The Bayelsa Education Tax – Robbing Peter to pay Paul

On the 1st of April, 2017, the Bayelsa State Government announced its intention to introduce an Education Tax, despite the existence of the federally-collected Tertiary Education Tax, which is administered by TETFUND (Tertiary Education Trust Fund). Several issues are raised by this move that require elucidation, but before delving into this task, it is necessary to give a brief outline of the relevant taxes to be discussed.

The Tertiary Education Tax is imposed at the rate of 2% on the assessable profit of a company by virtue of the provisions of section1(2) of the Tertiary Education Trust Fund (Establishment,Etc.) Act 2011, No. 16. This act repealed the Education Tax Act of 2003, which had become overstretched and ineffective due to great pressure placed on its scarce funds. Restricting the scope of the TETFUND to higher institutions alone, made its investments more noticeable and effective.

The Bayelsa education tax, is to be administered by the Education Development Trust Fund (EDTF). The average Bayelsan will pay between N400 to N100, 000 per month. This levy is also imposed on the assessable profits of businesses in the state. According to the state commissioner of education, Mr. Markson Fefegha, Bayelsa will generate between N1.2 billion and N3 billion annually from this tax. With this established, I shall now shift focus to the issues thrown up by this law.

First of all, what is the relationship between the Bayelsa Education Tax and the Federal Tertiary Education Tax? The purpose of both taxes is to provide alternative funding for the educational sector, apart from the conventional budgetary funding. The enabling laws have been enacted pursuant of the powers granted both tiers of government by virtue of the provisions of Concurrent Legislative List of the Constitution of the Federal Republic of Nigeria, 1999. Section 2 provides that a House of Assembly may make provisions for the imposition of charge upon the revenue and assets of that State for any purpose “notwithstanding that it relates to matters with respect to which the National Assembly is empowered to make laws.” Going further down, sections 27 & 30 respectively give National Assembly and the State House of Assembly powers to make laws with respect to university, technological and post-primary education. An imposition of a tax to fund the education sector can therefore be enacted by virtue of these express provisions. But it is worthy of note that section 4(5) of the 1999 Constitution provides that any Law of the House if Assembly of a State, which is inconsistent with any law validly ,made by the National Assembly shall be void to the extent of the inconsistency.

This leads to the next issue- can the Bayelsa Education Tax be enforceable alongside the Federal Education Tax? In the first place, the Bayelsa tax law purports to impose a levy on the assessable profits of businesses, for the purpose of education, which is already being done by the federal law. This amounts to multiple taxation, which has been defined by the National Tax Policy Document of 2012, as occurring when a tax, fee, or rate is levied on the same person in respect of the same liability, by different authorities. Against the backdrop of the recent directive of the then Acting President, Prof. Yemi Osinbajo, to oil companies to relocate their headquarters to the Niger Delta region, this is simply another extra reason to disregard this well-intentioned plea as far as Bayelsa is concerned, militancy aside. It could even most likely boomerang against either tax. In other words, the rate of collection of tax A could become inversely proportional to tax B, to the detriment of the intended beneficiaries.

Furthermore, the validity of the Bayelsa tax could be validly contested on the grounds of its inconsistency with the TETFUND law, based on the provisions of section 4(5) of the 1999 Constitution.

But this should not mark the end of this well-intentioned law capable of providing the necessary leverage to propel Bayelsa State form the dumps of the Educationally Disadvantaged States List in Nigeria’s educational hierarchy. A stillbirth of this law can be prevented by two simple amendments to eliminate the issues raised in the preceding paragraphs.

First of all, the law should be amended to exclude corporate bodies, since they are already being taxed for the purpose of education. It has been judicially observed in the case of Registered Trustees of the Association of Licensed Telecommunication Operators & Ors v. Lagos State Government & Ors that the driving force behind some state tax laws is to simply to make money for the government by getting a share of the booty that corporate bodies are believed to be sitting on. The need to diversify the economy should not lead the government into committing constitutional travesties.

The law can also be amended to specifically make it an education tax for funding basic education, that is, primary and secondary education, so as to prevent the current situation where it clashes with the tertiary education tax. Funding tertiary education is very capital-intensive, and any attempt by the state government to fund the three tiers of education from the same tax will lead to a watered-down effect of little consequence. The state government would be advised to take wisdom the federal government’s decision to restrict its education tax to tertiary institutions for greater effectiveness. To complement the FG’s efforts, a basic education tax should be created by not just the state in question, but all states of the federation.

It has been projected that Nigeria needs an oil price of $139 per barrel its budget, but oil currently sells for $52 to the barrel. There is obviously a seriously budget deficit crisis in the land. To fill the gap, governments at all levels must put on their thinking caps to raise the needed revenue to fund growth and development. But at no time should this lead us into robbing Peter to pay Paul.


Akintunde Agunbiade

0815 703 3780