How constitutional impasse between Federal, Lagos government’s remain unresolved
EXPECTATIONS were high then, and the belief was that the constitutional row between Lagos state and the federal government bothered on political differences and so would be settled as soon as the party gained power at the centre. That was when the Peoples Democratic Party ( PDP) held sway at the federal level, while the opposition Action Congress of Nigeria ( ACN), which was formed via the merger of a faction of the Alliance for Democracy and other minor political parties reigned in Lagos. But pundits were wrong. Since the All Progressive Congress ( APC) won the presidential election in 2015 and retained control of Lagos, the centre of excellence, the major conflicts have remained unresolved. The APC was formed through the merger of four biggest opposition parties in Nigeria, which are the ACN, All Nigerian Peoples Party ( ANPP), Congress for Progressive Change ( CPC) and a faction of All Progressive Grand Alliance ( APGA). Some of the issues one would have expected the APC to have settled by now either by truce or constitutional means but are still flustering include the long time demand for a special status for Lagos State, dispute between the National Assembly and Lagos State Assembly over which of the two is competent to make laws governing Nigeria’s intrastate and inland waters as well as the yet to be resolved constitutional differences over the creation of additional 37 Local Council Development Areas ( LCDA) by the state. The LCDA are not recognised by the 1999 constitution till date. There is also the lingering face- off between the Lagos State Lotteries Board ( LSLB) and the National Lottery Regulatory Commission ( NLRC).
But just as these issues remained unresolved, major stakeholders and investors in some of the sectors, especially the lottery and gaming industry have raised the alarm over the burden of double taxation, which according to them “is a wreck to our businesses.” A major one that is in focus is the ongoing standoff between LSLB and NLRC on issue of National Lottery Licence. In a recent newspaper publication, April 30 2020, LSBL frowned at the position of NLRC, stressing that the 1999 Constitution ( as amended) remains the grundnorm upon which other existing laws rest and it specifically grants the state jurisdiction over lotteries, gaming and related matters in Nigeria.
The body therefore said the powers of NLRC to regulate gaming activities in states by virtue of National Lottery Act, 2005 ( as amended), is unfounded and unconstitutional. LSLB further maintained that the Federal Government only has the powers to legislate on matters in the exclusive and concurrent legislative list of which gaming does not fall within the items stated in both lists.
It also noted in addition that Part II, Section 5, Taxes and Levies ( Approved List for Collection) Act, Cap T2 Laws of Federation of Nigeria explicitly empowers State Government to collect tax in lotteries, pool, gaming and other related matters. Although, NLRC has asserted that the states cannot blacklist unlicenced gaming holders within the National licence” and that it NLRC is the apex regulator of lotteries and gaming in Nigeria, but LSLB considered this argument ultra vires the 1999 Constitution.
The LSLB therefore urged the general public to understand that gaming ( online and retail), lotteries and other related matters falls within the purview of the states only and not the Federal Government, just as it promised to eradicate all forms of illegal gaming operations and that it would not hesitate to enforce against the unlicensed gaming operators.
But digging deep in what could have caused the controversies between the two bodies, it was alleged that the row may not be unconnected with the decision of the Federal Inland Revenue Service ( FIRS) and NLRC way back in April 2019, when both organs of the Federal Government commenced the process to automate the collection of Value Added Tax ( VAT) on lottery and gaming businesses in Nigeria. FIRS, was then headed by its immediate past Executive Chairman, Mr. Babatunde Fowler, who before then served as the pioneer Permanent Secretary/ Executive Chairman of the Lagos State Board of Internal Revenue in 2005.
FIRS and NLRC then considered it appropriate that automation of collection of VAT from all betting placements was a lawful way of raising the country’s revenue profile to enable the government function optimally. Unfortunately, this line of thought was regarded to be detrimental to the interest and well being of stakeholders in the gaming and lotto business at the state level, who eventually found themselves paying double taxes to the two tiers of government.
A human rights lawyer, Dr. Femi Aborisade in his remark cited paragraph 1 ( 1) of the Taxes and Levies ( Approved list for collection) Amendment Order 2015, which provides that the Federal Government, state and local governments have authority to collect different categories of taxes. He noted that Part II, item No. 5 of the Schedule to the Taxes and Levies Act authorises the State Government to collect ‘ Pool betting and lotteries, gaming and casino taxes’ whilst Parts I and III spell out other types of taxes collectable by the federal and local governments, respectively. “To the extent that lotteries and gaming taxes are not specifically provided for in the Constitution and an Act of the Federal Government has made specific provision authorising the state government to so collect, it would be unlawful for any other arm of government to share in the collection of lotteries and gaming taxes. That would amount to double taxation, which is not supported by law,” he stated.
In Nigerian Agip Oil Co. Ltd v. Delta State Environmental Protection Agency ( 2019) LPELR46825 ( CA), it was held that there is no equity about a tax. There is no presumption about a tax. Nothing is to be read in and nothing is to be implied. One can only look fairly at the language used. The applicable law must be interpreted strictly. The court unequivocally held that the Taxes and Levies ( Approved List for Collection) Act, 2004 is a competent existing Act of the National Assembly, which has covered the field in respect of the tier of government authorised to collect specific taxes and levies.
Aborisade also said applying the above principles to the question of double or multiple taxation on lotteries and gaming, the state law which makes provision for collection of taxes on lotteries and gaming by the State Government is not harmful as it is consistent with the Taxes and Levies ( Approved List for Collection) Act, 2004.
“In summary, in my humble view, only the State Government has the power to collect taxes on lotteries and gaming activities. Such collections by the Federal Government would be deemed illegal under the Taxes and Levies ( Approved List for Collection) Act, 2004 as amended by the Taxes and Levies ( Approved list for collection) Amendment Order 2015.”
A Senior Advocate of Nigeria ( SAN), Mr. Tunde Fagbounlu said two different things must be distinguished concerning the issue, which are the power to regulate lottery and that of taxing the proceeds of lottery business. To him, in regulating lottery, there may be a dispute between the federal and state governments as to which of them has the power to regulate, which he said depends on interpretation of the Constitution.
“Finally, there has been a dispute over whether VAT applies to the proceeds of the lottery business. That, however is not a dispute between federal and state governments but it is rather a dispute between the lottery industry, on the one hand, and the governments on the other hand,” he explained.
In his observation, a former Secretary of Nigeria Bar Association ( NBA), Mr. Kunle Adegoke said the answer depends on the nature of the gaming or lottery involved. According to him, where the gaming or lottery is basically an intra- state commercial activity, the power to tax same is vested in the state but if it becomes an inter- state commerce, the power to regulate and tax same is vested in the Federal Government.
Adegoke explained further that since Nigeria is a federation with devolution of powers between the three tiers of governments “the powers of the National Assembly to make laws are constitutionally limited to: ( a) any matter included in the Exclusive Legislative List; ( b) any matter in the Concurrent Legislative List set out; and ( c) any other matter with respect to which it is empowered to make laws in accordance with the provisions of this Constitution.”
He said on the other hand, the State Houses of Assembly have the powers to make law with respect to any matter not included in the Exclusive Legislative List; any matter included in the Concurrent Legislative List to the extent prescribed in the second column opposite thereto; and any other matter with respect to which it is empowered to make laws in accordance with the provisions of the Constitution.
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