18 Jan



:: Just as it sounds, is the absolute authority of a sovereign government to compulsorily impose tax on persons, income and activities within its own territory. Subject (of course) to statutes, economic demands, political and policy considerations.

:: At Common-law, taxation power was seen as inherent in the sovereignty of a state. The court in Governor of India V Taylor, noted that it can refuse to recognise the revenue laws of another state. This shows that taxation is affected by territorial limitation.


How is Nigeria Structured?

:: The Court in AG Lagos V AG Federation noted that Section 2 of the 1999 Constitution makes Nigeria a federation. Section 2(2) of the constitution creates TWO tiers viz State and Federal… Section 3(6), 7, 8 provide for Local Governments. By Section 7(5) and schedule 4 of the constitution, Local governments have subsidiary legislative powers conferrable by statute. Like assessment of privately owned houses or tenements for the levying of rates-A.G V Knight Frank and R. Therefore, Nigeria is a Federation comprised of the Federal, State and Local Governments.

How is power shared?

Section 4 (1 and 6) of the 1999 Constitution creates the Federal and State legislature. Part 1 and 2 of the Seconds Schedule to the constitution list the jurisdiction of the Federal and State Legislatures… the exclusive list (for the Federal Government) and concurrent (where Federal and State may legislate). The residual list is NOT expressly provided for but is deemed to contain functions not listed in the exclusive or concurrent list-Section 4(7)), A.G Ogun State V Aberuagba.

In the exclusive list, the FG is granted jurisdiction over customs,[1] stamp duties[2], tax on income[3], capital gains, trade and commerce between Nigeria and other states. Item D7 under the Concurrent Legislative List provides as follows:

In the exercise of its powers to impose any tax or duty on: (a) capital gains, incomes or profits of persons other than companies; and (b) documents or transactions by way of stamp duties; the National Assembly may, subject to such conditions as it may prescribe, provide that the collection of any such tax or duty or the administration of the law imposing it shall be carried out by the Government of a State or other authority of a State”.

In other words, the National Assembly may authorize States to administer the law imposing tax on Capital gains, stamp duties, income and profits of persons other than companies.

Item D9 on the other hand entitles the States to delegate tax collecting powers to the local governments in a manner that would prevent double taxation.


:: In practice, the FG and State governments are usually at loggerheads as to who can tax what. The most prevalent areas include, Stamp Duties, VAT v. Sales Tax, Capital Gains Tax, Petroleum Profit Tax and so on.

On Value Added Tax V Sales Tax

:: The Sales Tax Law imposes tax on the supply of goods that have connection with the State while the VAT is a Federal Government Act which imposes a 5 percent duty on vatable goods.

Under the 1960 constitution, sales/purchase tax was under Item 38 of the Exclusive legislative list. Under the 1979 constitution, the Exclusive Legislative List omitted matters dealing with sales or purchase tax. The 1999 constitution also omitted same.

The States then allege that this omission means that Sales Tax is impliedly within the residual jurisdiction of the States[4]. The FG on the other hand argued that even though there was an omission, Item 61 of the Exclusive legislative list of the 1999 Constitution empowers the FG to legislate on Trade and commerce… therefore States cannot legislate on issues relating to trade and commerce.

:: The issue is that before the introduction of VAT in 1993, the Sales tax had been in operation in the various states. Now that VAT has been introduced, the States still impose Sales Tax on goods.

In AG Lagos V Eko Hotels, an inter-pleader action was brought by Eko Hotels. Meaning that a third party[5] holds something[6] which two or more parties[7] are laying claim to. The question was whether Eko hotels should remit tax to the FG or to Lagos for VAT and Sales Tax respectively. The court held in favour of the Federal Government. On the basis that the FG already covered the field on imposition of tax on goods and services, the Lagos State Sales Tax Law was null and void. In Mama Cass Restaurant V AG Lagos, the court also held in favour of the FG on similar circumstances.

In AG Ogun State V Ayinke Aberuagba, a (somewhat) logical conclusion was reached. The court noted that the State governments can impose sales tax within the limit of their jurisdiction (intra-state goods) and must not impose tax on goods that cross boundaries (inter-state goods). Held therefore that Section 3 of the Ogun State Sales Tax Law which sought to impose tax on inter-state goods was null for having the same pith and substance with the VAT. In Nigerian Soft Drinks Company Ltd V AG Lagos, held that since Section 2 of the Lagos State’s Tax law imposed tax on intra-state goods it was okay and constitutional. In AG Abia V AG Federation, the court held the Federal government levies tax on things/goods and services with interstate dimension/contact[8] while the State government can impose tax on things/goods and services with intrastate dimension/contact[9]. Therefore, the Ogun State Sales Tax Law which imposed tax on goods coming into Ogun State was ultra vires because the goods had an interstate contact.

:: The contentions of Lagos State (and some other States) includes that:

  • It generates more than 60 percent of VAT proceeds which are remitted to the FG. When the proceeds are shared to States, Lagos State receives a disproportionate part of the revenue compared to the other State and their inputs.
  • Few Local Governments: which it has tends to put other states at a privileged position. E.g in the Old Kano which has been divided into two states – Jigawa and Kano having 63 LGs while Lagos has 20 LGs… in considering Local Governments, Kano gets more.
  • That the northern states should not share the proceeds of vat because it is derived from certain luxurious activities which they morally and religiously detest. Like smoking, hotels, restaurants, and so on.
  • The need to practice true federalism as Tinubu has noted that “we want a republic not an empire”… allow us to collect money from people within our territory.
  • Huge population and facilities to maintain in Lagos requires intensive finance. So Lagos should be allowed to generate its own revenue.

:: The question to ask is: won’t the imposition of Sales Tax and VAT on the same goods and services amount to double taxation?

Akanle sees double taxation as occurring where the same item is subject to tax more than once. Double taxation was defined in Second St. Properties Inc V Fiscal Court of Jefferson County, as where tax is imposed on the same property by the same governing body during the same taxing period for the same taxing purpose. Chief Gani Fawehinmi has noted that “you may call it any name[10] but it’s the same thing and they serve the same purpose”.

It may be concluded that VAT should impose on inter State supplies while Sales tax should impose on intra State supplies. Doing contrary would be ultra vires and may amount to double taxation which runs contrary to Items D8 and 10 which enjoins the FG to prevent double taxation.

On Stamp Duties

Stamp duties is tax imposed on chargeable instruments[11] executed in Nigeria OR which relate to a matter or thing done or to be done in Nigeria. This is provided for under Item 58 of the Exclusive Legislative List[12].

:: The tussle between the FG and States is: who can administer Stamp Duties?

Section 4(1) STA vests State government with jurisdiction in respect of instrument executed between individuals and the FG has jurisdiction in respect of instruments executed where a company is a party to the transaction provided that such rates would be in agreement and consultation with the Federal Government.

:: The next tussle is What law should apply STDA or STDLaw?

We have noted that stamp duties is listed in Item 58 of the Exclusive Legislative List. Therefore, it is the Stamp Duties Act (of the Federal Government) as opposed to the Stamp Duties Law of the State that should apply since stamp duties is the exclusive reserve of the FG. In practice, State have been administering Stamp duties based on their stamp duties law.

In Savannah Bank V Director General of Ministry of Lands, Survey and Town Plannign and AG of Plateau, where the DG of ministry of lands Plateau refused to accept the deed of mortgage which was registered with the FG. The court granted an order of mandamus to compel him to register the deed. In Union Trust Ltd V AG Federation and AG Ogun State where the Ogun State authorities refused to accept the mortgage trust deed that was stamped with the FG until another N20,000 stamp duty was paid to the State under the STDlaw of the State. The court frowned upon this and held in favour of the FG.

There has also been other issues and arguments canvassed. Some of which include:

:: That since taxation at common-law is inherent in the sovereignty of a state, anything not contained in the exclusive or concurrent list is deemed to be within the competence of the Federal Government being the Sovereign. The answer to this argument can be found in Section 4(7) of the 1999 Constitution (and Agberuagba’s case above) which provides to the contrary.

:: It has also been argued that Since states can delegate the administration of tenement rates to the LG by virtue of Item 9 and Section 4(7) of the 1999 Constitution, it means that they (States) have the power to collect and spend the tax. As it is presumed that they have the substantive power over whatever they delegate. This is in furtherance of the Delegatus non potest delegare rule which means that you cannot delegate what you do not have the power to do.


:: Section 4(5) is to the effect that Acts of the National Assembly shall prevail over laws of the House of Assembly-Aberuagba V AG Ogun. Nwabueze has noted that the enactment by the National Assembly on a matter in the concurrent list does not foreclose the ability of the State to enact a law in consonance. In essence, for there to be conflict, the two laws/provisions must be at variance.

:: The Taxies and Levies (Approved List for Collection) 1998 was enacted by the FG, to prevent multiplicity of taxes. Under the List, the FG has jurisdiction over Companies Income Tax, PPT, VAT, Education Tax etc. The States shall collect Personal Income Tax, CGT, Individual Stamp Duties, Casino tax, lotto tax amongst others. The Local Government would collect Tenement rates, cattle tax, and so on. Unfortunately, this list is contrary to the provisions of the constitution by contradicting what was stated in the Exclusive and Concurrent Legislative list. By virtue of Section 1(1 and 3) of the 1999 constitution it is therefore null and void to the extent of its inconsistency.


[1] Item 16

[2] item 25.

[3] See item 59, 58 and 62

[4] Buttressing their argument with  Item 15 and 61 of the Concurrent Legislative List dealing with excise duty and regulations on trade and commerce respectively.

[5] Here it is Eko Hotels.

[6] Here it is tax.

[7] In this case it is FG and Lagos State.

[8] Goods and services that cross border.

[9] Local goods and services.

[10] By this he means, VAT and Sales Tax.

[11] They are listed in the Schedule to the Stamp Duties Act. They include; Affidavits, Debentures, Assignments, documents for hire purchase, Mortgage, Voting paper and so on.

[12] Obviously means that it is within the jurisdiction of the FG only.


Quite eccentric really

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