POLICY DIALOGUE - Multiple Taxation: Lagos State Government Assessment And Response
_{by Ade Ipaye, then Special Adviser to the Governor of Lagos State, On Taxation & Revenue (former Attorney General and Commissioner for Justice, Lagos State)}

... Most countries have a wide array of taxes, each of which is applicable in clearly defined circumstances. The proliferation may however be more noticeable in federalist countries like Nigeria. By virtue of powers conferred by the 1999 Constitution, taxes and levies in Nigeria are charged at three levels, i.e., Federal, State and Local. This follows a demarcation of functions among the three tiers and the distribution of legislative powers between the Federal and State Legislatures. In this respect, we should note that Local Government Councils are only empowered to make bye laws as may be permitted by the relevant State Legislature.

This constitutional arrangement makes it inevitable that various taxes would be charged at the three levels....

We admit however that too many taxes are bad for business as the efforts required to comply, as well as the total tax liability may drive up the cost of doing business and deplete profits, thereby adversely affecting the competitiveness of the business entity in question.

Brief History
Complaints of multiplicity of taxes first became prevalent in Nigeria of the late 1990s during the military regime of General Sani Abacha. Revenues from oil dwindled as prices fell on the international market and allocation from the Federation Account became inadequate for many States and local government councils, even for the payment of civil service salaries.

In response, the Military Governors adopted what was then known as ‘Accelerated Revenue Generation Programmes’ and appointed consultants to audit businesses and recover various taxes which the businesses had failed to pay. These typically included payroll taxes (which ought to have been deducted at source and remitted to the State Government under the Pay As You Earn (PAYE) system) and withholding tax on contracts, interests, rents, leases and directors? fees. Once established, accumulated tax liabilities were claimed by government and defaulters had their premises sealed off. At the same time Local Government Authorities also made concerted efforts to collect sundry levies which they had hitherto neglected, leading to an outcry by the organized private sector (e.g., Chambers of Commerce and Manufacturers? Associations).

The major complaint was mainly that taxes and levies were being imposed on corporate bodies by States and Local Government Authorities, even when they had already paid Companies Income Tax. The presumption that companies were only subject to federal taxes was, however, faulty. Be that as it may, Local Government levies were considered particularly intrusive as many were unknown, unpredictable and administered without any verifiable basis or supporting legislation. These were made even more annoying and disruptive of business with many local authorities setting up road blocks at which they arbitrarily enforced payments and impounded vehicles.

Being against the State and Local Governments, complaints of multiplicity of taxes were typically laid before the then Federal Military Government (FMG). That Government had, as usual, suspended essential provisions of the 1979 Constitution and combined both executive and legislative powers. It had also conferred on itself the power to make laws for any part of the country on any matter whatsoever. In the final analysis, the FMG sought to bring the situation under control by promulgating three Decrees. The first two were amendments to the Personal Income Tax Decree of 1993 (now Cap P8, Laws of the Federation of Nigeria, 2004) whereby the Federal Government created tax agencies (Boards of Internal Revenue and Local Government Revenue Committees) for States and Local Government Councils respectively and strictly defined the circumstances in which Governments may use tax consultants.[1]

The second legislative response was the Taxes and Levies (Approved List for Collection) Decree No. 21 of 1998 which set out a list of taxes and levies to be collected by the Federal Government, State Governments and Local Government Councils respectively. Apart from making illegal any tax or levy not included in the list, the Decree also prohibited the use of road blocks for tax collection and enforcement. Were the Constitution to be in force at the time, it is our view that these Decrees would have been unconstitutional, null and void. Indeed, the Taxes and Levies Decree recognized this fact by prefacing its provisions with the phrase “Notwithstanding anything contained in the Constitution of the Federal Republic of Nigeria 1979 as amended, or in any other enactment or law . . .”

Recent Tax Reforms in Lagos State
In Lagos State, we have paid close attention to this issue and found that the major problem, especially at the local government level where they were most rampant, were of illegal levies and fake tax collectors. We also found that even with levies that could be genuinely supported by legislation, some unscrupulous revenue officers were in the habit of including unauthorised heads of charge, varying the amounts payable to facilitate unlawful negotiations and extorting bribes from taxpayers. We came therefore to a conclusion that stricter controls were required..

Read the rest here: http://myndff.org/policy-dialogue/multiple-taxation-lagos-state-government-assessment-and-response-2/

Okonjo-Iweala warns on multiple taxation retention

_{Published Monday, April 20, 2015 | Latest News in Nigeria}

The Minister of Finance, Dr. Ngozi Okonjo-Iweala, has warned the incoming administration on the danger of retaining the multiple taxation regime, saying such move would be injurious to businesses and ultimately reduce revenue to government.

Okonjo-Iweala, who is also the Coordinating Minister of the Economy, addressed a group of Nigerian journalists at the end of the International Monetary Fund (IMF)/ World Bank Group meetings in Washington DC, United States, on Monday.

She said, “In our economy, there are entities charging all manner of fees, from the Federal Government, Ministries, Agencies, to the states and local governments. They are too many and sometimes they don’t raise the kind of revenue that is needed."

“However, there is an ongoing process to harmonise these multiplicity of taxes, as well as rationalize them so that businesses and individuals do not feel that they are being constantly taxed.

“The key thing is that the taxes that raise revenue for the economy (the VAT for example) has not been used as a policy. We will probably raise far more revenue than all these small taxes that are being raised. To harmonise, streamline and do away with most of the existing fees and charges, we need to focus on those taxes that will yield the revenue necessary for growth of the economy.”

The minister said her position on the review of the nation’s tax system is supported by state governors, who at their last National Economic Council meeting recommended the option. http://www.nigerianeye.com/2015/04/okonjo-iweala-warns-on-multiple.html