A CRITICAL APPRAISAL OF UNIFORM PERSONAL INCOME TAX SYSTEM WITHIN THE CONTEXT OF NIGERIAN FEDERALISM
CHAPTER ONE
1.1 BACKGROUND INFORMATION
Nigeria operates a federal system of government under which system each tier of government has its legislative competence or functions conferred on it as the case may be. It is significant to note that Federalism in Nigeria dates back to 1954 when the country which had hitherto been administered as a Unitary state was restructured into three quasi-self governing and administered regions.
It is equally noteworthy that shortly before and since the independence of Nigeria in 1960, all the constitutions that have been enacted have taken the pattern of federalism. Section 2 of the 1999 constitution also re-enacts the doctrine of federalism when it provides
that:
“Nigeria shall be a federation consisting of states and a federal capital territory” However, there is no doubt that Nigerian federalism is anomalous in practice. It is fraught with various phenomena that conflict with the universal precepts and normative imperatives of federalism to the extent that the danger and apprehension that the nation is susceptible to unitarism becomes heightened.
However, the focus of this thesis is not to appraise the entire constituents of Nigerian federalism but only the aspect of it that affects Uniform Personal Income
Fajana O. – Three-and-a-half decades of fiscal federalism in Nigeria In: Elaigwu J.I and Akindele R.A (ed) Foundations of Nigerian Federalism 1960 – 1995, NCIR, Abuja (1996) p.105
Kupolati I. – Democratic Federalism in the cloud of Assault being one of the issues discussed as fourth Anniversary editorial message in (2004) All FWLR (P t 211) PXIX
Tax system. It is expedient to note that one of the most constant sources of inter- governmental wrangles, which any federal system is likely to confront is the distribution of financial resources among the various levels of government. The pivotal concern in this regard is to ensure the different tiers of government have adequate financial resources for the effective discharge of their essential political and constitutional responsibilities.
The division of taxing power between the various parts of Nigeria has been a recurrent problem since the amalgamation of North and South in 19414; and perhaps, for the texture of Nigerian Federation, it has succeeded in rearing its ugly head into our nascent democracy. The enthronement of a democratically elected civilian government in Nigeria on May 29th 1999 was preceded by about fifteen years of Military interregnum during which a somewhat unitary system of administration was practised because of the command structure of the military.
That is a system where power flow from the centre. For instance, the Federal Military Government was vested with sweeping powers to make laws on any subject –matter whatsoever such as police affairs, census, imposition of taxation on incomes and profits, trade and commerce, etc including Local Government matters which is hitherto residual to the state governments.
Ayua I.A. – The Nigerian Tax Law. Spectrum Law Publishing, Ibadan, First edition (1996) p. 25 see also Fajana O. op cit. 106
Note that in 1914 what Nigeria achieved was only amalgamation not unification or unitarism, and at independence in 1960 it became a federation, not a unitary dispensation.
Abiola S. – Division of Taxing Powers In: Abdulrazaq M.T. (ed) Chartered Institute of Taxation of Nigeria – Tax guide and statues, P. 650
See generally sections 2 and 5 of the constitution suspension and modification Decree 107, 1993 quoted in Abiola S.
cit P.650.
This made the military era witnessed the enactment of certain Tax Decrees and edicts some of which are bound to generate jurisdictional conflict between the federal and state Governments with the coming into effect of the constitution of the Federal Republic of Nigeria, 1999. The recent observation of the Chief Justice of Nigeria lend credence to this view as thus:
Our present constitution seems to have been completely obliterated, negating the principles of federalism… the military as politicians under a constituent assembly to review and update the nation’s constitution and thereafter embark on windy transition programmes whenever it suited them to vacate. They (Military regime) simply remove the suspension orders and modifications made on the constitution while handling over power to the elected civilian. These constitutional alterations by various military regions have created numerous problems for successive civilian administration in the country.
A corollary of the above observation of His Lordship that is relevant to the topic under research is that since the inception of this democracy, the tension has been heightened on the arrangement of centralized financial and fiscal jurisdiction on federal government bequeathed by long years of military rule at the expense of the financial sovereignty of the federating states.
Justice Mohammed Lawal Uwais (CJN)
See New Nigerian Newspaper edition of 31st May, 2004 P.5
Be that as it may, there is another strong view that the Nigerian federalism is not bound to tow the pattern of foreign federalism lock, stock and barrel. The importation of formal structures or institutions of governments however excellent they may be on paper, cannot guarantee their success if the conditions which make them work in their country of origin are lacking. This cannot be imported from outside; but have to be developed an nurtured from within . It is further contended that each federal experiment has to cope with the peculiarities dictated by its own history, political economy, social cultural environment and leadership profile, even when it is simultaneously open to learning, borrowing, emulation or even stealing from the experience of other federations.
However, it is instructive to note that under the 1999 constitution there exists two separate legislative lists. One enumerating Exclusive central powers and the other enumerating concurrent powers, leaving the state governments with exclusive authority over unspecified residual fields. Personal
Income Tax is a significant tax that has all the time being the problem item of Nigeria’s revenue structure since its adoption of federalism in 1954, However, to reduce this attendant problem, the Federal Government is vested with the exclusive power under item 59 of the second schedule to the constitution[1]1 to legislate on
Nwabueze B.O. – The United State Constitution in Global Perspective In: Olaniyan R.A. (ed) Federalism in Changing World. A.U. Press, Ile-Ife (1988) P.1
Akindele R.A. – Nigeria in the Global Market of Experiments in Federalism In: Elaigwu J. I and Akindele R.A. (ed) Foundations of Nigerian Federalism, NCIR, Abuja (1996) P.1
Constitution of the Federal Republic of Nigeria 1999
personal income tax with the view to harmonise the rates of taxes, reliefs and allowances. As straight forward as this arrangement seems, it has excited mixed feelings from cross section of professionals.
structure and also make the State governments virtually junior partners in Federal- State relationship.
It is equally worthy of thorough examination the belief that once the subject-matter of taxation has been allocated to one tier of government, the proceeds therefrom usually belong exclusively to the authority levying the tax.[2] Is this a water-tight arrangement? Particularly when in the 1999 constitution the power to impose and or collect a tax is allocated to one level of government while the proceeds therefrom is disbursed to another level of government or shared among different tiers of government. There is therefore the need to examine which of these two arrangements will augur well for the Nigerian Federation.
for in the 1999 Constitution, and will also not affect the provision of the Personal
Income Tax Act.13
[1].2 STATEMENT OF PROBLEM
The quest for an acceptable pattern for sharing of powers to levy personal income tax between the Federal and State governments have been a recurring problem in Nigeria. There is hardly any civilian regime since independence till date that has not experienced contentious litigation on income tax jurisdiction. It therefore becomes imperative to examine, nay appraise why the Federal government (and not the State) is vested with the exclusive power to legislate on this important tax in a way that portends a centralising trend in Nigeria federal
[2] Ayua I.A. op. cit. P.32
Another significant issue worthy of consideration is the clamor or desire by state governments for securing that the maximum possible proportion of the income of state governments should be within the exclusive power of those governments to levy and collect. The practicability of this shall be confronted with the consideration of national policy, which involves the well-being of Nigeria as a whole, and inter-State policy which will ensure harmonious relations between States so as to avoid causes of frictions.
In this thesis therefore, it is necessary to examine carefully all these statements of facts with the hindsight that there would not be any infraction on the autonomy enjoyable by State government within Nigeria federal set up as provided.
