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How constitutional impasse between Federal, Lagos government’s remain unresolved

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Mr. Tunde Fagbounlu


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) LPELR-46825 (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 interstate 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.
   
Said he: “Any item not contained in either the Exclusive Legislative List or the Concurrent Legislative List is deemed to be residual matters over which the State Houses of Assembly have legislative competence. In Nigeria, both the National Assembly and States Houses of Assembly enacted legislations regulating lottery and gaming. The National Assembly enacted National Lottery Act, while, for example, the Lagos State House of Assembly enacted the Lagos State Lotteries (Amendment) Law, 2008. 

“Incidentally, whereas there is no specific mention of online lottery in the National Lottery Act, the Lagos State Lotteries (Amendment) Law, 2008 specifically mentions “public online lottery” and seeks to regulate it. Therefore, it is of utmost importance to consider which, as between the Federal Government (National Assembly) and the State Governments (Houses of Assembly), has the power to regulate gaming and lottery on one hand and online lottery activities on the other hand.

“In addressing this point, we must immediately state that neither the Exclusive Legislative List nor the Concurrent Legislative List contains any mention of gaming, lottery or gambling. In Edet v Chagoon, the Court of Appeal (Nigeria) held that pool betting and casino gaming do not appear in either Part I (Exclusive legislative list) or Part II (Concurrent Legislative list) of the 2nd Schedule to the 1999 Constitution. Not being an item in the Exclusive Legislative List or in the Concurrent Legislative List and not matters incidental or supplementary to the execution of any powers in the Exclusive Legislative or even the Concurrent Legislative List, pools, betting and casino gaming are residual matters. Being residual matters, they are within the legislative competence of the House of Assembly of a State. Thus, gaming, pool betting and lottery generally is within the legislative competence of a State House of Assembly.”
 
Another senior legal practitioner, Chief Goody Uwazurike said the issue has been in various courts for interpretation. “As a matter of fact, the current Vice President, Professor Yemi Osinbajo (SAN) and the minister of Works and Housing, Babatunde Fashola (SAN), vigorously challenged many grey areas of the Constitution in the Supreme Court when they served as commissioner and governor respectively in Lagos State.

He said: “Some of the grey areas were on physical planning, sales and consumption tax, creation of local government, control of waterways and of course gaming and lottery control. The Federal government created a Luxury board that competed with the Lagos state lottery board. The problem now is that Lagos state and Federal government belong to one party. Both Lagos and the Federal government are still flexing muscles, the decision of the court notwithstanding. The operators, like the coastal waters businessmen, pay both sides in the interest of peace. Only the Supreme Court has the final say!”
 
Anti-piracy crusader, intellectual property and human rights lawyer, Mr. Akeem Olaniyi Aponmade said what is paramount is the legal basis of the dispute between the Federal Government and State Governments. “I see the unnecessary fight as emblematic of palpable ignorance on the part of the officials of the two arms of government with regards to the functioning of a lottery or gaming business combined with insatiable greed for tax revenue,” he said. He flayed the operators as knowing next to nothing about the laws that underpin their authority to collect revenue for government.
   
According to him, they go on harassing members of the public for no just cause. “Go and read through the provisions of the Constitution, you will not find anywhere where the words ‘lottery’ and ‘gaming’ were used therein. Neither in the Exclusive List nor Concurrent List will you find any provisions empowering the Federal Government to tax companies carrying out gaming or lottery business other than for capital gains and company income. It is absolutely illegal for the Federal Government to seek to tax a company just for carrying out lottery business,” he said.

In conclusion, from the various arguments it could be said that most of the commentaries favours the state to collect the disputed taxation just as stakeholders in the business are much convinced and believe the state is at a vantage position to collect the lotto and gaming tax.


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