June 20, 2020
On 8th May, 2020, the Federal High Court (“FHC” or “the Court”), sitting in Lagos, declared the Taxes and Levies (Approved List for Collection) Act (Amendment) Order, 2015 (“Amendment Order”) null and void. This decision was reached in the case of the Registered Trustees of Hotel Owners and Managers Association of Lagos (“HOMAL”) v. Attorney-General of the Federation & Anor.
The Court reached this decision on the grounds that the powers of the Minister of Finance under the Taxes and Levies (Approved List for Collection) Act (“Taxes and Levies Act”) to amend the Schedule to the Act is a violation of the powers of the National Assembly to make laws and is therefore unconstitutional. According to the Court, the power to legislate resides with the National Assembly and cannot be shared with any other body.
Section 1(2) of the Taxes and Levies Act grants the Minister of Finance the power to amend the Schedule to the Taxes and Levies Act. In 2015, the Minister of Finance, pursuant to this power, issued the Amendment Order which amended the Schedule to the Taxes and Levies Act to include Hotel, Restaurant and Event Centre Tax as a tax to be collected by States.
However, in 2019, the Registered Trustees of Hotel Owners and Managers Association of Lagos (representing itself and the interest of its members) instituted an action at the FHC against the Federal Government. Amongst other things, HOMAL sought a declaration that Section 1(2) of the Taxes and Levies Act which vests the power to amend the Schedule to the Act in the Minister of Finance is inconsistent with the provisions of the 1999 Constitution and therefore null and void. HOMAL also sought a declaration that any amendment to the Schedule to the Taxes and Levies Act by the Minister is illegal and void.
HOMAL argued that the power given to the Minister of Finance under Section 1(2) of the Taxes and Levies Act is a usurpation of the legislative powers of the National Assembly as set out in Section 4 of the 1999 Constitution and therefore unconstitutional.
The Court ruled in favour of HOMAL and held that the amendment to the Schedule to the Taxes and Levies Act vide the Amendment Order is null and void. In reaching this decision, the Court explained that lawmaking is a constitutional function of the National Assembly and no other body is empowered to amend laws. The Court also clarified that a Schedule to an enactment is part of the enactment and has the same legal effect as the enactment itself. Thus, an amendment of the Schedule to the Taxes and Levies Act is an amendment of the Taxes and Levies Act itself and the power to do so cannot be delegated by the National Assembly to anyone.
Based on this Judgment, the Taxes and Levies Amendment, Order, 2015 and all other amendments introduced to the Taxes and Levies Act by the Minister of Finance pursuant to that Order would no longer be applicable except this Judgment is set aside upon appeal. The implication of this is that all taxes introduced by such amendments will also cease to have legal basis.
Furthermore, recourse will have to be made to the National Assembly in the event of any need for amendment of the Taxes and Levies Act given the nullification of Section 1(2) of the Taxes and Levies Act.
This Judgment also calls to question other amendments or Modification Orders issued by the Executive Arm of Government based on statutory provisions that are worded similarly to Section 1(2) of the Taxes and Levies Act (e.g. the recently introduced VAT modification Order). As such, it is important for the Government to address these concerns in order to achieve certainty for taxpayers and the Nigerian tax environment regarding the validity of such amendments or Modifications Orders. Given the far reaching implications of this Judgment, taxpayers will have to be properly guided on the interpretation and implementation of tax provisions especially those that impacted by the uncertainty created by Section 1(2) of the Taxes and Levies Act and the 2015 Modification Order issued by the Minister. Taxpayers are also advised to consult with their tax advisors to determine the specific impact of the Judgment on their business operations.