Lottery regulation: Avoiding another constitutional row



TEMITOPE OGUNBANKE writes on the constitutional row between federal and state agencies over lottery regulation



ince the beginning of the present political dispensation in May 29, 1999, few constitutional rows between the Federal Government and states, especially Lagos have not been resolved up till date. But with Lagos State and the Federal Government now belonging to the same political party, the ruling All Progressives Congress (APC) since 2015, the situation seems to be changing unlike in previous years.



It is of note that some of the controversial issues one would have expected the APC-led administration to have settled by now either by truce or constitutional means are still flustering. Among the issues are the long time demand for a special status for Lagos; dispute between the National Assembly and Lagos State House of Assembly over which is legally competent to make laws governing Nigeria’s intrastate and inland waters; constitutional differences over the creation of additional 37 Local Council Development Areas (LCDA) by Lagos State.




Till date the LCDAs are not recognised by the 1999 Constitution. There is also the lingering face-off between the Lagos State Lotteries Boards (LSLB), Association of State Gaming Regulators (ASGR), consisting of 20 states and the National Lottery Regulatory Commission (NLRC).




Following the concern over some of the lingering constitutional matters, some major players and investors in the lottery and gaming industries, have raised the alarm over the burden of double taxation, which according to them is wrecking their businesses. But New Telegraph gathered that a major one that is in focus is the ongoing standoff between ASGR, LSLB and NLRC over the issue of National Lottery Licenses.




Reacting to a recent newspaper publication by NLRC and EFCC, the LSLB frowned at the position of the NLRC. The board stressed 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.



ASGR also noted the powers of NLRC to regulate gaming activities in states by virtue of National Lottery Act, 2005 (as amended), is unfounded and unconstitutional. ASGR 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 respective states cannot blacklist unlicensed gaming holders with the national license and that it (NLRC) is the apex regulator of lotteries and gaming in Nigeria, but this argument; ASGR considered ultra vires the 1999 Constitution.



The ASGR, 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 in various states, adding 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 wellbeing 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.



Commenting on the issue, a human rights lawyer, Dr. Femi Aborisade cited paragraph 1 (1) of the Taxes and Levels (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 “Pools 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.




“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,” he said.



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,” he said.



Commenting on the issue, another lawyer, Mr. Tunde Fagbounlu (SAN) said two different things must be distinguished concerning the issue, which are the power to regulate lottery and that to tax 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 lingering dispute over whether VAT applies to the proceeds of the lottery business. That however is not a dispute between the federal and state governments, but it is rather a dispute between the lottery industry, on one hand, and the governments on the other hand,” he said.



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.



“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 inter-state commerce, the power to regulate and tax same maybe vested in the Federal Government. However, the doctrine of inter-state commerce will go against the Taxes and Levies  (Approved list for collection) Amendment Order 2015, that emphatically indicates that gaming, lotteries and casinos taxes and levies should be collected by the state government,” he said.




Adegoke added 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.”



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 and the Minister of Works and Housing, Babajide Fashola, vigorously challenged many grey areas of the Constitution in the Supreme Court when they served as commissioner and governor respectively in Lagos State.



“Some of the grey areas were on physical planning, sales and consumption tax, creation of local government, control of water ways 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 not withstanding. The operators, like the coastal waters businessmen pay both sides in the interest of peace. Only the Supreme Court has the final say,” he said.



In his response, anti-piracy crusader and human rights lawyer, Barr. Akeem Aponmade, said what is paramount is the legal basis of the dispute between the Federal Government and the states. “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 also flayed the operators as knowing next to nothing about the laws that underpin their authority to collect revenue for government.



His words: “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 tax. It is absolutely illegal for the Federal Government to seek to tax a company just for carrying out lottery business.”



From the various arguments it could be said that most of the commentaries favour the state to collect the disputed taxes just as the stakeholders in the business are much convinced and believe the state is at vantage to collect the lotto and gaming tax.




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