The Federal High Court Prohibit Local Government Council from Creating New Taxes and Levies.
The High Court sitting in the Federal Capital Territory has delivered a judgment in favour of Abuja Electricity Distribution Company (AEDC) in the case between Abuja Electricity Distribution Company (AEDC) and Kuje Area Council (KAC) in the Federal Capital Territory. The judgment delivered on the 14 January 2019, held that Local government councils in the FCT have no legislative power or competence to create or impose any tax head or levy that is not captured in the Nigeria Constitution and Taxes and Levies (Approved List for Collection) Act. The court relied on section 299 of the Nigeria constitution that states that such legislative power of the FCT is conferred only on the National Assembly.
The Fact of the case
Kuje Area Council is one of the council areas in the FCT, in exercise of its legal right, issued a demand notice of N540,000 for levies for outdoor advertisements, corporate parking, sanitation and operational permit for the year 2015 and 2016 to AEDC, who operates in the council jurisdiction. AEDC reaction to the demand notice was to institute a legal action against KAC at High Court of Federal Capital Territory challenging it legislative competence to create and impose new taxes and levies outside the constitution.
The court decided the case in favour of the plaintiff, stating that KAC has acted outside the scope of its power as stated in the Fourth Schedule to the Constitution and Part III of the Taxes and Levies (Approved List for Collection) Act. The Court based his judgment on the provisions of Section 299 of the 1999 Constitution that clearly states that the legislative powers of the FCT is vested in the National Assembly and that the LGCs of the FCT are not in a position to create any new heads of taxes without any enabling enactment by the National Assembly.
From this judgment, it clearly shows that local government council in the Federal Capital territory can only collect taxes and levies that are approved by an enabling law and cannot singlehandedly create new ones. In the light of this, tax payers are encouraged to know, understand and exercise their rights as it concern tax assessment from all the tiers of government and seek professional advice when it becomes necessary.
This alert is for general information purposes to its recipients only. It is not offered as advice on any particular matter, whether legal, procedural or otherwise. However, for further information on the issues raised above, please contact:
Associate, Tax & People Services
T: +234 817 951 4310
Senior Associate, Tax & People Services
T: +234 809 515 5549