tax Versus Residual Taxing Powers

It would appear that all the taxes and most of fiscal items specifically listed in the 1999 Constitution are under the control of the Federal Government. Thus, by virtue of the Exclusive List, the Federal Government has the power to legislate and control the under listed fiscal matters to the exclusion of the States. Interestingly this is also its weakness:

??????????????????????????????? i.??????????? Accounts of the Government of the Federation

???????????????????????????? ii.???????????? Borrowing of monies within or outside Nigeria for the purpose of the Federation or of any State

?????????????????????????? iii.??????????? Custom and Excise duties

??????????????????????????? iv.??????????? Exchange Control

????????????????????????????? v.???????????? Export Duties

??????????????????????????? vi.??????????? Implementation of Treaties

???????????????????????? vii.???????????? Maritime, Shipping and Navigation

?????????????????????? viii.??????????? Public Debt of the Federation

??????????????????????????? ix.???????????? Stamp Duties

????????????????????????????? x.??????????? Taxation of Incomes, profits and capital gains

??????????????????????????? xi.???????????? Trade and Commerce

????????????????????????? xii.??????????? Any matter incidental or supplementary to any matter mentioned elsewhere in the list.

?The large number of fiscal matters entrusted under the powers of the central government shows that Nigeria is actually practising constitutional centralism under the guise of federalism. The over concentration of fiscal powers in the central is not the practice in other federal climes. For example, Article 105 of the German Constitution titled Distribution of powers regarding tax laws provides as follows: The Federation shall have exclusive power to legislate with respect to customs duties and fiscal monopolies. The two named taxes are the only taxes exclusively reserved for the federal government in Germany. All other taxes are shared between the Federal Government and States and expressly stipulated in the Constitution. In this way, the States will not be fiscally tied to the financial apron string of the Federal Government.

?It is reiterated that there is no express provision in the 1999 Constitution directly granting powers to States to impose taxes and there is no tax specifically reserved for the State Governments in the current legislative list. Assuming that there is any such power, it is subject to the doctrine of covering the field. In the case of AG Ogun State v Aberuagba & 7 Ors,[34] the Supreme Court held, with respect to the power of a State to impose taxes under the 1979 Constitution (similar to the 1999 Constitution) that -

?"A state has the power to impose tax on all matter in on the Concurrent List (sic) and residuary matters. However, it must be noted that the taxing power of a State in the concurrent matters is subject to the rule of inconsistency under Section 4(5) and the doctrine of covering the field…"

?Thus, while the powers of the Federal Government to impose and collect taxes are expressly enumerated and exhausted in the Constitution, the powers of the States are at large. Put differently, whilst the taxing powers of the National Assembly are circumscribed by the powers created in that regard by the Constitution, the Constitution does not however expressly exhaust all the various kinds of taxes imposable by a state government on persons or activities within its territory. Hence, the power to impose any tax that is not expressly enumerated in the Constitution is a residual power, which vests exclusively in the governments of the various states of the federation.

The apex court in Attorney General of Abia State v Attorney General of the Federation[35] emphasised the existence of residual matters under the Constitution, in the following words:

"The Constitution of the Federal Republic of Nigeria 1999, like most constitutions, does not provide for a residual list. And that is what makes the list residual. The expression emanates largely from the judiciary, that is, it is largely a coinage of the judiciary to enable it exercise its interpretative jurisdiction as it relates to the constitution. Etymologically, residual merely means that which remains. In legislative or parliamentary language, residual matters are those that are neither in the exclusive nor concurrent legislative list; that is what remains or is not covered by the exclusive and concurrent legislative lists."

?It may well be that lack of direct taxing provisions in the Constitution may be responsible for the confusion associated with what level of government has the power to FIRS Act and the collection of VAT by the federal government have drawn criticism from a wide spectrum of stakeholders.[36] According to Sanni, it is illegal for the Federal Government to collect VAT on intra state transactions.[37] At the State level, a notable example is the sales tax by some states including Lagos State. This has drawn much condemnation and challenges.[38]

?The Federal Government’s power to impose tax is enumerated and extends to the items on which it is constitutionally competent to make law (it should be remembered that not all the items on the exclusive legislative list are suitable to tax). For the States, their power to tax is at large. It is residual and almost infinite. It is pursuant to this understanding that the Lagos State Government introduced the Hotel Occupancy and Restaurant Consumption Law which replaced the Sales Tax Law. It is imposed at the same rate as the latter. [39]

?Ostensibly, under Nigeria’s marque of federalism, taxing power or the power to impose tax extends from the existence of government at more than one level and it is to be implied from legislative competence save for local government councils which, by the Constitution, lack explicit legislative competence as well as taxing power although the Constitution reserves to them certain functions that implicate taxation in the fourth schedule.

4.0.?????????? TAXING POWERS IN OTHER JURISDICTIONS

?Observing other fiscal jurisdictions concerning their taxing power practice can provide a useful lens to analyse the country’s arrangement and offer spectrum of possible reforms for the practice in Nigeria. In addition, a comparison of different jurisdictions affords an opportunity for scholarly appreciation of the global best practices and provide some benchmark to which Nigeria may aspire. For comparative analysis, the respective Constitutions of the United States of America, Australia, Ethiopia and Germany are adopted for examination, the common denominator being that they are federalist constitutions.

In the?United States, article 1, section 8?of the Constitution?gives Congress the?power?to lay and collect?taxes, duties, imposts and excises, to pay the debts and provide?for the?common defence and general welfare?of the United States. This is also referred to as the ‘Taxing?and Spending Clause.’ The American Constitution makes express provision for the imposition and collection of taxes and vests same on the Congress for defined purposes with the following constitutional limitations:

??????????????????????????????? i.??????????? Congress may tax only for public purposes, not for private benefit;

???????????????????????????? ii.???????????? Congress may not tax exports;

?????????????????????????? iii.??????????? direct taxes must be apportioned among the States, according to their populations; and

??????????????????????????? iv.??????????? indirect taxes must be levied at a uniform rate in all parts of the country.

The federating states in the United States since the beginning of the country’s history, have maintained the right to impose taxes. The Federal Government has always recognized this right. When the US Constitution was adopted, the Federal Government was granted the authority to impose taxes whilst the States, however, retained the right to impose any type of tax except those taxes that are clearly forbidden by the United States Constitution and their own state Constitution.[40]

?Similarly, the Australian Constitution, under section 51(ii) provides that the Parliament shall, subject to the Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to taxation but so as not to discriminate between States or parts of States. In section 114, it is provided that a State may impose any tax on property of any kind belonging to the Commonwealth with the consent of the Parliament. In the same section, the Parliament is forbidden from imposing any tax on property of any kind belonging to a State. Again, in Australia, express provision exists in the Constitution for taxing powers.

?In Ethiopia, article 51 of the Constitution stipulates that the Federal Government is to levy and administer taxes and duties on those sources of revenue reserved to the Federal Government while under article 52(2)(e) the States may levy taxes and duties on those sources of revenue reserved for the States.? Articles 98 and 99 then enumerate taxes that may be levied by each tier of government. Article 100 contains concurrent power to tax while article 101 then provides for powers to levy and collect taxes and duties not specifically determined under the Constitution. It stipulates that such power must be determined by a two-thirds majority of a joint meeting of both the Council of Peoples' Representatives and the Council of the Federation. The Ethiopian Constitution is very explicit and detailed on taxing powers.

?A similar provision is contained in the German Constitution which provides in article 105 titled ‘Distribution of Powers regarding Tax law’ thus:

"(1) The Federation shall have exclusive power to legislate with respect to customs duties and fiscal monopolies

(2) The Federation shall have concurrent power to legislate with respect to all other taxes the revenue from which accrues to it wholly or in part or as to which the conditions provided for in paragraph (2) of Article 71 apply

(2a) The Lander shall have power to legislate with regard to local taxes on consumption and expenditures so long and in so far as such taxes are not substantially similar to taxes regulated by federal law. They are empowered to determine the rate of the tax on acquisition of real estate."

?Article 106 of the German Constitution further and expressly divides taxing powers in Germany by providing as follows:

"(1) The yield of fiscal monopolies and revenue from the following taxes shall accrues to the Federation:

1. custom duties

2.taxes on consumption in so far as they do not accrue to the Lander pursuant to paragraph (2), or jointly to the Federation and the Lander in accordance with paragraph (3) or to municipalities in accordance with paragraph (6) of this Article

3.the road freight tax, motor vehicle tax, and other taxes on transactions related motorized vehicles

4. the taxes on capital transactions, insurance and bills of exchange;

5 non recurring levies on property and equalisation of burden levies income and corporation surtaxes

?6. income and corporation surtaxes

?7. levies imposed within the framework of the European Communities."

?The German Constitution also goes further to expressly provide for taxes the revenue from which accrues to the Landers. These include property tax, inheritance tax and motor vehicle tax.

?It would appear that the best practice, going by what is obtainable in the jurisdictions reviewed, is to provide expressly for taxing power in the Constitution. So, does Nigeria follow global best practice in this area? There is no provision in the Nigerian Constitution expressly delineating taxing powers between the State and the Federal Governments. The Constitution merely provides for legislative lists.

5.0.?????????? CONCLUSION

?Nigeria’s federalism is unique. The local government has been affirmed by the Supreme Court as the third tier in Nigeria’s federal government structure[41]?with the apex court ordering the federal government to pay allocations directly to local government authorities from the federation account.[42] According to the apex court, the power of the government is portioned into three arms of government, the federal, the state and the local governments. The court further declared that a state government has no power to appoint a caretaker committee and a local government council is only recognizable with a democratically elected government. The Constitution should be amended to reflect this landmark decision which has effectively re-defined Nigeria’s federation.

As it may have become obvious, legislative competence and taxing powers are intertwined or put more concisely, taxing powers are implied and inferred from legislative competence of each tier of government. Once it is understood which tier of governments is constitutionally empowered to legislate on an issue or a matter, it will not be difficult to understand which tier of governments has the vires to impose a tax on the item. Put differently, legislative competence determines who can enact what tax.

It is however disheartening to note that the taxing power of each tier of governments has not been spelt out; rather they are inferred from the list of items over which they can make laws. Meanwhile, it has been asserted and rightly so that not all the items on the legislative lists are amenable to tax. Notwithstanding, it is commonly accepted that the federal government’s taxing power is enumerated while that of the States are residual and therefore plenary. Under the current arrangement, the local government councils are not imbued with any power to tax since they do not possess legislative competence known to the Constitution. However, the Constitution has saddled them with certain functions which implicate taxation.

?The way forward seems to suggest itself. We have examined the practices in other fiscal jurisdictions including advance federations and democracies which Nigeria should seek to emulate. The lesson from the comparison analysis is that taxing powers should be separated from legislative powers. In addition, power of each tier of government to tax should be clearly spelt out to avoid ambiguities which result in double taxation. It will also reduce the proclivity of multiplicity of taxes and enhance the fiscal federalism credentials of the country. Dividing taxing powers amongst the three tiers of government appears to be global best practice. Policy makers and the National Assembly should begin the process of amending the Constitution to reflect global best practices in this area.

?Postscript: A big appreciation to Professor Abiola Sanni, SAN for his pivotal work on taxing powers in Nigeria.

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[1] Honourable Justice (Dr) Nnamdi Dimgba, ‘Dispute Adjudication in Nigeria: The Importance of the Tax Appeal Tribunal’ a paper presented at the 2024 Retreat of the Tax Appeal Tribunal held at the Ibom International Conference and Resort, Uyo, Akwa Ibom State between the 15 - 16 January 2024.

[2] ibid.

[3] The Constitution of the Federal Republic of Nigeria, 1999 (as altered) (the 1999 Constitution), para D (7)(9), Part II, Second Schedule.

[4] ibid para D (7) (10), Part II, Second Schedule.

[5] (n 1).

[6] Black’s Law Dictionary, Bryan A. Garner (ed.) (8th edn, West Publishing Co 2004) 644.

[7] Attorney - General Federation v Attorney -General Abia State & Ors Suit No. SC/VC/343/2024 (11 July 2024 unreported).

[8] (n 3), s 7(5).

[9] ibid, s 7(6).

[10] Kehinde M. Mowoe, Constitutional Law in Nigeria (Malthouse Law Books: Surulere 2008) 49.

[11] Ibid.

[12] B.O. Nwabueze, Federalism in Nigeria Under the Presidential Constitution of 1979 (Sweet & Maxwell) 1.

[13] ibid.

[14] Abiola Ojo, Constitutional Law and Military Rule in Nigeria, (Evans Brothers Limited: 1987) 171 - 172; quoting in part Holmes Jean, ‘The Australian Federal System’ in International Political Science Review, 398

[15] Ibid.

[16] William Livingstone, Federalism and Constitutional Change (Oxford University Press: London 1956) 1.

[17] (2004) 14 WRN 1.

[18] 173 U.S. 505, 905 (1989).

[19] See Jirinwayo Jude Odinkonigbo, ‘Does a Local Government in Nigeria have the Power to Tax?’ (2020) 48 (6 & 7) Intertax 642, 646 – 649. See also Re Dymond (1959) 101 CLR 11, 18.

[20] (2000) Nigerian Revenue L.R. 62.

[21] Black’s Law Dictionary (n 6) 353.

[21] ibid.

[22] Abiola Sanni, ‘Division of Taxing Powers’ CITN Nigerian Tax Guide and Statutes (2nd edn, Lexis Nexis 2010) 31.

[23] See Part I and Part II of the Second Schedule to the 1999 Constitution. Sanni is a Professor of law and a Senior Advocate of Nigeria (SAN).

[24] See Attorney General of Abia State & 2 Ors v Attorney General of the Federation & Ors (2002) 17 WRN 1; Also available at <https://www.nigeria-law.org/Attorney%20General%20of%20Abia%20State%20&%202%20Ors%20V%20Attorney%20General%20of%20the%20Federation%2033%20Ors.htm> accessed May 13, 2021.

[25] The Black’s Law Dictionary defines fiscal as ‘of or relating to financial matters’ ‘Of or relating to public finances or taxation’. See the Black’s Law Dictionary (n 6) 668. Thus, the fiscal provisions of a Constitution relate to public financial matters or taxation.

[26] (n 3) s 4(2) & (3).

[27] ?ibid s 7(1).

[28] (1982) 3 NCLR 881.

[29] See Bamidele v Commissioner for Local Government, Lagos State (1994) NWLR (Pt. 328) 568.

[30] (2007) LPELR - 8464 (CA) 13 – 17.

[31] (2014) LPELR - 23740 (CA) 26.

[32] (1998) 7 NWLR (Pt. 556) 1; (1998) LPELR – 1694 (SC) 17 - 18.

[33] (2010) LPELR – 9014 (CA) 14 – 25.

[34] (1997) 1 NRLR (Pt. 1) 51, 68.

[35] (2006) 16 NWLR (Pt. 1005) 265, 380.

[36] See Abiola Sanni, ‘Lagos State Sales Tax: Matters Arising’ Essays in Honour of Professor D.A. Ijalaye, (2002) Justice Chambers, Obafemi Awolowo University.

[37] ibid at 209.

[38] See AG Lagos State v Eko Hotels (2009) 1 TLRN 198.

[39] However, the scope of the tax has been reduced to goods and services consumed in Hotels Facility or Event Centres within the territory of Lagos State.

[40] The U.S. Department of the Treasury, ‘State and Local Taxes’ available at <https://www.treasury.gov/resource-center/faqs/taxes/pages/state-local.aspx> accessed 12 May 2021.

[41] Attorney - General Federation v Attorney -General Abia State & Ors Suit No. SC/VC/343/2024 (11 July 2024 unreported). See also Debora Musa and Okiki Adeduyite, ‘Supreme Court grants LG financial autonomy’ Punch Newspaper?(Lagos, 11 Juky 2024) < https://punchng.com/breaking-supreme-court-grants-lgs-financial-autonomy/#:~:text=The%20seven%2Dman%20panel%2C%20in,state%20and%20the%20local%20government> accessed 28 July 2024.

[42] Bolanle Olabimtan ‘S’court orders FG to pay allocations directly to LGs, bars governors from dissolving councils’ TheCable (Lagos, 11 July 2024) <https://www.thecable.ng/breaking-scourt-orders-fg-to-pay-allocations-directly-to-lgas/amp/ >accessed 29 July 2024. In May, the federal government?filed a suit?at the supreme court against governors of the 36 states.

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