Lawyers Pay VAT, Why Not Doctors?

The answer to this question might seem obvious; doctors ease pain, heal the sick and save lives, but not Lawyers. Really? Are those functions peculiar to only doctors, to the exclusion of other professionals, including Lawyers? The question is prompted by the decision of the Court of Appeal in AL-MASEER LAW FIRM v FIRS CA/J/179/2018, in which the court upheld the applicability of the Value Added Tax Act (VAT Act) to legal practitioners, on the ground that legal services are excluded from the list of services which the Act exempts from collecting and remitting VAT.

While the rationale for the judgement can hardly be faulted on the basis of the ipsisima verba (or the exact terms) of the law which the court was asked to interpret, the larger question, in my view, is whether that law itself is valid, either by reference to any other law or the Constitution. We shall shortly undertake that exposé, but, first, an analysis of that decision.

Background The Appellant in Al-Maseer Law Firm v FIRS is a private legal practitioner, who challenged a demand by the Federal Inland Revenue Service (FIRS) to pay Value Added Tax (VAT) purportedly due from the Appellant’s clients, which she had failed to remit to the Respondent. The Appellant requested the Federal High Court, Bauchi, to interpret relevant provisions of the VAT Act in her favour, to wit: (i) that legal practice is not a business venture under Section 8 of the VAT Act, and as such, is not required to register with the FIRS as an agent for the purpose of collecting VAT; (ii) that a (private) legal practitioner is not a “taxable person” within the contemplation of Section 46 of the VAT Act. The trial court agreed with the Respondent, that the Act was applicable to the Appellant, and dismissed her originating summons.

Dissatisfied, the Appellant approached the Jos Division of the Court of Appeal. In determining the appeal, the Court of Appeal considered the provisions of Sections 1 – 3 of the VAT Act, viz:

“There is hereby imposed and charged as a tax to be known as the Value Added Tax which shall be administered in accordance with the provisions of this Act”;

“Tax shall be chargeable and payable on the supply of all goods and services (in this referred to as “taxable goods and services”) other than goods and services listed in the First Schedule to this Act”.

In affirming the decision of the lower court, the Court of Appeal reiterated that, to the extent that “legal practitioners” and “law firm” are not included in the list of services specifically exempted from collecting/remitting VAT in the First Schedule to the Act, “the rule of interpretation is that, when something is specifically mentioned in a statute, the intendment is that it excludes whatever is not mentioned”. Accordingly, the Court of Appeal dismissed the appeal.

A subsequent, somewhat similar decision ( AMA ETUWEWE v FIRS FHC/ WR/CS/27/2019, Federal High Court, Warri, delivered on 30th September, 2019) should, however, be understood within its own peculiar facts, which turned on whether a solicitor to an oil company, is bound to remit VAT already paid by his client. This piece is concerned with the status of legal practitioners and other professionals vis-à-vis the distinction which the VAT Act makes in exempting only medical practitioners (“medical services”) from collecting and remitting VAT. I believe that it raises profound questions about ...

The Status of Professionals in Nigeria

Are they co-equal or, is one class or group of professionals superior to the other or others, in the eyes of the law? This poser is significant, because the answer to it will determine the validity or otherwise of the distinction between medical professionals and others - including legal practitioners - for the purposes of collection/payment of VAT.

As ever, the starting point is the fons et origo of our law – the Constitution. By virtue of Section 4(3) and Item 49 of the Exclusive Legislative List of the 1999 Constitution, only the National Assembly is competent to legislate in respect of “professional occupations as may be designated by (it)”. The National Assembly has exercised that power in relation to a number of professions, including Architecture, Estate Surveying/Valuation, Engineering, Pharmacy, Teaching (yes), Computer Science, Nursing/Midwifery, Medicine/ Dentistry and, of course, Law. The relative statutes in this regard are all contained in the relevant volumes of the current edition (2010) of the Laws of the Federation.

The implication of the above provisions is that, as far as the Constitution is concerned, all the professions which the National Assembly has so designated are duly recognised (baptised?) by the law. Such a recognition should not to be taken lightly, as it makes all the difference between a genuine professional and a fake one; in other words, whether there has been compliance, in any given case, with laid down guidelines contained in (a) relevant Act(s) of the National Assembly. I humbly submit that, to this extent, all professions which have been designated by the National Assembly are similarly circumstanced, or, in colloquial language, are “birds of the same feather”.

Accordingly, just as the members of our avian analogy flock together, no discrimination ought to exist between professionals in the eyes of the law. This is otherwise known as, the right to equal protection of the law, and it is codified in Article III(II) of the African Charter on Human and Peoples Rights, an international treaty, domesticated vide an Act of the National Assembly. As conceded at the beginning of this piece, an obvious criticism of this analogy is that, suggesting that Lawyers and other professionals should enjoy the same exemption from remitting VAT as medical doctors, would be somewhat akin to comparing grapes with apples.

This is far from the case however, because that notion ignores hard statistics gathered in a census of private health facilities across six States in Nigeria conducted by the Strengthening Health Outcomes through the Private Sector (SHOP) Project in 2014. That study identified 5,086 private health facilities in the six target States of Abia, Benue, Edo, Kaduna, Lagos and Nasarawa, compared to only 3,612 public health facilities (see page 66 of the report). Extrapolating this across the 36 States of the Federation, the import is clear: the overwhelming preponderance of health facilities (read: medical services and, therefore, medical professionals or doctors/dentists/ ophthalmologists, optometrists, etc.) in Nigeria, are provided by the private sector.

Accordingly, I posit that to the extent that the VAT Act does not distinguish between private medical services and public medical services which it exempts from its coverage, it unwittingly subsidises the income of the former to the detriment of their counterparts in other professions, including, of course, private legal practitioners. I believe that a contrary intention to achieve that goal can be gleaned from the definition of “taxable person” in Section 2 of the Act, which includes “an agency of Government exploiting tangible or intangible property for the purpose of obtaining income therefrom by way of trade or business”. I submit that, to construe the said provisions literally would simply be unfair and unjust, as that cannot be presumed to be the intention of the Legislature.

For the avoidance of doubt, the right to equal protection of the law - which I humbly posit, is violated by the aforesaid exclusion of medical services, without discriminating between those offered by private health providers and public ones - “demands that laws will only be legitimate if they can be described as just and equal. Equal protection guarantees that, the Government must treat a person or class of persons the same as it treats other persons or class of persons of like circumstances . . . equal protection means a legislation that discriminates, must have a rational basis for doing so. And if the legislation affects a fundamental right or involves a suspect classification, it is unconstitutional unless it can withstand strict scrutiny” see BLACK’S LAW DICTIONARY, 8th edition, page 577.

I submit that the blanket exclusion of “medical services” from paying VAT without discrimination as aforesaid, fails the twin tests for the validity of any discriminatory legislation - intelligible differentia and rationality - laid down by the Court of Appeal in N.N.P.C v FAWEHINMI (1998) 7 NWLR pt. 559 pg. 598 @ 616.

Conclusion To the extent that, by virtue of Section 4(3) and Item 49 of the Exclusive Legislative List of the Constitution, all professionals are similarly circumstanced, it is illegitimate and unacceptable to confer the privilege of exemption from paying VAT on medical services (or medical professionals), without distinguishing between private health/medical services and public health/medical services.

The latter is justifiable and acceptable, whilst the former is not. If the rationale is that they provide a supposedly “critical” service, what about Lawyers? We defend the rights - sometimes to life - of the oppressed, downtrodden and, all-too-often, economically-disadvantaged.

Accordingly, it is arguable that, the decision in AL-MASEER’S case was given per incuriam, as the foregoing argument was never canvassed by the Appellant, either at the trial court or before the Court of Appeal.

“....ALL PROFESSIONALS ARE SIMILARLY CIRCUMSTANCED, IT IS ILLEGITIMATE AND UNACCEPTABLE TO CONFER THE PRIVILEGE OF EXEMPTION FROM PAYING VAT ON MEDICAL SERVICES (OR MEDICAL PROFESSIONALS), WITHOUT DISTINGUISHING BETWEEN PRIVATE HEALTH/MEDICAL SERVICES AND PUBLIC HEALTH/MEDICAL SERVICES”