The Illegality of the Rivers State Social Services Levy Bill

By Esosa Omo-Usoh

On Friday, July 30, 2010, the Ad Hoc Committee on the Social Services Bill of the
Rivers State House of Assembly held a public hearing on the Social Services Levy Bill,
an executive Bill of the Rivers State Government.

The gist of the Bill is that it seeks to impose a Social Services Levy on all working
persons in Rivers State, and to establish a Social Service Trust Fund to be managed by a
Board of Trustees for purposes of funding social services such as the free education
programme, scholarship for the pursuit of academic excellence, free medical care,
provision and improvement of medical facilities in Government health centres and
hospitals.

I am puzzled by the fact that the Rivers State Government would contemplate such a Bill.
Firstly, because I think it is insensitive to seek to increase the tax burden of the people
during these difficult times, and secondly, because it will amount to an illegality if such a
Bill is passed into law.

As one speaker put it at the hearing, it is apparent that the draftsman of the Bill did not
conduct a thorough research before drafting the Bill. I agree completely with the speaker.
If the Bill is passed into law, it will set the Rivers State House of Assembly on a collision
course with the National Assembly and the Law itself on a collision course with the
Constitution and federal statutes on taxation in Nigeria.

The legislative powers of the Federal Government and the States of the Federation
(such as the Rivers State of Nigeria) are prescribed in Section 4 of the Constitution
of the Federal Republic of Nigeria Cap C.23 Laws of the Federation of Nigeria, 2004
(the Constitution).

By Section 4 (2) of the Constitution, the National Assembly is vested with the powers
to make laws with respect to matters in the Exclusive Legislative List in Part I of the
2nd Schedule to the Constitution, to the exclusion of the Houses of Assembly of
States (such as the Rivers State House of Assembly).

By Section 4(4) of the Constitution, the National Assembly also has powers to
legislate on any item in the Concurrent Legislative List set out in Part II of the
2nd Schedule to the Constitution in the manner set out therein.

By Section 4(4)(b) of the Constitution, the State House of Assembly (such as the
Rivers State House of Assembly) has powers to legislate on matters in the concurrent
legislative list set out in Part II of the 2 nd Schedule to the Constitution and only to
the extent specifically provided.
The Bill, when given its proper construction, is seeking to legislate for the
imposition of a levy (which is the same as a tax) on the incomes of all persons
working in Rivers State. Taxation of incomes is an item in the Exclusive Legislative
List. In particular, item 59 in the Exclusive Legislative List provides for “taxation of
incomes, profits and capital gains, except as otherwise prescribed by the
Constitution”. Thus, the Constitution confers power exclusively on the Federal
Government, acting through the National Assembly, to enact laws for the imposition
of taxes on incomes of persons. The Rivers State Government lacks the power to
impose taxes on incomes as it seeks to do through the Bill.

If and when the Bill is passed into law by the Rivers State House of Assembly and
assented to by the Governor of Rivers State, such law will be unconstitutional and ought
to be declared illegal and void on the application of affected citizens. The fact that such
a law would be unconstitutional is reinforced by items D7 to 10 in the Concurrent
Legislative List. Items D7 and D8 confirm the powers of the National Assembly
to make laws for the imposition of tax on incomes of persons and further
provides that the National Assembly may by law give rights to State Governments
to collect the taxes.

Items D9 and D10 in the Concurrent Legislative List which provide for State
Governments on tax matters speak specifically of collection and administration of
taxes and not imposition of taxes as the Bill seeks to do. Thus, the Federal
Government has the controlling legislative machinery to determine and legislate as
to the quantum of taxes and levies that should be imposed on the incomes of
persons. The Federal Government uses the Joint Tax Board to make
recommendations on taxes, including income tax and this usually informs its
legislation on these matters.

The Constitution recognizes that
caprice of the different tiers of
multiple and over lapping taxes
Exclusive Legislative List and
Government.
to leave the imposition of taxes at the whim and
government could expose the citizenry to undue
and levies. This is why it is a matter for the
it is to the exclusion of the Rivers State

If the Bill is passed into law, it will have the effect of imposing a levy (tax) on the
incomes of all persons working in Rivers State in the manner prescribed in the
Schedule to the Bill. This levy will be in addition to the personal income tax
payable by employees as prescribed by the Personal Income Tax Act (PITA) Cap
P8 Laws of the Federation of Nigeria, 2004. It will therefore constitute multiple taxes
on the incomes of persons working in Rivers State.

Furthermore, the Bill, if passed into law, will conflict with the Taxes and Levies
(Approved List for Collection) Act Cap T2 Laws of the Federation of Nigeria, 2004 (the
Act) which is a federal law. This is because the Act provides for the different taxes and
levies that may be collected by State Governments (including Rivers State of Nigeria),
and Social Services Levy is not one of the taxes and levies recognized by the Act. The
result of this conflict is that the Bill, if passed into law, will be null and void to the extent
that it is inconsistent with the federal law.

The Bill seems to me to be a hurried job by its sponsors to achieve a predetermined

objective without giving serious thought to their actions. This can be said to have been
accurately captured by the approach of the Ad Hoc Committee to the public hearing. One
member in particular caught my attention.

The member appeared for the hearing dressed in jeans, a pair of leather slip-ons with his
short-sleeve shirt untucked. I am all for casual Fridays but this was taking the notion a tad
too far. Not done yet with offending my delicate sensibilities, the said member, in the
course of the presentation of papers by invited speakers, proceeded to read text messages
on his phone and receive phone calls. Intermittently, he would step down from the
podium and retire to a corner of the auditorium to continue with his telephone
conversation, all these while the hearing was still in session.

It is difficult not to assume that the same approach was taken towards the drafting of the
Bill and perhaps, its subsequent consideration by the State Legislature. I hope that all the
arguments made against the Bill at the hearing will be taken into consideration before any
further step is taken on the matter.