TEN REASONS WHY THE FEDERAL GOVERNMENT SHOULD RECONSIDER THE EXPATRIATE EMPLOYMENT LEVY — Professor Abiola Sanni SAN
President Bola Ahmed Tinubu (PBAT), in an apparent breach of his promise to address the menace of multiplicity of taxes and levies, launched the Expatriate Employment Levy (EEL) at the State House Council Chambers, Abuja on 27 February 2024. EEL is a new levy on employers who hire expatriate workers (employed) in the private sector in Nigeria. The employer is liable to pay a levy of $15,000 (Fifteen Thousand US Dollars) on each director and $10,000 (Ten Thousand US Dollars) on other categories of expatriates so employed. Accredited staff of Diplomatic Missions and government officials and expatriates with Temporary Work Permits
employed for a duration less than 183 days are exempt unless the employment duration is up to an aggregate of 183 days within one fiscal year. Every employer is under obligation to report (within a timeline yet to be prescribed) details of employed expatriates on an online platform
to be provided by the Nigerian Immigration Service (NIS) for that purpose. Employers should promptly update the platform on any changes in the employment circumstances of each expatriate including job roles, salary, and employment duration that may impact EEL calculation. NIS may conduct compliance audits from time to time. Inaccurate or incomplete
reporting is an offence, which attracts a five-year imprisonment or a fine of ₦1,000,000.00 (One Million Naira Only) or both under section 56(5) of the Immigration Act 2015. Noncompliance may attract “further sanctions/penalties based on the provisions of Regulation 52(6) of the Immigration Regulations 2017.
The unique selling point of EEL is that it seeks to discourage employers in Nigeria from employing expatriates for roles which expertise is available in Nigeria. The EEL Handbook stated in paragraphs 2.1.1.1 and 2.1.2.1 thus:
- “2.1.1.1. By attaching a financial commitment to the employment of expatriate, government encourages employers to actively engage in training and mentorship programmes. This facilitates the development of local talents, thereby strengthening the domestic workforce over time.
- 2.1.2.1. EEL ensures that while expatriate workers contribute to economic development, the right and opportunities of local employees are not compromised”
Apart from the transfer of technology, EEL seeks to promote collaborations between government agencies for broader national goals including security and economic interest in line with relevant legal provisions.
While the overriding revenue-generation objective is clear, EEL has been praised to the high heavens as a silver bullet for the myriad of challenges that I consider, at best, secondary and exaggerated. My concern is that there already exists an elaborate framework for the attainment of the same laudable objectives under the regulation of NIS and cognate Ministries, Departments and Agencies.
I have highlighted below ten reasons why I believe the Federal Government should reconsider the policy.
- Why a dollar-denominated levy?
While Nigeria requires all the foreign exchange it can muster to boost the fast depreciating rate of the naira, this objective should be pursued within the framework of existing laws. It is presumptuous to assume that EEL will shore up the forex reserve of Nigeria on the basis that dollars would come from external sources or abroad. Section 20(1) of the Central Bank of Nigeria Act, 2007 makes naira the legal tender in Nigeria. On this premise, why will an agency of the government encourage the dollarisation of the economy and put further pressure on local demand for dollars? In my view, the dollarisation of EEL will further worsen the foreign exchange challenge of Nigeria in due course to the extent that the employers will source for the same in the Nigerian economy.
2. No penalty is prescribed for Non-Compliance.
A person can only be punished for an offence prescribed by the Immigration Act or the Regulations made pursuant to it. However, neither the Immigration Act 2015 nor the Immigration Regulations 2017 contain any provision on EEL or provide any express punishment for non-compliance. Paragraphs 4–9 of the Regulation expressly provide
a legal framework for business permits, residence permits, visiting permits, transit permits, temporary work permits and visas on arrival. To the extent that a person can only be punished for an offence under the Immigration Act and the Regulations, The Act and the Regulations are the bedrock of the power of NIS. NIS as a statutory body cannot operate outside its power. Section 36(12) of 1999 Constitution of the Federal Republic of Nigeria and the case of Aoko v. Fagbemi 1961) 1 All NLR 400 are instructive.
3. There is no Enabling Law for the imposition of EEL.
An imposition is made by clear expression in an enabling law. Such a law must state, “what is being levied, when and how”. In an enabling law, there is typically a charging clause of the law. For instance, section 1(1) of the Tertiary Education Trust Fund (Establishment) Act provides:
“As from the commencement of this Act, there shall be charged and
payable an annual tertiary education tax which shall be assessed, collected and administered in accordance with the provisions of this Act.” Such statutory stipulation is an exercise of the sovereign power of the country through the legislature to “force” a taxpayer to part with his property (money) without any direct benefit being rendered in return. EEL must be rooted in the Act or the Regulations to be lawful. I submit without any equivocation that a levy cannot be imposed vide the EEL Handbook, on the ground that it is neither a legal instrument nor an Act of Parliament.
4. Inconsistency with the statements by the President.
During his inauguration on 29 May 2023, PBAT pledged to address unfriendly business and fiscal policy measures and the multiplicity of taxes in Nigeria. In his words, “I have a message for our investors, local and foreign. Our government shall review all their complaints about multiple taxation and various anti-investment inhibitions.” On 31 July 2023, PBAT signed four Executive Orders deferring and suspending the commencement of certain taxes on the basis that they were anti-business. This move sent a positive signal that PBAT has a better understanding of the business terrain. While the words of a President are not law, they represent the direction of the government’s public policy and impose self-restraint on the President and his team not to act inconsistently with his affirmation. In the unlikely event that the EEL survives, the quotable quotes of PBAT on fiscal matters would almost count for nothing. The
President should recall his commitment to ensuring that the government’s quest for improved revenue shall be based on best practices. According to him, “We shall not tax capital and investments. We shall tax the fruits, not the trees.” PBAT in a recent trip to Qatar to woo investors would have made certain assurances. Can these assurances be taken seriously, if the government could approbate and reprobate?
5. Lack of consultation.
The first and only breaking news about the EEL appears to be the formal launch, yet the idea was said to have been on the drawing board for the past four years since the administration of President Muhammadu Buhari. This means that the promoters must have kept it under wraps. It is doubtful if it was debated in the hallowed Federal Executive Council Chambers where it was launched. The EEL would have been subjected to public debate if it had been channelled through the right constitutional procedures (and not through the ‘backdoor’). The stakeholders would have contributed during the public hearing, which would have been on record. They would have had their say even if the legislature had its way. As it were, no one saw the EEL coming; it came like the Biblical thief in the night — without notice!
6. Commencement date.
There is something to be said about the commencement date of 25 March 2024 for the operation of EEL. Assuming that everything has been done in line with constitutional imperative, the government should allow adequate notice as a matter of good administrative practice. Paragraph 3.1(iv) of the National Tax Policy, 2017 provides that “All levels and arms of Government, Ministries, Extra-Ministerial Departments and Agencies where applicable shall ensure a reasonable transition period of between three and six months before implementation of a new tax.” It is on record that this was
one of the reasons cited by Mr. Dele Alake when PBAT signed the four Executive Orders postponing the commencement date of the Finance Act 2023 and suspending the implementation of the Customs, Excise Tariff (Variation) Amendment Order, 2023, which introduced the levy on Single-Use Plastics.
7. Inconsistency with the policy of one revenue agency.
EEL will be operated under a model where the Federal Government of Nigeria represented by the Ministry of Interior “as the guarantor” andthe Nigeria Immigration Service (NIS), as the implementing agency; whatever this means. What is esoteric about this levy that the FIRS cannot collect it at a time when the policy is to ensure a single revenue agency at all levels of government? As it were, the FIRS is saddled with the collection of special taxes, it is not clear what sets the EEL apart for this established pattern.
8. EEL is tax deductible.
While the EEL might seem like a revenue enhancement initiative, it is a farce, or at best, a mirage because the levy will be treated as a deductible in adjusting the income of companies for taxation. The bottom line is that the NIS has designed a measure to “ring-fence” part of the money that should flow into the Federation Account for its Ministry. This obnoxious practice will encourage other Ministries to do the same and worsen the problem of multiplicity of taxes in Nigeria. Additionally, EEL further erodes the profit margin of companies and businesses who will be subject to it; profits that
should ordinarily be taxed become deductibles going directly to an MDA.
9. International Obligations
Nigeria is a signatory to many multilateral and bilateral instruments on international trade, movement of personnel and resources under the aegis of World Trade Organsiation (WTO), African Union, African Continental Free Trade Agreement (AfCFTA) and Economic Community of West African States (ECOWAS) some of which contain obligations on nondiscrimination and conferment of most favoured clauses. Nigeria as a responsible nation cannot sacrifice the time-honoured principle of “pacta sunt servanda” on the altar of a promise of new money being dangled by the promoters of EEL.
10. There is no quick fix.
It suffices to say that there is no quick fix to the revenue challenge(s) of Nigeria, rathera holistic reform is required for sustainability. The Federal Government of Nigeria should remember that a good number of Nigerians are also expatriates in other countries. One can imagine what will be their lot in the unlikely event that other countries decide to follow Nigeria’s bad example of levying this kind of tax. EEL could strain diplomatic relations with countries whose citizens are affected. Also, a policy that imposes
disproportionate burden on employers merely for employing expatriate may erode investor confidence in Nigeria’s business environment. Investors seek stability, predictability, and favorable conditions for conducting business.
Conclusion
A calm review of the pros and cons of EEL would reveal that it could have broader negative implications for trade, investment, and international cooperation. Furthermore, it will foul and heat up the evolving fiscal space, resulting in avoidable lawsuits and worsening the trust deficit
in government — citizens’ relations. Beyond the new revenue, there is nothing EEL promises that cannot and should not be achieved through the existing legal framework, which for all intents and purposes is fairly well-regulated.
Abiola Sanni is a Professor of Commercial Law at the University of Lagos available at asanni@unilag.edu.ng.
