The Federal Government, under the Goodluck Jonathan administration, acting through the then Minister of Finance and Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, on May 26, 2015, amended the Taxes and Levies (Approved List for Collection) Act, Cap. T2, Laws of the Federation of Nigeria, 2004. The Act was previously referred to as Taxes and Levies (Approved List for Collection) Decree, No. 21 of 1998. It came into effect on 30th September, 1998. The Act is an existing law under the Constitution of the Federal Republic of Nigeria, section 315 of which provides in subsections (1)(a) and (2) that 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 (a) – 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 law.
It states in Subsection 2, that the appropriate authority may at any time by order make such modifications in the text of any existing law as the appropriate authority considers necessary or expedient to bring that law into conformity with the provisions of this Constitution.
By the combined provisions of Paragraphs 7, 8, 9 and 10 of Part II of the Second Schedule, and Paragraphs 1 and 2 of the Fourth Schedule to the 1999 Constitution, the Federal, State and Local Governments have the responsibility to collect taxes, levies and other variants of them as a fallout of our federal system of government.
Pursuant to section 1(2) of the Taxes and Levies (Approved List for Collection) Act (hereafter referred to, for convenience, as “the Act”) provides:
The Minister of Finance may, on the advice of the Joint Tax Board and by Order published in the Gazette, amend the Schedule to this Act.
Throughout the Jonathan administration, the Minister was under intense pressure to harmonise taxes and levies payable in Nigeria at all levels because of its bearing on the cost of doing business in Nigeria.
The necessity to generate increased revenue for the various tiers of government had led to a situation where the Federal, States, and Local Governments had refused to be bound by the taxes and levies listed in the Schedule consisting of three parts to wit, Part I (eight for Federal Government), Part II (eleven for each State Government), and Part III (twenty for each Local Government) as provided for by section 1(1) of the Act. Besides, it was discovered that ad hoc revenue contractors and touts were being used by many States and local governments to harass taxpayers contrary to section 3 of the Act which provides:
A person who—
collects or levies any tax or levy; or
mounts a road block or causes a road block to be mounted for the purpose of collecting any tax or levy,
in contravention of section 2 of this Act, is guilty of an offence and liable on conviction to a fine of N50,000 or imprisonment for three years or to both such fine and imprisonment.
Section 2 of the Act actually provides that no person, other than the appropriate tax authority, shall assess or collect, on behalf of the Government, any tax or levy listed in the Schedule to the Act, and members of the Nigeria Police Force shall only be used in accordance with the provisions of the tax laws. It is also part of the provision of section 2 that no person, including a tax authority, shall mount a road block in any part of the Federation for the purpose of collection of any tax or levy.
Any person resident in Nigeria, since 1999, will attest to the fact that the provisions of these stated sections 2 and 3 of the Act were obeyed more in breach than otherwise. Many States and local government councils patronised non-professional revenue officers who mounted road blocks indiscriminately demanding for myriad of levies thereby distorting business plans and disrupting businesses. This prompted the Manufacturers Association of Nigeria (MAN) (as a representative of the business community in Nigeria) in 2011 in collaboration with the Centre for International Private Enterprise (CIPE), USA, carried out a study on “Fostering Private Sector Participation in Policy Making through Taxation Reform” across three pilot states of Lagos, Ogun and Oyo.
Out of the 1,298 questionnaires administered, 1,014 were retrieved and analysed, while 17 Chief Executives Officers of selected companies were directly interviewed. The study was aimed at understanding the nature of multiple taxation and its effects on businesses. The result formed the basis for appropriate advocacy programmes intended to influence policy formulation processes of government with a view to reducing the tax burden and make Nigerian businesses more competitive.
The objectives of this study were to strengthen the capacity of the private sector to contribute more meaningfully to policy making process, and to enhance the capacity of local, state and federal government officials to appropriate tax policies and their effect on business community. Relying on the result of its study, MAN petitioned the Federal Government, which allowed MAN to make a presentation to the National Economic Council (NEC) on 29th January, 2014.
Consequently, the NEC set up a Committee with Alh. Ibrahim Dankwambo, Governor of Gombe State, as chairman, on the Review of Incidences of Multiple Taxation across the Federation at various levels and its effects on the Manufacturing Sector’s Productivity. The Committee created a Technical Sub-Committee headed by Alh. Kabir Mashi, the then Ag. Chairman, FIRS, which met from 22–24, February, 2013 and produced a report that acknowledged the existence of multiple taxes and levies in Nigeria.
It submitted the Report with observations and recommendations to the Dankwambo Committee, which considered it before submission to NEC. Given the seriousness of the incidence of multiple taxation as constraints to manufacturing, agriculture and overall national development, five critical recommendations were made for immediate attention:
(i) Review and amendment of the Taxes and Levies (Approved List for Collection) Act, Cap. T2, LFN 2004;
(ii) Outlaw the use of unorthodox means to collect taxes and levies;
(iii) Automation of tax operations by relevant tax authorities to eliminate leakages and ensure ease of collection;
(iv) Tax authorities should discontinue the use of consultants for tax assessment and collection; and
(v) Tax authorities should publish the approved list of taxes and levies within the States and Local Governments to educate the public and facilitate compliance.
The National Economic Council in due course accepted these recommendations. The duty to review and amend the Taxes and Levies (Approved List for Collection) Act, Cap. T2, LFN, 2004 fell on the Minister of Finance in accordance with section 1(2) of the Act. The States, whose Boards of Internal Revenue are members of the Joint Tax Board, made out a case for the inclusion of several taxes and levies in the amended list. No wonder, the list of taxes and levies for State Governments contained in Part II to the Schedule has increased by 14 from eleven (11) to twenty-five (25). This astronomic rise, is regarded in official circles as harmonisation of taxes and levies but critics see it as legalisation of multiplicity of taxes. In contrast to the States, the taxes and levies contained in Part I for the Federal Government merely increased from eight to nine while Part III for local governments increased from twenty to twenty-one.
Furthermore, a 4th Schedule contains 6 levies that are to be harmonised among the State and Local Governments, where applicable. Besides, members of the Joint Tax Board are to advise the Minister of Finance on determining the amounts payable and review of rates from time to time with due cognisance to changes in economic trends in the country.
For instance, the Social Services Contribution Levy is a creation of the Rivers State Social Services Contributory Levy Law of 2010. The law later became a matter of litigation and the High Court in Port Harcourt subsequently struck out the suit instituted by the Institute of Human Rights and Humanitarian Law on 19/8/2012 due to lack of locus standi. Rivers State has caused the JTB to prevail on the Minister of Finance to include this levy as No. 24 of Part II of the Schedule to the Act as amended by the 2015 Order. The Rivers State Social Services Contributory Levy Law is too harsh in its punitive provision as contained in section 19, which provides that a company or organisation who fails or neglects to deduct from its employees and remit the levies due, shall be liable to a fine of three times the total deduction due; (2) A person who defaults in the payment of levy imposed shall after notice by the Board be guilty of an offence and liable to a fine of twice the levy imposed or imprisonment for one year.
The Land Use Charge, which is a tax harmonisation enterprise between the Lagos State Government and its local government councils in respect of tenement rate and ground rent, has been included as No. 12 in the new Part II of the Schedule. Hotel, Restaurant or Event Centre Consumption Tax, which originally became controversial in Lagos before stakeholders gradually accepted it, is now No. 13 in Part II of the Schedule. Ogun and Edo States have emulated Lagos and enacted their own variants of the Law. Some States charge Entertainment Tax and in order to accommodate their own nomenclature, Entertainment Tax is distinct and chargeable on a taxpayer.
Although it will be foolish to do so, a State may charge Entertainment Levy as well as Hotel, Restaurant or Event Centre Consumption Tax. Also of significance is the No. 7 levy in the new Part II of the Schedule, which has revised the previous levy on business premises.
The amended provision provides that “business premises registration fee in respect of urban and rural areas which includes registration fees and per annum renewals as fixed by each state.” The obvious implication is that a State may increase the Business Premises Levy from the maximum sum of N10,000 for registration to N50,000 or N100,000. Each State is also at liberty to revise the renewal fee to any sum it deems fit.
No. 25 on the List contained in the new Part II of the Schedule is “Signages and Mobile Advertisement.” This means basically payment for signages such as signboards, billboards, posters, etc. A local government is also empowered under No. 20 of the new Part III of the Schedule to collect signboard and advertisement permit fees. There is no better example of multiplicity of levies than this. A similar relationship exists for a business operating in a riverine or coastal environment like Lagos or Port Harcourt. He will pay Wharf Land charge to a Local Government as legalised by No. 21 on the Part III List of the Schedule, pay Wharf Landing Fee as approved by paragraph 2(c) of Part IV of the Schedule. Besides, he will pay for sticker [see 2(a), Part IV], Haulage Fee [See para. 2(b), Part IV], single Parking Permit [see para. 2(d), Part IV], road worthiness [see para. 2(f), Part IV], Environmental (Ecological) Fee or Levy [see No. 15, Part II], Fire Service Charge (no. 21, Part II), Infrastructural Maintenance Levy (where applicable) (No. 20, Part II), Economic Development Levy (where applicable) (No. 23, Part II), Road Taxes (No. 6, Part II), Personal Income Tax (No. 1, Part II or No. 8, Part I), Withholding Tax (No. 2, Part II or No. 2, Part I), Companies Income Tax (where applicable) (No. 1, Part I), Business Premises Levy (No. 7, Part II), Vehicle radio licence fees (No. 15, Part III), Motor Park Levies (No. 9, Part III), Wrong Parking Charges (No. 16, Part III) (where the vehicle parks wrongly), etc.
With a total list of 61 taxes, levies, fees and charges contained in the Schedule to the new Order (9 in Part I, 25 in Part II, 21 in Part III, and 6 in Part IV), leading to an increase of 22 taxes and levies from the previous 39 to the current 61, is this what the MAN bargained for when it presented its petition to NEC on 29th January, 2013? Is this the meaning of harmonisation of taxes? Or should it be understood as legalisation of multiple taxes and levies? Let the debate continue!
Chukwuemeka Eze, FCTI, is a Lagos-based lawyer and taxation consultant. He was Chairman of the Chartered Institute of Taxation of Nigeria (CITN), Ikeja District Society between 2009 and 2011. He is currently the Legal Adviser of the West African Union of Tax Institutes (WAUTI).