Court bars local government councils from creating new taxes and levies

Federal High Court dismisses FIRS application for stay of execution on VAT judgement

Federal Capital Territory High Court (“the Court”) on Monday, 14 January 2019 ruled that Local Government Area Councils (LGCs) in the Federal Capital Territory (FCT) lack authority to impose taxes and levies that are outside the purview of the Constitution of the Federal Republic Of Nigeria, 1999 as amended (the Constitution) and Taxes and Levies (Approved List for Collection) Act (TALC). This was delivered in the case between Abuja Electricity Distribution Company (AEDC) v. Kuje Area Council (KAC).

AEDC, an electricity distribution company with operations in areas within KAC, was issued demand notices by the latter, requesting it to pay a total of N540,000 for outdoor advertisements, corporate parking, sanitation and operational permit levies for 2015 and 2016. AEDC, dissatisfied with the demand notices, approached the Court for a declaration that KAC has no legal basis for the taxes underpinning the demand notices.

Agreeing with AEDC in part, the Court held that some of the taxes imposed by KAC were outside the ambit of the Fourth Schedule to the Constitution and Part III of the TALC, thus beyond KAC’s scope. The Court further held that the Constitution confers FCT’s legislative powers on the National Assembly. Hence, LGCs in FCT do not have the powers to create new heads of taxes (outside of the Constitution and TALC) in the absence of any enabling legislation by the National Assembly. This judgement suggests that LGCs are only able to impose applicable taxes and levies provided in the Fourth Schedule to the Constitution and Part III of the TALC – any imposition beyond this is null & void. It further reinforces the conclusion reached by the Court in 2018 in the case between AEDC and Abuja Municipal Area Council.

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