OVER VIEW OF THE TAXES AND LEVIES (APPROVED LIST FOR COLLECTION) IN NIGERIA

Abdulateef Olatunji Abdulrazaq (AOA)

Senior Manager - Tax, Regulatory & Advisory Services

Saffron Professional Services,

Lagos, Nigeria.

INTRODUCTION

Under current Nigerian law, taxation is enforced by the 3 tiers of Government, i.e. Federal, State, and Local Government with each having its sphere clearly spelt out in the Taxes and Levies (approved list for Collection) Decree, 1998.In the Nigerian Federation, the National Assembly is empowered by S.4(3) of the Constitution of the Federal Republic 1999, to make laws for the Federation in respect of matters included in the exclusive legislative list to the exclusion of the Houses of Assembly of the States.

In furtherance of its powers, the Legislature enacted the following into law at various times.

(i)            Personal Income Tax Act – Cap P8 Vol. 13 LFN 2004

(ii)           Companies Income Tax Act – Cap C 21, Vol. 3 LFN 2004.

(iii)           Stamp Duties Act – Cap S8 Vol.14 LFN 2004

(iv)          Value Added Tax Act – Cap V1 Vol. 15 LFN 2004

(v)           Petroleum Profit Tax Act - Cap P13 Vol. 13 LFN 2004

(vi)           Capital Gains Tax Act - Cap C1 Vol. 2 LFN 2004

(vii)          Customs Duties - Cap 45 Vol. 4 LFN 2004

(viii)       Excise Duties - Cap 45 Vol. 4 LFN 2004

DIVISION OF TAXING POWERS AND RESPONSIBILITY FOR COLLECTION OF TAXES

The imposition or assessment of a tax is the means by which the government acquires the revenue required for its activities. This is usually, by way of a monetary charge imposed by the government on persons, companies, transactions or property to yield revenue. The division of taxing powers in a country invariably depends on the system of government, whether it is federal or unitary. Nigeria runs a federal system of government.

In a bid to stop the challenges of multiplicity of taxes and levies in Nigeria, the Legislature enacted the Taxes and Levies (Approved List of Collection) Act 1998, whereby taxes, levies and fees collectible by the various tiers of government were spelt out.

(i)                  Taxes Collected by the Federal Government

• Company income tax.
•  Withholding tax on companies, residents of the Federal Capital Territory, Abuja and non-resident individuals.
•  Petroleum profits tax.
•  Education Tax.
• Value Added Tax.
•  Capital gains tax on residents of the Federal Capital Territory, Abuja, corporate and non-resident individuals.
• Stamp duties on bodies corporate and residents of the Federal Capital Territory, Abuja.
•  Personal income tax in respect of

 (a) Members of the armed forces.

 (b) Members of the Nigeria Police Force.

(c) Residents of the Federal Capital Territory, Abuja; and

(d) Staff of the Ministry of Foreign Affairs and non-resident individuals

(ii)          Taxes and levies collected by the State Government.

·         Personal income tax in respect of:

(a) Pay-As-You-Earn (PAYE);

(b) Direct taxation (Self-assessment)

·         Withholding tax for Individuals

·         Capital gains tax for individuals

·         Stamp duties on instruments executed by individuals.

·          Pools betting, lotteries, gaming and casino taxes.

·         Road tax.  

·         Business premises registration

·          Development levy for individuals

·           Naming of street registration fees in State Capitals.

·         Right of Occupancy fees on lands owned by the State Government.

·         Market taxes and levies where State finance is involved.

(iii)         Taxes and Levies to be collected by Local Government 

·         Shops and, kiosks rates

·          Tenement rates

·          On and off liquor license fees

·          Slaughter slab fees.

·          Marriage, birth and death registration fees.

·          Naming of street registration fee, excluding any street in the State Capital

·          Right of Occupancy fee on lands in rural areas, excluding those collectable by the Federal and State Governments.

·          Market taxes and levies excluding any market where State Finance is involved.

·          Motor Park levies.

·          Domestic animal license fees.

·         Bicycle, truck, canoe, wheelbarrow and cart fees, other than a mechanically propelled truck.

·          Cattle tax payable by cattle farmers only.

·          Merriment and road closure levy.

·         Radio and television license fees (other than radio and television transmitter).

·         Vehicle radio license fee (to be imposed by the local government of the State in which the car is registered.

·          Wrong parking charges.

·         Public convenience, sewage and refuse disposal fees.

·          Customary burial ground permit fees.

·         Religious places establishment permit fees.

·         Signboard and advertisement permit fees

AN OVERVIEW OF RECENT DEVELOPMENTS ON APPROVED TAXES FOR COLLECTIONS

The Federal Government, under President Goodluck Jonathan administration, through the then Minister of Finance and Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, on May 26, 2015, amended the Taxes and Levies (Approved List for Collection) Act, Cap. T2, Laws of the Federation of Nigeria, 2004. The Act was previously referred to as Taxes and Levies (Approved List for Collection) Decree, No. 21 of 1998. It came into effect on 30th September, 1998. The Act is an existing law under the Constitution of the Federal Republic of Nigeria, section 315 of which provides in subsections (1)(a) and (2) that subject to the provisions of this Constitution, an existing law shall have effect with such modifications as may be necessary to bring it into conformity with the provisions of this Constitution and shall be deemed to be (a) – an Act of the National Assembly to the extent that it is a law with respect to any matter on which the National Assembly is empowered by this Constitution to make law.

It states in Subsection 2, that the appropriate authority may at any time by order make such modifications in the text of any existing law as the appropriate authority considers necessary or expedient to bring that law into conformity with the provisions of this Constitution.

By the combined provisions of Paragraphs 7, 8, 9 and 10 of Part II of the Second Schedule, and Paragraphs 1 and 2 of the Fourth Schedule to the 1999 Constitution, the Federal, State and Local Governments have the responsibility to collect taxes, levies and other variants of them as fallout of our federal system of government.

Pursuant to section 1(2) of the Taxes and Levies (Approved List for Collection) Act (hereafter referred to, for convenience, as “the Act”) provides:

The Minister of Finance may, on the advice of the Joint Tax Board and by Order published in the Gazette, amend the Schedule to this Act.

Throughout President Jonathan administration, the Minister was under intense pressure to harmonise taxes and levies payable in Nigeria at all levels because of its bearing on the cost of doing business in Nigeria.

The necessity to generate increased revenue for the various tiers of government had led to a situation where the Federal, States, and Local Governments had refused to be bound by the taxes and levies listed in the Schedule consisting of three parts to wit, Part I (eight for Federal Government), Part II (eleven for each State Government), and Part III (twenty for each Local Government) as provided for by section 1(1) of the Act. Besides, it was discovered that ad hoc revenue contractors and touts were being used by many States and local governments to harass taxpayers contrary to section 3 of the Act which provides:

A study aimed to understand the nature of multiple taxation and its effects on businesses was carried out. The result formed the basis for appropriate advocacy programmes intended to influence policy formulation processes of government with a view to reducing the tax burden and make Nigerian businesses more competitive.

The objectives of the study were to strengthen the capacity of the private sector to contribute more meaningfully to policy making process, and to enhance the capacity of local, state and Federal Government officials to appropriate tax policies and their effect on business community. Relying on the result of its study, Manufacturer Association of Nigeria (MAN) petitioned the Federal Government, which allowed MAN to make a presentation to the National Economic Council (NEC) on 29th January, 2014.

Consequently, the NEC set up a Committee with Alh. Ibrahim Dankwambo, Governor of Gombe State, as chairman, on the Review of Incidences of Multiple Taxation across the Federation at various levels and its effects on the Manufacturing Sector’s Productivity. The Committee created a Technical Sub-Committee headed by Alh. Kabir Mashi, the then Ag. Chairman, FIRS, which met from 22–24, February, 2013 and produced a report that acknowledged the existence of multiple taxes and levies in Nigeria.

It submitted the Report with observations and recommendations to the Dankwambo Committee, which considered it before submission to NEC. Given the seriousness of the incidence of multiple taxation as constraints to manufacturing, agriculture and overall national development, five critical recommendations were made for immediate attention:

(i) Review and amendment of the Taxes and Levies (Approved List for Collection) Act, Cap. T2, LFN 2004;

(ii) Outlaw the use of unorthodox means to collect taxes and levies;

(iii) Automation of tax operations by relevant tax authorities to eliminate leakages and ensure ease of collection;

(iv) Tax authorities should discontinue the use of consultants for tax assessment and collection; and

(v) Tax authorities should publish the approved list of taxes and levies within the States and Local Governments to educate the public and facilitate compliance.

The National Economic Council in due course accepted these recommendations. The duty to review and amend the Taxes and Levies (Approved List for Collection) Act, Cap. T2, LFN, 2004 fell on the Minister of Finance in accordance with section 1(2) of the Act. The States, whose Boards of Internal Revenue are members of the Joint Tax Board, made out a case for the inclusion of several taxes and levies in the amended list. No wonder, the list of taxes and levies for State Governments contained in Part II to the Schedule has increased by 14 from eleven (11) to twenty-five (25). This astronomic rise is regarded in official circles as harmonisation of taxes and levies but critics see it as legalisation of multiplicity of taxes. In contrast to the States, the taxes and levies contained in Part I for the Federal Government merely increased from eight to nine while Part III for local governments increased from twenty to twenty-one.

Furthermore, a 4th Schedule contains 6 levies that are to be harmonised among the State and Local Governments, where applicable. Besides, members of the Joint Tax Board are to advise the Minister of Finance on determining the amounts payable and review of rates from time to time with due cognisance to changes in economic trends in the country. Below is the detail new approved list for collection of taxes and levies.

SCHEDULE TO THE TAXES AND LEVIES (APPROVED LIST FOR COLLECTION)(ACT AMENDMENT) ORDER,2015.

Below are the incorporated parts from both old and amended sections of the law.

1. Taxes Collected by the Federal Government

• Company income tax.
•  Withholding tax on companies, residents of the Federal Capital Territory, Abuja and non-resident individuals.
•  Petroleum profits tax.
•  Education Tax.
• Value Added Tax.
•  Capital gains tax on residents of the Federal Capital Territory, Abuja, corporate and non-resident individuals.
• Stamp duties on bodies corporate and residents of the Federal Capital Territory, Abuja.
•  Personal income tax in respect of

 (a) Members of the armed forces.

 (b) Members of the Nigeria Police Force.

(c) Residents of the Federal Capital Territory, Abuja; and

(d) Staff of the Ministry of Foreign Affairs and non-resident individuals

• National Information Technology Development Levy

2. Taxes and levies collected by the State Government.

·         Personal income tax in respect of:

(a) Pay-As-You-Earn (PAYE);

(b) Direct taxation (Self-assessment)

·         Withholding tax for Individuals

·         Capital gains tax for individuals

·         Stamp duties on instruments executed by individuals.

·          Pools betting, lotteries, gaming and casino taxes.

·         Road tax. 

·         Business premises registration

·          Development levy for individuals

·           Naming of street registration fees in State Capitals.

·         Right of Occupancy fees on lands owned by the State Government.

·         Market taxes and levies where State finance is involved.

·         Hotel, Restaurant or Event Centre Consumption Tax, where applicable

·         Entertainment Tax, where applicable

·         Environmental(Ecological) Fee or Levy

·         Mining, Milling and Quarry Fees, where applicable

·         Animal Trade Tax, where applicable

·         Produce Sales Tax, where applicable

·         Slaughter or Abattoir Fees, where state finance is involved

·         Infrastructure Maintenance Charge or Levy, where applicable

·         Fire Service Charge

·         Economic Development Levy, where applicable

·         Social Services Contribution Levy, where applicable

·         Signage and Mobile Advertisement, Jointly collected by States and Local Governments

·         Property Tax

·         Land use charge, where applicable.

3. Taxes and Levies to be collected by Local Government 

·         Shops and, kiosks rates

·          Tenement rates

·          On and off liquor license fees

·          Slaughter slab fees.

·          Marriage, birth and death registration fees.

·          Naming of street registration fee, excluding any street in the State Capital

·          Right of Occupancy fee on lands in rural areas, excluding those collectable by the Federal and State Governments.

·          Market taxes and levies excluding any market where State Finance is involved.

·          Motor Park levies.

·          Domestic animal license fees.

·         Bicycle, truck, canoe, wheelbarrow and cart fees, other than a mechanically propelled truck.

·          Cattle tax payable by cattle farmers only.

·          Merriment and road closure levy.

·         Radio and television license fees (other than radio and television transmitter).

·         Vehicle radio license fee (to be imposed by the local government of the State in which the car is registered.

·          Wrong parking charges.

·         Public convenience, sewage and refuse disposal fees.

·          Customary burial ground permit fees.

·         Religious places establishment permit fees.

·         Signboard and advertisement permit fees

·         Wharf Landing Charge, where applicable

4. Harmonised Taxes and Levies

·         Members of the Joint Tax Board(JTB) are to advised the Minister of Finance on determining the amounts payable and review rates from time to time with due cognizance to changes in economic trends in the country.

·         Collections of the taxes and levies listed in the schedule are to be harmonized among the States and Local Governments where applicable as follows:

¨       A single Inter-State Road Taxes sticker for any vehicle within Nigeria designed by the Joint Tax Board for all the states and the stick is to be administered by all the states

¨       A single haulage fee payable at the points of loading in the state of departure and single haulage fee payable at the points of discharge of the goods which the state are required to set up institutional structure to collect.

¨       Wharf Landing fee collected by the state where there are facilities to administer such fees which may be jointly administered by the state and local government and proceeds from collection shared in line with an agreed proportion.

¨       A single parking permit sticker designed by the JTB and issued by the operators of the parks where vehicles are parked in the courses of their journey

¨       Fire Service Levy should be a charge on business premises and corporate organisation and the Federal Fire Service can only collect fire service levies in the FCT and not in state.

¨       Road Worthiness Certificate fee should be collected by the state in which the vehicle operates and should be administered by Board of Internal Revenue in conjunction with appropriate agencies.

Offences and Penalties

It is a mandatory provision of the Approved List of Taxes Law that no person other than the legally authorised tax authority of either the Federal or State or Local government area, as applicable, can access and collect any tax except as authorised under the Approved List of Taxes Law. The unlawful mounting of road blocks on expressways in any part of Nigeria for the purpose of collecting any tax or levy with or without Policemen or other law enforcement agents is forbidden and punishable under this referenced Law. Any person who collects or levies any tax or levy, or who mounts a road block or causes one to be mounted for the purpose of collecting any tax or levy contravenes Section 2 of the Approved List of Taxes Law and is liable on contravention to a fine of N500, 000 or three years imprisonment or to both the fine and the term of imprisonment.

Conclusion

There are 61 taxes, levies, fees and charges contained in the Schedule to the new Order (9 in Part I, 25 in Part II, 21 in Part III, and 6 in Part IV), leading to an increase of 22 taxes and levies from the previous 39 to the current 61.

The Federal Government envisages smooth and efficient collection of taxes by the three (3) tiers of government with no further friction. The schedule to the taxes and levies (Approved list for collection) order 2015 as amended has legitimized some of the levies states are collecting, as this would increase Internally Generated Revenue (IGR) in the nearest future.

Olatunji is Senior Manager  (Tax ,Regulatory & Advisory Services) with Saffron Professional Services(Member firm of Geneva Group International), Lagos, Nigeria.E-mail:Oabdulrazaq@saffron-ng.com,Oabdulrazaq11@gmail.com