The Federal High Court in Abuja has summoned the Minister of Interior, Dr. Olubunmi Tunji-Ojo, and Attorney-General of the Federation (AGF), Mr. Lateef Fagbemi, SAN, to justify the controversial Expatriate Employment Levy (EEL) unveiled by the Federal Government last year.
In a ruling delivered on Thursday, Justice Inyang Ekwo mandated the defendants to appear within three days to explain why the tax scheme should not be halted. This directive follows a motion filed by the Incorporated Trustees of New Kosol Welfare Initiative, challenging the legality and economic implications of the policy.
Details of the Tax Regime
The Expatriate Employment Levy, introduced in February 2024, proposes significant charges on foreign workers employed in Nigeria. According to the plaintiff, the policy imposes annual levies of $15,000 (₦23 million) on expatriates in director-level roles and $10,000 (₦16 million) on non-director roles.
Additional penalties for non-compliance include fines and potential imprisonment. Companies failing to register expatriate employees within 30 days or renew the levy on time face fines of ₦3 million. Submission of false information could also attract penalties, while inaccurate reporting may lead to up to five years’ imprisonment.
Legal and Economic Concerns Raised
The Incorporated Trustees of New Kosol Welfare Initiative argue that the EEL is not only economically stifling but also constitutionally questionable. The group’s Programme Implementation Coordinator, Raphael Ezeh, in an affidavit, described the policy as “anti-people” and warned of its potential to harm Nigeria’s economic growth.
“The proposed taxation regime works like a chokehold against the economic growth of the nation,” Ezeh stated, adding that taxation matters require the collaboration of both the executive and legislative arms under the 1999 Constitution.
He pointed out that the Federal Government acted unilaterally, contravening constitutional provisions, particularly Section 59, which limits the executive’s authority in imposing taxes.
Court’s Directive
During Thursday’s proceedings, the plaintiff’s counsel, Patrick Peter, sought an interim injunction to prevent the implementation of the policy pending the court’s final decision. Justice Ekwo, while declining to grant the injunction immediately, ordered that the defendants be notified of the suit within three days.
The court emphasized the need for the minister and the AGF to “show cause why the prayers of the plaintiff ought not to be granted” during the next hearing on January 16.
Background on EEL’s Suspension
The Federal Ministry of Interior had earlier suspended the implementation of the EEL, initially launched on February 27, 2024, after public backlash. Stakeholders such as the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA) had called for consultations to address concerns over its potential impact on businesses and foreign investments.
Despite the suspension, the plaintiff alleges that preparations for full implementation are underway, raising fears of imminent economic disruptions.
Industry Concerns
Economic analysts have expressed mixed reactions to the EEL. While the government argues that the levy will generate revenue and regulate the employment of foreign nationals, critics warn it could discourage foreign investment and worsen unemployment.
“This policy, if enforced, will create unnecessary barriers for companies relying on expatriate expertise,” said a Lagos-based economist. “Nigeria needs foreign investors, not policies that scare them away.”
Future Implications
The case highlights a broader debate over Nigeria’s tax policies and their alignment with constitutional frameworks. Should the court rule in favor of the plaintiff, it may set a precedent for challenging other government-imposed levies that bypass legislative approval.
Meanwhile, businesses and expatriates await the court’s decision with bated breath, as the outcome could redefine the operational landscape for foreign workers in Nigeria.
Justice Ekwo’s ruling underscores the judiciary’s role in scrutinizing executive actions, ensuring they comply with legal and constitutional standards. For now, the controversial Expatriate Employment Levy hangs in the balance, with January 16 set as the decisive date.
