1. Introduction

On May 8^th 2020, the Federal High Court in the case of The Registered Trustees of Hotel Owners and Managers Association of Lagos (suing for itself and on behalf of all its members) v Attorney General of the Federation and the Minister of Finance FHC/L/CS/1082/19 held inter alia that Section 1(2) of the Taxes and Levies (Approved List for Collection) Act Cap T2, Laws of the Federation of Nigeria, 2004 (which gives the Minister of Finance the power to amend the Schedule to the Act) is inconsistent with the Constitution of the Federal Republic of Nigeria, 1999. The court consequently held that the amendment to the Schedule of the Taxes and Levies (Approved List for Collection) Act, carried out by the Minister of Finance is unconstitutional, null and of no effect.

2. Relevant Facts

The Plaintiff – an association of Hotel Owners and Managers – concerned with the effect of the Hotel, Restaurant or Event Center Consumption Tax being imposed by the States of the Federation vis a vis Value Added Tax imposed on the consumption of services rendered by them, commenced this action by way of originating summons on 27^th July 2019 seeking the determination of the following issues –

(i)      Whether by virtue of Section 4 of the Constitution of the Federal Republic of Nigeria 1999, the legislative powers of the Federal Republic of Nigeria are vested in the National Assembly.

(ii)   If question (1) is answered in the affirmative, whether the Minister of Finance, a member of the Executive arm of government, has constitutional power (legislative competence) to amend an Act of the National Assembly or any part thereof.

(iii)   If question (2) is answered in the negative, whether Section 1(2) of the Taxes and Levies (Approved List for Collection) Act, which vests the Minister of Finance with the power to amend the schedule to the Taxes and Levies (Approved List for Collection) Act, is inconsistent with the provisions of the constitution of the Federal Republic of Nigeria and therefore, unconstitutional, null and void in light of Section 1(3) of the Constitution.

(iv)    If question 3 is answered in the affirmative, whether any purported amendment to the Taxes and Levies (Approved List for Collection) Act, by the Minister of Finance, a member of the Executive arm of government, including but not limited to the schedule to the Taxes and Levies (Approved List for Collection) Act (Amendment) Order, 2015 is illegal, null and void in light of Section 1(3) of the Constitution.

3. Contentions of Parties

The Plaintiff contended inter alia that the power given to the Minister of Finance under Section 1(2) of the Taxes an Levies (Approved List for Collection) Act is an usurpation of the power of the National Assembly set out under Section 4 of the Constitution and that delegation of the power to amend the schedule to the Act to the Minister of Finance is unconstitutional because such power falls under the primary law making power of the National Assembly which a Minister – a member of the executive branch – cannot validly exercise.

The 1^st and 2^nd Defendants in their respective submissions, argued that the Minister of Finance has the statutory power to amend the Schedule to the Act and that such exercise is not inconsistent with the provision of Section 4 of the Constitution. It was contended that by virtue of Section 315(4)(a)(iii) of the Constitution, a person duly authorized can modify an existing law.

4. Decisions of the Court

The Federal High Court as per A. O. Faji, J in resolving all the issues in favour of the Plaintiff held inter alia as follows:

(i)   The power confined on the Minister of Finance under Section 1(2) of the Taxes and Levies (Approved List for Collection) Act does not qualify as delegated legislation because any exercise of power that affects the terms and wordings of an enactment cannot be delegated legislation but an amendment to the legislation. The Minister of Finance cannot validly exercise such power.

(ii) The Taxes and Levies (Approved List for Collection) Act (Amendment) Order, 2015 seeks to add to the text of the main legislation and seeks to change the main legislation. This power to legislate is for the Parliament to exercise and cannot be shared with another body as this will violate the principle of separation of powers set out in Sections 4, 5 and 6 of the Constitution.

(iii)The power exercised by the Minister of Finance was not under Section 315 of the constitution but under Section 1(2) of the Act and that Minister does not fall under scope of Section 315 as it is not the appropriate authority with powers to reverse or rewrite the laws of the federation.

(iv) The Taxes and Levies (Approved List for Collection) Act (Amendment) Order is null, void and unconstitutional.

5. Implications of the Judgment

By the decision of the court, the Minister of Finance or any other person (other the National Assembly) does not have the power to amend or add to existing laws. To that extent we agree with the Federal High Court that Taxes and Levies (Approved List for Collection) Act (Amendment) Order is null, void and unconstitutional.

However, the validity or constitutionality or otherwise of the Hotel, Restaurant or Event Center Tax laws enacted by the States House of Assembly is not dependent on the provisions of Taxes and Levies (Approved List for Collection) Act or any Order made pursuant to it. The main test is whether by virtue of the provisions of the Constitution (the

Exclusive Legislative List, the Concurrent Legislative List and the Residual List), the various States can make such laws. If the power to make such law is Residual, it is the State House of Assembly that has the power to impose such taxes.  This is why the Federal High Court earlier in Registered Trustees of Hotel Owners and Members Association of Lagos v AG of Lagos State and FIRS (2019)47TLRN 1 at 16 – 17 held as follows having identified the subject matter of consumption tax as residual:

“With matters of consumption tax on individuals or goods and services consumed in hotels, restaurants etc absent in either the exclusive or concurrent list, my view that VAT Act covering the field on these matters is no longer relevant…

 My view is that the various provisions of the VAT Act which deal with services consumed in hotels, restaurants and events centres are inconsistent with the Constitution. Being a residual matter, it is within the exclusive legislative competence of a state, in this case the Lagos State Government to legislate upon.”

The above position is fortified by the decision of the Supreme Court in Honourable Min. For Justice and AG Federation v Honourable AG of Lagos State (2013)12TLRN 55 where the apex court held that the Hotel Occupancy and Restaurant Consumption Law, Lagos State is valid because the subject matter covered under the law deal with residual matters. It is important to note that this case was decided in 2013 before the coming into effect of The Taxes and Levies (Approved List for Collection) Act (Amendment) Order.

For more information – contact:

Maxwell Ukpebor

MAS Tax and Legal Services

Lofty Heights Maruwa

Lekki 1 – Lagos

Maxwell.ukpebor@mastaxandlegalservices.com

+234 8039600520