SC693

PAPUA NEW GUINEA

[IN THE SUPREME COURT OF JUSTICE]

SCR No. 1 of 2000

SPECIAL REFERENCE PURSUANT TO
CONSTITUTION SECTION 19

BY MOROBE PROVINCIAL GOVERNMENT
FOR AND ON BEHALF OF THE
MOROBE PROVINCIAL EXECUTIVE COUNCIL

Waigani: Amet CJ, Salika, Kandakasi, JJ.

2002:	26 February
27 September

Constitutional Law – Whether sections 86 (1A) and 85 (2) of the Organic Law on Provincial Governments and Local-level Governments are provisions expressly authorized by section 187C (4) of the Constitution within the meaning of section 12 (1)(a) of the Constitution and are therefore valid and effective – Whether the Valued Added Tax Act 1998 is solely for matters set out in section 86 (2) of the Organic Law on Provincial Governments and Local-level Governments – Whether the Valued Added Tax Act of 1998 is invalid and without effect by virtue of sections 10, 11 and 187C (4) of the Constitution and section 85 of the Organic Law on Provincial Governments and Local-level Governments – The provisions of the Constitution must be given their fair large and liberal meaning so as to give effect to the intent or purpose of the provisions – There is no authorization in the Constitution for the taxing powers of the Provincial Governments to be made concurrent with the National Government once such powers are vested in the Provincial Governments – Sections 86 (1A) and 85 (2) of the Organic Law on Provincial Governments and Local-level Governments not authorized within the meaning of section 12 (1)(a) of the Constitution by section 187C or any other provision in the Constitution and are invalid and unconstitutional – The Value Added Tax Act of 1998 has no foundation in the Constitution and is therefore invalid and of no effect – Constitution ss.10, 11, 12, 100, 109 and 187C – Organic Law on Provincial Governments and Local-level Governments ss.85 and 86.

Facts

By special constitutional reference under section 19 of the Constitution, the Morobe Provincial Government challenged the validity of the Value Added Tax of 1998 and sought to have that Act declared unconstitutional and therefore invalid and of no effect. The reference raised the following questions for the Supreme Court to answer:

1.	Is the VAT Act an act that makes provision solely for the matters referred to in section 86 (2) of the Organic Law On Provincial Governments and Local-level Governments ("OLPLLG") in respect of sales and service taxes imposed by the Provincial Governments under s.86 (1)(a) of the said law?

2.	Is the VAT Act an act that imposes a tax on sales and services for the purposes other than those prescribed by section 86 (2) of the OLPLLG?

3.	If the answer to the proceeding question No.2 is YES, is the VAT Act invalid and without legal effect by virtue of sections 10 and 11 of the Constitution, by reason that it is enacted contrary to and in breach of section 85 of the OLPLLG?

4.	If the answer to question 2 is YES, does the OLPLLG provide for the Parliament to make an Act of the kind referred to in section 86 (2) in respect of taxes on sales and services authorized by section 86 (1A) of the said Law?

5.	Are the provisions of section 86 (1A) of the OLPLLG invalid and without legal effect by virtue of the provisions of section 187C (4) of the Constitution by reason that section 86 (1A) is a law which does not give reasonable adequacy to the Provincial Government for the performance of the duties of the Government in that the relevant section allows concurrency of powers between the National Government and the Provincial Governments?

6.	Whether section 86 (1A) of the OLPLLG is a law, which is expressed to be made under section 12 (1)(a) of the Constitution?

7.	Whether section 86 (1A) of the OLPLLG is inconsistent (within the meaning of section 12 (1)(b) of the Constitution) with the provisions of section 187C of the Constitution to the extent that the section 86 (1A) of the OLPLLG confers powers of concurrency of taxation to the National Government?

8.	Whether section 86 (1A) of the OLPLLG is inconsistent (within the meaning of section 12 (1)(b) of the Constitution) with the provisions of sections 85 and 86 of the OLPLLG to the extent that section 86(1A) confers powers of concurrency of taxation to the National Government?

9.	Whether section 85 (2) of the OLPLLG is inconsistent (within the meaning of section 12 (1)(b) of the Constitution) with the provisions of section 187C of the Constitution to the extent that section 85 (2) of the OLPLLG confers powers of concurrency of taxation to the National Government?
Held:

1.	There is no expressed authorisation within the meaning of s.12 (1)(a) of the Constitution for the OLPLLG for the National Government to have a concurrency of power with the Provincial Governments for taxation in respect of the matters specified in s. 86 (1) of the OLPLLG.

2.	Sections 86 (1A) and 85 (2) of the OLPLLG to the extent that they confer a concurrency of power between the Provincial Governments and the National Government, are not authorized by section 187C or any other provision in the Constitution and are therefore invalid, unconstitutional and without any effect.

3.	Subject only to the Constitution, the National Government has the unlimited power by virtue of sections 100 and 109 to legislate on any matter, but once that power has been delegated or devolved to Provincial Governments pursuant to s.187C (4) and (5) of the Constitution, the National Government has no power to exercise the powers so delegated or devolved in the absence of any expressed provision to the contrary.

4.	The Value Added Tax Act of 1998, has no Constitutional foundation and is therefore invalid and of no effect.

5.	Questions of adequacy in respect of s.187C (3), (4), (5), or (6) are non justiciable as defined in schedule 1.7 of the Constitution and as such whether the concurrency of taxing powers pursuant to ss.86 (1A) and 85 (2) of the OLPLLG gives reasonable adequacy to the Provincial Governments in the performance of their powers and functions is not a question that can be considered by this Court.

6.	As for the questions raised, they are answered as follows:

Question 1 – No
Question 2 – Yes
Question 3 – No
Question 4 – No
Question 5 – No answer provided
Question 6 – No
Question 7 – Yes
Question 8 – Yes
Question 9 - Yes 

Cases Cited:
Kaseng v. Namaliu [1995] PNGLR 481.
SCR No. 4 of 2000; Re: In the Matter of Section 18(1) of the Constitution and In the Matter of Anderson Agiru (08/10/01) SC671.
The State v Independent Tribunal; Ex parte Sasakila [1976] PNGLR 491.
Constitutional Reference No. 1 of 1977 [1977] PNGLR 362.
Canisius Karingu v. Papua New Guinea Law Society (unreported judgement delivered on 9/11/01) SC674.
SCR No. 5 of 1987 In the Matter of the State v. Songke Mai & Gai Avi Reference under s.18 of the Constitution [1988] PNGLR 56.
Sir Julius Chan v. The Ombudsman Commission of Papua New Guinea (25/06/99) SC607.
Rosa Angitai v. The State [1983] PNGLR 185.
Chritopher Haiveta, Leader of the Opposition v. Paias Wingti Prime Minister of Papua New Guinea (No.3)[1994] PNGLR 197.
SCR No. 2 of 1995 Reference by the Western Highlands Provincial Executive (1995) SC486.
Wik Kor v. The State [1983] PNGLR 24. 
Application Pursuant to Section 155 (4) of the Constitution SC536.

Counsel:
Mr. I. Molloy for the Referror.
Mr. J. Gawi for the Respondent.

27 September 2002

AMET CJ: This is a Special Reference bought pursuant to Constitution s.19 by the Morobe Provincial Government seeking the opinion of the Court in relation to the several provisions of the Constitution and the Organic Law on Provincial Governments and Local Level Governments (the Organic Law), and as to the constitutional validity of the Value Added Tax Act 1998 (the VAT Act).

Nature of the Case

The National Parliament amended the Organic Law provisions on Provincial and Local Level Government Taxes ss.85 & 86, thereby vesting concurrent powers in the National Government with Provincial governments to impose value added tax on goods and services.

The National Parliament subsequently amended the VAT Act giving effect to the amendments to the Organic Law.

The Facts

Under Part VI A of the Constitution s.187C (1) (4)(b) provides for an Organic Law to make provision in respect of the constitution, powers and functions of a provincial government and provision for and in respect of "the imposition and collection of taxation by provincial governments".

Section 12 of the Constitution, falling within Part 2 Division 2, which establishes the National Legal System including the laws and the definition of Constitutional Laws which include the Organic Law defines what an Organic Law is and the matters for and or in respect of which provision may be made by an Organic Law as expressly authorized by the Constitution.

The Organic Law on Provincial Governments and Local Level Governments provides specifically for Provincial Government and Local Level Government Taxation in Division 3, Subdivision B s.85 and s.87.

By Amendment No.4 the Organic Law, which came into operation on 18 June 1997, s.85 (2) and s.86 were amended to vest in the National Government concurrent power to impose Sales and Service Taxes.

Subsequently the VAT Act 1998 was made by the National Parliament and came into operation on 1 July 1999 making provision for the Imposition and Collection of Value Added Tax on Goods and Services and related purposes.

The principal issues raised by these legislative enactments are:

1.	Is the amendment to the Organic Law constitutionally valid, as being authorized by section 12 and s. 187 (C)(4)(b) of the Constitution?

2.	Is the VAT Act valid, as having been authorized by the Organic Law?

The Constitutional Law

Part VIA of the Constitution makes provision for the system of Provincial Government and Local Level Government to be established in the country. Section 187C (1)(c) provides for Organic Law to make provision in respect of the Constitution, powers and functions over a provincial government.

Section 187C (4) provides that:

"An Organic Law shall make provision for an in respect of the imposition and collection of taxation by Provincial Governments, and may make other financial provision for Provincial Governments, to an extent reasonably adequate for the performance of their functions.

Section 12 (1)(a) provides that an Organic Law is a law made by the Parliament that is for or in respect of a matter, provision for which by way of an Organic Law is expressly authorized by this Constitution."

Decision

The Provincial Government challenges the constitutional validity of the VAT Act. The issues are whether the amendment to the Organic Law was constitutionally valid and thus enabling the enactment of the VAT Act. 

An Organic Law is a superior law to an ordinary Act of the Parliament. See s.9 and 11 of the Constitution. Section 12 describes what an Organic Law is, how it is made, what it is to be made in respect of, what authorizes it to be made, that it is not to be inconsistent with the Constitution and that it is specifically expressed to be an Organic Law. See Kaseng v. Namaliu [1995] PNGLR, 481 and in the Application of Anderson Agiru (Unreported Supreme Court Judgment No SC 671).

Constitution Part VIA which provides for the system of Provincial Government and Local Level Government, provides under s.187C (1) for an Organic Law to make provision in respect of the constitution, powers and functions of a Provincial Government. Section 187C (4)(b) provides further that, "an organic law shall make provision for and in respect of the imposition and collection of taxation by provincial governments".

The Organic Law on Provincial Governments and Local Level Governments is the Organic Law provided for by s.187C. It states so in its Preamble that it is an Organic Law to implement Part VIA of the Constitution. Part 4 Division 3 then makes provisions for Provincial Government and Local Level Government Taxation. Subdivision A, s.83 & s.84 make provision for taxation matters generally. Subdivision B, s.85 & s.86 make provisions for Provincial and Local Level Taxes. Section 85 (1) which is headed Exclusively Provincial Taxes, provides that subject to the Organic Law, a provincial law may impose or provide for the imposition of taxation of all or any kinds referred to in s.86. Subsection (2) then provides that the National Government may not impose or provide for the imposition of tax of any kind referred to in s.86 except by virtue of a delegation under s.50 or for those taxes or fees specified in s.86 as Taxes and Fees in respect of which the National Government has concurrent power. The vesting of concurrent power in the National Government to impose taxes and fees was effected by Amendment No. 4 which came into operation on 18 June 1997. Section 86 (1A) was also added by Amendment No.4 and it states that "the National Government has concurrent power to impose sales and service taxes."

The unamended s.86 (1) which is headed ‘Kinds of Provincial Government Taxes and Fees’, provides that: "A Provincial Government has power to impose all or any of the following taxes and fees:

"86. Kinds of Provincial Government taxes and fees.

(1)	A Provincial Government has power to impose all or any of the following taxes and fees:—

(a)	sales and service tax;
(b)	fees for the licensing of places where intoxicating liquor is sold;
(c)	fees for licences to operate or carry on gambling, lotteries and games of chance;
(d)	developed property tax;
(e)	motor vehicle registration licences;
(f)	provincial road-users tax."

Subsection 86 (2) as unamended states that:

"An Act of the Parliament shall make provision for—

(a)	the manner of imposition of; and
(b)	details of management and collection of; and
(c)	any arrangements between the National Government and Provincial Governments; and
(d)	any arrangements between Provincial Governments and between Provincial Governments and Local-level Governments concerning; and
(e)	any arrangements between Provincial Governments and between Local-level Governments concerning, the taxes and fees referred to in Subsection (1)."

Section 86 (3) states that:

"An Act of the Parliament shall make provision for the rate of taxes and fees and shall ensure that the rates are uniform throughout all provinces."

Subsequently to the amendment to s.85 (2) and the addition of ss. 86 (1A), the Value Added Tax Act 1998 was enacted and bought into operation on 1 July 1999. The Value Added Tax Revenue Distribution Act 1998 was enacted and brought into operation on 1 January 1999 to make provision for the control and disbursement of revenue accruing consequent on the imposition of VAT and to be read as one with the VAT Act.

Prior to the enactment of the VAT Act, the Interim Provincial Governments Tax Act 1996, implemented s.86 of the Organic Law to provide for and confirm the powers of the Interim Provincial Governments to impose and collect sales and services taxes.

Section 12 of the Constitution states that the constitution may expressly authorize an Organic Law to make provision in respect of a particular matter, and that such an Organic Law shall be expressly stated to be an Organic Law. The effect of this empowerment under s.12 in relation to any purported enactment by way of an Organic Law, is to ensure that a specific constitutional provision expressly authorized the making of an Organic Law to make provision in respect of a particular matter. No Organic Law can make provision in relation to any matter without such express authorization by the Constitution.

The specific constitutional provision which expressly authorized the making of an Organic Law, in this instance is s.187C (1), (3), (4), (a) and (b), in relation to provisions for the imposition and collection of taxation by Provincial Governments. 

Returning to the issues at hand, can the amendments to s.85 (2) and 86 (a) be said to be provision in respect of a matter by way of an Organic Law is expressly authorized a provision of the Constitution? Is the provision vesting in the National Government concurrent power to impose sales and services tax, concurrently with Provincial Governments, a provision expressly authorized by any provision of the Constitution, to be provided for by an Organic Law? Can the VAT Act be said to be validly enacted pursuant to such an enabling provision in the Organic Law?

In my respectful opinion, the answer to these questions or issues must be in the negative. That is that the amendment to s.85 (2) and the insertion of s.86 (1A) vesting concurrent power in the National Government to impose Sales and Service Taxes is a provision in respect of a matter not expressly authorized by either s.187B or 187C (1), (3) or (4)(b) of the Constitution, nor indeed by any other provision of the Constitution.

Consequently, the amendment to the Organic Law must firstly be struck down as being contrary to the enabling expressed provision of Constitution, s.187B and C. The amendments to s.85(2) and 86 are therefore unconstitutional and invalid. In consequence therefore also, the Value Added Tax Act 1998 and the Value Added Tax Revenue Distribution Act 1998, both of which are founded on the amendments to s.85 and 86 of the Organic Law effected by Amendment No.4, must necessarily fall.

The alternative contention by the State that the National Government, in any event, retains the constitutional ability to enact legislation to impose sales and service taxes concurrently with Provincial Governments, looses credibility when the amended provisions are struck down. Section 85 (2) in particular prohibits the National Government from imposing or providing for the imposition of tax of any kind referred to in s.86, except by virtue of a delegation under s.50. As discussed earlier, the Organic Law is a superior law to an ordinary statute or Act of Parliament and so consequently, even if the VAT Act and the Value Added Tax Revenue Distribution Act can stand alone without the empowering amendments to the Organic Law, they are nevertheless prohibited by s.85 (2) of the Organic Law.

In consequence therefore, the Value Added Tax Act 1998 is unconstitutional and invalid.

SALIKA J: I have read the judgments of the Chief Justice and Kandakasi J. I agree with the conclusion and orders they propose for the reasons they give. I have nothing to add.

KANDAKASI J:	This is a Special Reference under s. 19 of the Constitution by the Morobe Provincial Government ("the referrer") challenging the constitutionality of the Value Added Tax Act of 1998 ("the VAT Act"). 

Facts and history of the case

The VAT Act was enacted in 1998 and certified into law on the 17th of May 1999. Prior to that Provincial Governments imposed and collected their respective Provincial Government sales and services taxes. The enactment of the VAT Act effectively, took away the ability of Provincial Governments to impose and collect sales and services taxes. The referrer took issue on the constitutionality of the VAT Act.

There is no dispute between the parties that, immediately, prior to the coming into operation of the VAT Act, the referrer raised a monthly average of over K1.6 million from such taxes in 1998 and a similar amount up to June 1999. Then after the introduction of the VAT Act, the referrer received this time from the National Government an average of K2 million per month by way of distributions of revenue raised under the VAT Act.

An earlier reference under the reference number SCR No.1 of 1999 by the same referrer was dismissed for want of prosecution. The current Reference SCR. No. 1 of 2000 was filed on the 25th of May 2000. Then eighteen months after its filing, the referrer substantially amended it on the 24th of October 2001. Essentially, the referrer withdrew an earlier question number 4 which required a lengthy inquiry in complex factual matters which attracted inquiries from the Chief Justice as to desirability of the Supreme Court making such inquiries. The matter did not get to a hearing until the 26th of February 2002.

The questions for determination are these:

1.	Is the VAT Act an act that makes provision solely for the matters referred to in section 86 (2) of the Organic Law On Provincial Governments and Local-level Governments ("OLPLLG") in respect of sales and service taxes imposed by the Provincial Governments under s.86 (1)(a) of the said law?

2.	Is the VAT Act an act that imposes a tax on sales and services for the purposes other than those prescribed by section 86 (2) of the OLPLLG?
3.	If the answer to the proceeding question No.2 is YES, is the VAT Act invalid and without legal effect by virtue of sections 10 and 11 of the Constitution, by reason that it is enacted contrary to and in breach of section 85 of the OLPLLG?

4.	If the answer to question 2 is YES, does the OLPLLG provide for the Parliament to make an Act of the kind referred to in section 86 (2) in respect of taxes on sales and services authorized by section 86 (1A) of the said Law?

5.	Are the provisions of section 86 (1A) of the OLPLLG invalid and without legal effect by virtue of the provisions of section 187C (4) of the Constitution by reason of section 86 (1A) is a law which does not give reasonable adequacy to the Provincial Government for the performance of the duties of the Government in that the relevant section allows concurrency of powers between the National Government and the Provincial Governments?

6.	Whether section 86 (1A) of the OLPLLG is a law, which is expressed to be made under section 12 (1)(a) of the Constitution?

7.	Whether section 86 (1A) of the OLPLLG is inconsistent (within the meaning of section 12 (1)(b) of the Constitution) with the provisions of section 187C of the Constitution to the extent that the section 86 (1A) of the OLPLLG confers powers of concurrency of taxation to the National Government?

8.	Whether section 86 (1A) of the OLPLLG is inconsistent (within the meaning of section 12 (1)(b) of the Constitution) with the provisions of sections 85 and 86 of the OLPLLG to the extent that section 86 (1A) confers powers of concurrency of taxation to the National Government?

9.	Whether section 85 (2) of the OLPLLG is inconsistent (within the meaning of section 12 (1)(b) of the Constitution) with the provisions of section 187C of the Constitution to the extent that section 85 (2) of the OLPLLG confers powers of concurrency of taxation to the National Government? 

Clearly the questions raised are constitutional and therefore constitutional issues. It is therefore appropriate that we first set out the rules governing the interpretation of provisions of the Constitution. I start with schedule 1.5 of the Constitution itself, which provides:

"(1)	Each Constitutional Law is intended to be read as a whole.

(2)	All provisions of, and all words, expressions and propositions in, a Constitutional Law shall be given their fair and liberal meaning."

Going by this expressed dictation in the Constitution, it is now an accepted principle of both constitutional and other statutory interpretation, that provisions of the Constitution and all Acts of Parliament must be given their fair and liberal meaning. This is so as to give effect to the intent of Parliament behind the provisions in question. There is a long line of case authority on that. Examples of these are the cases of The State v Independent Tribunal; Ex parte Sasakila [1976] PNGLR 491 at 506, 507, per Kearney J; Constitutional Reference No 1 of 1977 [1977] PNGLR 362 at 373, 374, per Prentice DCJ (as he then was) and Canisius Karingu v. Papua New Guinea Law Society (unreported judgement delivered on 9/11/10) SC674 for a recent reference to this principle.

Both the referrer and the State chose to deal with questions 6,7, 8 and 9 together as they all deal with the issue of whether the provisions of the OLPLLG namely, sections 85 (2) and 86 (1A), which provide for the concurrency of taxation powers in respect of sales and services taxes are valid. These questions or the broad issue raised by all of these questions is the subject of contention between the parties. I will deal with those questions jointly after addressing the earlier questions.

There is not much argument between the parties as to the answers to be given to each of the earlier questions. I will however for completeness, discuss them briefly before getting to the questions the parties are arguing over.

Question 1

"Is the VAT Act an act that makes provision solely for the matters referred to in section 86 (2) of the OLPLLG in respect of sales and service taxes imposed by the Provincial Governments under section 86 (1)(a) of the said law?"

For the purposes of answering this question it is necessary to state what section 86 (1) and (2) of the OLPLLG provide for. These provisions read:

"86.	Kinds of Provincial Government taxes and fees.

(1)	A Provincial Government has power to impose all or any of the following taxes and fees:—

(a)	sales and service tax;
(b)	fees for the licensing of places where intoxicating liquor is sold;
(c)	fees for licences to operate or carry on gambling, lotteries and games of chance;
(d)	developed property tax;
(e)	motor vehicle registration licences;
(f)	provincial road-users tax.

(1A) 	The National Government has concurrent power to impose sales and services taxes.
(2)	An Act of the Parliament shall make provision for—

(a) 	the manner of imposition of; and
(b) 	details of management and collection of; and
(c)	any arrangements between the National Government and Provincial Governments; and
(d)	any arrangements between Provincial Governments and between Provincial Governments and Local-level Governments concerning; and
(e)	any arrangements between Provincial Governments and between Local-level Governments concerning,

the taxes and fees referred to in Subsection (1).

(3)	An Act of the Parliament shall make provision for the rate of taxes and fees and shall ensure that the rates are uniform throughout all provinces."

Clearly, s.86 (1) provides that Provincial Governments may impose various taxes and fees. Subsection 2 then provides that, an Act of Parliament may make provision for amongst others, the manner of imposition, details of management and collection and any arrangements between the National and a Provincial Governments and a Provincial Government and a Local-level Governments in relation to any of the taxes and fees referred to in subsection 1.

There is no expressed provision in the VAT Act itself on the question under consideration. Usually, where an Act of Parliament is enacted pursuant to a particular provision of the Constitution or any other law, that would be stated in the preamble. The preamble to the VAT Act in the present case states only as follows:

"Being an Act to make provision for the imposition and collection of a value added tax on goods and services, and for related purposes, MADE by the National Parliament to come into operation on 1 July 1999."

Clearly, therefore the Act concerns the imposition and collection of valued added tax on goods and services as well as things related to that purpose. Hence it is not restricted to the imposition and collection of sales and services tax only but all goods and services tax. Further a careful perusal of the Act reveals that it is aimed only at the imposition and collection of value added taxes for goods and services in the country. It makes no provision for any management of that. More importantly, there is no provision made in relation to any arrangement between the National and Provincial Governments and Provincial Governments and Local-level Governments on the subject.

I note that the conjunctive "and" is used instead of "or" in subsection 2 of section 86. It is settled law that, wherever the conjunctive "and" is used, all the matters or factors listed must all exist, or if it is a requirement, all of them must be met. For examples of authorities on this see: SCR No.5 of 1987 In the Matter of the State v. Songke Mai & Gai Avi Reference under s. 18 of the Constitution [1988] PNGLR 56 at p.84 per Los J; Sir Julius Chan v. The Ombudsman Commission of Papua New Guinea (25/06/99) SC607 per Sheehan, and Jalina, JJ. and Rosa Angitai v. The State [1983] PNGLR 185 at p.190 per Kaputin, and Gajewicz JJ.

It follows therefore, that an Act enacted under s.86 (2) of the OLPLLG must provide for all of the matters listed in that provision. As already noted, the VAT Act only provides for the imposition and collection of sales and services tax. It does not provide for the management of such taxes and more importantly it does not provide for arrangements between the National and the Provincial Governments and the Provincial Governments and Local-level Governments on the subject of sales and services tax.

The State argues that the VAT Act is for imposition and collection of a national tax called "valued added tax" in the exercise of the National Governments legislative power under ss.100 and 109 of the Constitution. That is not the same as a tax under s. 86 (1)(a) of the OLPLLG.

For reasons I will shortly state in the context of questions 6, 7, 8, and 9 coupled with the observations I have just made above, I do not agree with the States arguments. Nevertheless on the basis of the observations I have just made and the reasons I will give eventually, I agree that the answer to this question is NO.

Question 2

"Is the VAT Act an act that imposes a tax on sales and services for the purposes other than those prescribed by section 86 (2) of the OLPLLG?"

I have just expressed the view that an Act enacted under s.86 (2) of the OLPLLG, must provide for all of the matters listed in that provision. This is so because of the use of the conjunctive "and" in that provision. I have also found that the VAT Act provides only for the imposition and collection of sales and services tax. It does not provide for the other matters an Act under s.86 (2) of OLPLLG must provide for such as any arrangement between the National Government and the Provincial Government over such taxes. To the extent that the VAT Act does not make provision for all of the matters mentioned in s.86 (2), I am of the view that, it is an Act that is for purposes other than those prescribed by s.86 (2) of the OLPLLG.

The State admits that the VAT Act does not make provision for the matters referred to in s.86 (2) of the OLPLLG. Instead, it argues that the VAT Act creates a National Value Added Tax and does not in any way make provision for any of the matters provided for in section 86 (2) of the OLPLLG. It goes on to argue that a related Act, the Value Added Tax Revenue Distribution Act 1998 is not a law that is referred to in s. 86 (2)(b) because s.86 (2) specifically refers to the provincial laws and powers and not other laws and powers.

With respect, I do not see the logic or the point in this argument. If the VAT Act was enacted under s.86 (2), then as I have already said, it must provide for all of the matters set out in that section for the reasons I have just given above. If it is enacted under any other provision or authority on a subject in which the National and the Provincial Governments have concurrent power, the Act should state the provision or authority under which it is acting. This I consider is necessary in order to show to what extent the VAT Act affects or does not affect the Provincial Governments power to impose and collect taxes of the type the VAT Act covers.

Given this I asked counsel for the State as to what is the effect of the National Government legislating on a subject in which it has concurrent jurisdiction with Provincial Governments on the latter’s ability to do likewise. Counsel’s answer was simply that the Provincial Governments are at liberty to legislate on the same subject and referred to the Value Added Tax Revenue Distribution Act 1998. This effectively means that the Provincial Governments could legislate to impose and collect taxes. The end result of that would be that the ultimate consumers the people or the subjects of the State would be taxed twice.

This response ignores the obvious consequence in law that, where, two authorities have concurrency of power to do something and one of them exercises it, that precludes the other from exercising it. The rationale is simply to avoid duplication of what is done and the bad consequence such as was just mentioned.

Further, with respect, I do not see what is the relevance for raising the Value Added Tax Revenue Distribution Act 1998. That Act is not the subject of any consideration in this reference as it has not been raised either specifically or by necessary implication.

In the end, I agree for the observations I have just made, that question number 2 should be answered with a YES.

Question 3

"If the answer to the proceeding question No.2 is YES, is the VAT Act invalid and without legal effect by virtue of sections 10 and 11 of the Constitution, by reason that it is enacted contrary to and in breach of section 85 of the OLPLLG?"

Sections 10 and 11 of the Constitution and section 85 of the OLPLLG respectively provide as follows:

"10.	Construction of written laws.

All written laws (other than this Constitution) shall be read and construed subject to-

(a)	in any case—this Constitution; and
(b)	in the case of Acts of the Parliament—any relevant Organic Laws; and
(c)	in the case of adopted laws or subordinate legislative enactments—the Organic Laws and the laws by or under which they were enacted or made,

and so as not to exceed the authority to make them properly given, to the intent that where any such law would, but for this section, have been in excess of the authority so given it shall nevertheless be a valid law to the extent to which it is not in excess of that authority."

"11.	Constitution, etc., as Supreme Law.

(1)	This Constitution and the Organic Laws are the Supreme Law of Papua New Guinea, and, subject to section 10 (construction of written laws) all acts (whether legislative, executive or judicial) that are inconsistent with them are, to the extent of the inconsistency, invalid and ineffective.

(2)	The provisions of this Constitution and of the Organic Laws are self-executing to the fullest extent that their respective natures and subject-matters permit."

"85.	Exclusively Provincial taxes.

(1)	Subject to this Organic Law, a provincial law may impose or provide for the imposition of taxation of all or any kinds referred to in section 86.

(2)	The National Government may not impose or provide for the imposition of tax of any kind referred to in section 86 except by virtue of a delegation under section 50 or for those taxes or fees specified in section 86 as taxes and fees in respect of which the National Government has concurrent power."

Sections 10 and 11 have been the subject of discussions and judgements in a number of Special Constitutional References and other cases that have come up to this Court. Examples of these are Christopher Haiveta, Leader of the Opposition v. Paias Wingti Prime Minister of Papua New Guinea (No.3) [1994] PNGLR 197 and SCR No. 2 of 1995 Reference by the Western Highlands Provincial Executive (1995) SC486.

From this line of cases and the provision themselves, it is very clear law that all Acts of Parliament must be consistent with the Constitution and any relevant organic law. Any inconsistency renders the Act invalid and ineffective to the extent of the inconsistency.

Section 85 of the OLPLLG has not yet been considered either by this Court or the National Court as far as I am aware. Accordingly, this is the first time that provision is being considered. In my view, going by the fair and liberal meaning of the words used, the first subsection authorizes Provincial Governments to enact laws for the imposition of taxes of the kind specified in section 86 of the OLPLLG. The next subsection then precludes the National Government from making any law and collecting any taxes of the kind spoken of in s.86 of the OLPLLG unless it comes within the exception provided for in the later part of s.85 (2) of the OLPLLG.

The original of s.86 of the OLPLLG did not vest a concurrency of power between the Provincial Governments and the National Government for the kind of tax spoken of in that section. Also, there is no argument that neither a provincial law nor an Act of Parliament has delegated the National Government the power to make a law in relation to s.86 of the OLPLLG subjects. Subsequently however, in 1997, s.86 was amended by the Organic Law on Provincial Governments and Local-level Governments (Amendment No. 4) Law (No. 8 of 1997), by adding a new provision as subsection 1A. That provision provides in relevant parts, "The National Government has concurrent power to impose sales and services taxes." After the amendment, the National Government became vested with the power concurrently with the Provincial Governments to make laws for the purposes of imposing and collecting taxes of the kinds specified in s.86 of the OLPLLG.

Following on from the above, it is clear that s.85 of the OLPLLG empowers the National Government to make laws for the imposition and collection of taxes of the kind specified in s.86 of the OLPLLG concurrently with provincial governments. That being the case, the VAT Act is not inconsistent or in breach of s.85 of the OLPLLG. Thus the answer to the third question is NO.

Question 4

"If the answer to question 2 is YES, does the OLPLLG provide for the Parliament to make an Act of the kind referred to in section 86 (2) in respect of taxes on sales and services authorized by section 86 (1A) of the said Law?"

I have already noted that s.86 (2) of the OLPLLG provides for an Act of Parliament to make provision for the imposition, management, collection and any arrangement between the National Government and the Provincial Governments or between Provincial Governments and Local-level Governments in relation to the matters specified in s.86 (1) of the OLPLLG. There is no similar provision for the exercise of the concurrent power vested in the National Government by s.86 (1A).

It follows therefore, that no guidance is provided by the OLPLLG itself as to how the National Government could exercise its concurrent power. Accordingly, the answer to the question under consideration should be a straight No.

Nevertheless, in the absence of any expressed provision to the contrary, one could argue that, Parliament could enact an Act of Parliament under s.86 (1A) in the exercise of Parliament’s inherent power to legislate subject to the Constitution pursuant to ss.100 and 109 of the Constitution. Indeed, the State submits that the VAT Act was enacted by Parliament pursuant to its general law making power under these constitutional provisions.

Counsel for the State submits that "Section 86 (2) is solely in respect to a Provincial law and not a National law and Section 86 (2) is not the section authorising the making of a Sales and Services Tax Act is contained in Section 86 (1)(a) and in respect to the National Parliament the provision for the making of a Sales and Services Tax Act is contained in Section 100 and Section 109 of the Constitution."

This argument could easily be countered in terms of the fact that, the imposition and collection of taxes of the kind provided for s.86 (1) is specific. They are areas in which Provincial Governments have legislative jurisdiction. There is no contest that the VAT Act is for the purpose of imposing and collecting sales and services tax although it is termed "valued added tax" on all goods and services. This lack of contest is consistent with the Provincial Governments no longer imposing and collecting their respective provincial sales and services taxes in exchange for a proportional distribution arrangement with the National Government from the proceeds of the monies collected under the VAT Act. It is therefore, necessary that the OLPLLG should make provisions as to how the National Government could exercise the concurrent powers. Whilst these arguments could be legitimately raised, the question under consideration is specific and it makes it unnecessary to consider any of these arguments. The question under consideration is whether the OLPLLG provides for an Act of Parliament for s.86 (1A) in the same way it does for s.86 (1). The simple answer to that in view, as already stated is No.

Question 5

"Are the provisions of section 86 (1A) of the Organic Law invalid and without legal effect by virtue of the provisions of section 187C (4) of the Constitution by reason of that section 86 (1A) is a law which does not give reasonable adequacy to the Provincial Government for the performance of the duties of the Government in that the relevant section allows concurrency of powers between the National Government and the Provincial Governments?"

This question requires a consideration of s.187C (4) of the Constitution first. To properly appreciate the intent and meaning of that provision, the context in which it appears must as of necessity be considered. That means that the whole context of section 187C must be considered. That section provides:

"187C. Constitution, functions, etc., of Provincial Governments and Local-level Governments.

(1)	Subject to this Part, an Organic Law shall make provision in respect of the constitution, powers and functions of a Provincial Government or a Local-level Government.

(2)	For each Provincial Government and Local-level Government, there shall be established—

(a)	a mainly elective (elected directly or indirectly), legislature with such powers as are conferred by law; and
(b)	an executive; and
(c)	an office of head of the executive.

(3)	An Organic Law shall provide for the minimum number of members for the Provincial Assemblies and Local-level Governments and the maximum number of members that may be appointed as nominated members of Provincial Assemblies and Local-level Governments.

(4)	An Organic Law shall make provision for and in respect of-

(a)	grants by the National Government to Provincial Governments and Local-level Governments; and

(b)	the imposition and collection of taxation by Provincial Governments and Local-level Governments, and may make other financial provisions for Provincial Governments and Local-level Governments, to an extent reasonably adequate for the performance of their functions.

(5)	An Organic Law shall make provision for the devolution and delegation to each Provincial Government and Local-level Government of substantial powers of decision-making and substantial administrative powers in respect of matters of direct concern to the province and to the local-level government area.

(6)	An Organic Law shall make provision in respect of the legislative powers of Provincial Governments and Local-level Governments.

(7)	A question of the adequacy of provision made under Subsection (3), (4), (5) or (6) is non justiciable.

(8)	Elections to a Local-level Government shall be conducted, in accordance with an Organic Law, by the Electoral Commission."

This is the important provision in the Constitution that provides for the constitution and function of Provincial Governments and Local-level Governments. Finance of the Provincial and Local-level Governments is an important part of those governments. It is therefore no wonder that subsection 4 is there. This subsection provides that these governments get their finances through two means. The first is grants from the National Government and the second is from the imposition and collection of taxes by these governments.

The referrer argues that the making of the power in the Provincial Governments to impose and collect taxes of the kind provided for in s.86 (1) OLPLLG concurrent with the National Government by sections 85 (2) and 86 (1A) of the OLPLLG, impacts on the adequacy of the Provincial Governments power to raise revenue to perform its functions. At the same time however, the referrer acknowledges that the questions of adequacy are non-justiciable. It therefore refrains from answering the question under consideration.

The respondent argues that the question of whether s.86 (1A) of the OLPLLG does not give reasonable adequacy to the Provincial Government for the performance of the duties of that Government, is a question, which requires examination of facts. Those facts it submits are in relation to what is adequate and reasonable in monetary terms for the Provincial Government to perform its powers and functions. It goes on to argue that extensive issues as to economic undertakings of Provincial Governments, social obligations of the Provincial Governments and aspirations of the Morobe people would properly need to be examined to be able to sufficiently give consideration to that question. There is no agreed statement of facts for the purpose of this question.

The respondent then refers to subsection 7 of s.187C of the Constitution and schedule 1.7 of the Constitution. The latter provision defines the word "non-justiciable" in the following terms:-

"Where a constitutional law declares a question to be non-justiciable, the question may not be heard or determined by any Court or tribunal, but nothing in this section limits the jurisdiction of the Ombudsman Commission or of any other tribunal established for the purposes of Division III.2 (leadership code)."

On these bases the respondent submits that this Court should not entertain question numbered 5 at all.

I accept that, this question should not be considered at all because of the provisions of subsection 7 of s.187C as defined in schedule 1.7 of the Constitution. I also accept that there must be a set of facts from which the question must arise. There must then be an agreed statement of facts giving rise to the question so that it can have some relevance factually. For there can be no issue unless there is some reference to the amounts actually allocated to Provincial Governments and Local-level Governments and such governments legitimate operational budgets for their purposes. There might well be more grants to compensate for any impact the provisions of sections 8 5(2) and 86 (1A) of the OLPLLG might have on these governments. Or there might even be arrangements such as those since the enactment of the VAT Act for a proportionate sharing between the National Government and these governments.

For these reasons I decline to provide an answer to question number 5.

Question 6, 7, 8 and 9

As noted earlier, both parties agreed to have these questions dealt with together. These questions all raise the issue of whether sections 85 (2) and 86 (1A) of the OLPLLG are constitutionally valid. In summary question 6, asks whether s.86 (1A) is a law, which is expressly made under s.12 (1)(b) of the Constitution. Question 7 asks whether s.86 (1A) is inconsistent with the provisions of s.187C of the Constitution within the meaning of s.12(b) of the Constitution. The next question, question 8 asks whether s.86 (1A) of the OLPLLG is inconsistent with the provisions of s. 85 and 86 of the OLPLLG within the meaning of s.12 (b) of the Constitution. The final question asks, whether s.85 (2) of the OLPLLG is inconsistent within the meaning of s.12 (b) of the Constitution with the provisions of s.187C of the Constitution.

Parties Submissions

The referrer submits that these provisions are unconstitutional and therefore invalid. The main reason for that submission is that, these provisions are not specifically authorized by s.187C (4) of the Constitution within the meaning of s. 12 (1)(a) of the Constitution. It goes on to argue that the provisions of s.12 (3) of the Constitution do not save them. It refers to and relies on the recent judgement of this Court in SCR No.4 of 2000; Re: In the Matter of Section 18 (1) of the Constitution and In the Matter of Anderson Agiru (08/10/01) SC671.

The State concedes that the amendment to the OLPLLG in 1997 resulting in the addition of subsection 1A to s. 86 of that organic law made the earlier exclusive Provincial Governments’ legislative jurisdiction concurrent with that of the National Government. It then submits that, the amendment complements section 85 of the OLPLLG and there is no inconsistency between the two sections. Also, it submits that, the right of the Parliament to pass laws to give effect to the Constitution and good governance of Papua New Guinea includes a constitutional authorisation for the making of laws by the National Parliament for taxation. The OLPLLG seeks to limit the decentralisation of that taxing power to the Provincial Government by making the taxation law (on Sales and Services) a concurrent right of both Governments.

Furthermore, the State argues that the referrer’s Provincial Sales and Services Tax law has not been repealed by the OLPLLG, the VAT Act or any other law. Thus, it argues that, the right of the referrer to raise a sales and services tax remains intact. Administratively however, the National Government passed the Value Added Tax Revenue Distribution Act and has taken on the financial cost and obligation of collecting the Value Added Tax and distribute the Provincial Governments’ portion of that to them. Under that scheme, the referrer is better off. It is better off because the referrer’s share has been and is consistently paid and the amount is equal if not more than the tax that was collected under its own Provincial sales and service tax. It is also better of in terms of the costs of its collection of those monies.

In relation to the issues built around s.12 (1)(a) of the Constitution, the State argues that, sections 85 (2) and 86 (1A) of the OLPLLG are authorised by the provisions of s.187C of the Constitution. Though not clearly stated, the State seems to argue that the Agiru case did not resolve the issue as to how the requirements of s.12 (1)(a) of the Constitution must be met. This is so because the Court was divided and the views of both the majority of Deputy Chief Justice, Salika, and Sevua, JJ. and the dissenting views of Chief Justice and Los, J. were equally open to them.

The State then submits that this Court must distinguish the Agiru case from the present. It is submitted that the distinction should be in terms of:

1.	there being no alternative provision in the Constitution limiting or authorising collection of taxes by Provincial Governments unlike in the Agiru case of there being already a provision for the suspension of Provincial Governments; and

2.	that the empowerment in s.187C (4)(b) must be seen to be inclusive of concurrency in the Provincial Government and the National Government to impose and collect taxes.

The State goes on to argue that, by listing in s.86 (1) of the OLPLLG the areas in which Provincial Governments can legislate, it in fact limits these governments legislative powers. It adopts one of the well-known principles of statutory interpretation "the express inclusion of one omits the other." At the same time, it acknowledges that this is not an issue before us but the argument is that, if there is no challenge to the effects of s.86 (1) of the OLPLLG then it is valid. It follows therefore that, the making of the power of the Provincial and Local-level Governments to impose and collect tax concurrently with the National Government is another form of limiting that power. Thus, it follows that it is also valid.

Proceeding on the above, the State argues that, it is not necessary for specific provision to authorize concurrency of power to tax in both the National Government and the Provincial Governments. The provisions of s.187C (4) are wide enough to grant taxing powers with limits. Further or in the alternative, it is argued for the State that, the National Government always has the power to raise taxes by reference to ss.100 and 109 of the Constitution. Therefore, the OLPLLG which defines and delimits the respective powers of the National Government with respect to the Provincial Governments’ powers is within the provisions of the Constitution and is not offensive to s.12 (1)(a) of the Constitution.

They State goes on to argue that, for ss.86 (1A) and or 85(2) to be inconsistent with the Constitution it would need to be demonstrated that there is a constitutional provision which prevents concurrency of taxing powers between the National Government and the Provincial Government. It also argues that, having regard to the provisions of ss.100 and 109 of the Constitution which vests in the National Government broader taxing powers than Provincial Governments, sections 86 (1A) and 85 (2) of the OLPLLG do not restrict the power of the taxing powers of the Provincial Government. Instead that power is retained but defined and delimited by making it concurrent with the National Government. It is therefore submitted that, these provisions of the OLPLLG are consistent with ss.100 and 109 of the Constitution and are not inconsistent with s.187C of the Constitution.

Decision

Whilst I agree that the present case must be distinguished from the Agiru case, I do not agree that it should be done in the way the State suggests. In the Agiru case there was authorization of the general subject matter of a system of Provincial Governments by the Constitution. The issue in that case was whether that authorization also authorized a withdrawal of powers of a Provincial Government by the National Executive Council over allegations of mismanagement. In the present case, the issue is whether section 187C (4) of the Constitution authorizes provisions to be made in the OLPLLG for a concurrency of power or jurisdiction in the area of imposing sales and services tax in the National and Provincial Governments. 

There is no expressed authorization in the Constitution for this power to be a concurrent one with the National Government. It is settled law that the Courts in the disguise of statutory interpretation can not supply that which is not specifically provided for by the legislature. See Wik Kor v. The State [1983] PNGLR 24 at p.26; Application Pursuant to section 155(4) of the Constitution SC536 and the Agiru case at page 39 for examples of relevant authorities on this point.

In so far as is relevant s.12 (1)(a) of the Constitution is in these terms:

"12.	Organic Laws.

(1)	For the purposes of this Constitution, an Organic Law is a law made by the Parliament that is—

(a)	for or in respect of a matter provision for which by way of an Organic Law is expressly authorized by this Constitution …"

As the Chief Justice said, in the Agiru case at page 11 of the judgement, s.12 does a number of things:

"Firstly, it stipulates that an organic law can only be made if it is authorized by a constitutional provision, and that the constitutional provision authorizes what the organic law shall be in respect of. Secondly, it requires that the organic law shall not be inconsistent with the constitution and thirdly, it is expressed to be an organic law."

The majority in the Agiru case held that, because there was no specific provision in the Constitution authorizing the withdrawal of powers of Provincial Governments, the provisions in the OLPLLG authorizing the National Government to withdraw powers was unconstitutional and therefore invalid. They reasoned that, there was already provision in the Constitution on the suspension of Provincial Governments, which is a supervisory role played by the National Government or the National Executive Council, which is responsible and accountable to the people through Parliament. Withdrawal of powers was a supervisory power in the National Government and if Parliament considered it appropriate, it could have provided for it in the Constitution in the same way it did with regard to suspension of powers. They were also of the view that, the provisions on the withdrawal of powers were inconsistent with the provisions on suspension of Provincial Governments because it did not provide for the National Government to be responsible and or accountable to the people through Parliament which is necessary in our democracy.

The dissenting view held that, as long as there is authorization by a constitutional provision of the general subject matter it is not necessary to authorize the specific areas of the general matter. Specific aspect of a general subject matter need not be specified in the Constitution because to do so would load up the Constitution with a lot of provisions and hence undermine the intention of making provision for organic laws which are to amplify general subject matters. Then on the issue before the Court, they held that, since there was authorization for an organic law to provide for Provincial Governments and their powers and functions, it was not necessary to specifically authorize a power in the National Government to withdraw powers of Provincial Governments. They were therefore of the view that the provisions in the OLPLLG empowering the National Government to withdraw powers were constitutional and therefore valid. 

The minority view found support from the Chief Justice’s own opinion in Kaseng v. Namaliu [1995] PNGLR 481at pp.488-489 in these terms:

"I am of the opinion that s 12 (1)(a) is descriptive … of the kind of law that an Organic Law is; that it is to be a special class of law made by the Parliament, only in respect of any matter that the Constitution expressly gives authority to be made by an Organic Law. In other words, unlike an ordinary statute that Parliament has power to enact in respect of any matter, an Organic Law can only be made by Parliament if a constitutional provision expressly authorizes the making of an Organic Law in respect of a particular subject matter."

They also found support in the words of Hinchliffe and Andrew JJ. in the same case at p. 517 who said:

"Part VIA provides for certain matters to be dealt with by way of Organic Law. section 187A deals with ‘a system of Provincial Government’ and the succeeding provisions make provision for various matters relating to the system of provincial government and provide for an Organic Law to spell out the detail of the matter.

Section 12 (1)(a) of the Constitution requires:

1.	provision for, or in respect of, a matter by way of an Organic Law

2.	be expressly authorised by this Constitution.

Thus, there is only a requirement that there be ‘provision’ for an Organic Law to deal with a matter. Since Organic Laws are themselves to spell out the detail, ‘provision’ for which is made by the Constitution, there does not have to be a detailed statement providing for, or in respect of, a matter.

In our opinion, there has been no breach of s 12 (1)(a) of the Constitution."

The majority also referred to the above passage as well as the following passage from the Deputy Chief Justice in the same case at p. 504:

"The meaning of this provision is this: for the Parliament to make an Organic Law to make a provision in a matter, there must be a provision in the Constitution which authorizes an Organic Law to make provision for the matter. To put it differently, no Organic Law may be made by the Parliament in respect of a matter unless there is a constitutional provision in force which authorizes an Organic Law to make provision for the matter. That is the proper meaning to be given to the words ‘Organic Laws is expressly authorized by this Constitution.’"

The majority opinion in the Agiru case agreed that these passages correctly stated the law and that there were no inconsistencies in those statements. The Deputy Chief Justice state that position in these terms at p. 27 of the judgement:

"The effect of these passages is this. An organic law cannot of itself make provision for any matter which is not expressly authorised to be so made by the Constitution. As to what may be the scope of such authorisation, is a matter to be determined in accordance with the expressed terms of the Constitution."

There was no dispute in the Agiru case, that there was provision in the Constitution for an organic law to provide for Provincial Governments, with their powers and functions. The issue was only in the specific area of the National Government’s power to withdraw the powers and or functions of Provincial Governments apart from the power of suspension of Provincial Governments at the instance of the National Government subject to parliamentary accountability. 

The present case concerns the authority provided under s.187C of the Constitution. That provision reads:

"(4)	An Organic Law shall make provision for and in respect of-

(a)	…

(b)	the imposition and collection of taxation by Provincial Governments and Local-level Governments,

and may make other financial provisions for Provincial Governments and Local-level Governments, to an extent reasonably adequate for the performance of their functions."

In line with the well accepted principles governing the interpretation of provisions of the Constitution, as earlier noted, these words need to be interpreted liberally so as to give effect to the real intent and purpose of the provisions in question. I consider the real intent and purpose of s.187C can be ascertained by having regard to the context within which it has been placed.

The whole of s.187C once again reads:

"187C. Constitution, functions, etc., of Provincial Governments and Local-level Governments.

(1)	Subject to this Part, an Organic Law shall make provision in respect of the constitution, powers and functions of a Provincial Government or a Local-level Government.

(2)	For each Provincial Government and Local-level Government, there shall be established—

(a)	a mainly elective (elected directly or indirectly), legislature with such powers as are conferred by law; and
(b)	an executive; and
(c)	an office of head of the executive.

(3)	An Organic Law shall provide for the minimum number of members for the Provincial Assemblies and Local-level Governments and the maximum number of members that may be appointed as nominated members of Provincial Assemblies and Local-level Governments.

(4)	An Organic Law shall make provision for and in respect of—

(a)	grants by the National Government to Provincial Governments and Local-level Governments; and
(b)	the imposition and collection of taxation by Provincial Governments and Local-level Governments,
(c)	and may make other financial provisions for Provincial Governments and Local-level Governments, to an extent reasonably adequate for the performance of their functions.

(5)	An Organic Law shall make provision for the devolution and delegation to each Provincial Government and Local-level Government of substantial powers of decision-making and substantial administrative powers in respect of matters of direct concern to the province and to the local-level government area.

(6)	An Organic Law shall make provision in respect of the legislative powers of Provincial Governments and Local-level Governments.

(7)	A question of the adequacy of provision made under Subsection (3), (4), (5) or (6) is non-justiciable.

(8)	Elections to a Local-level Government shall be conducted, in accordance with an Organic Law, by the Electoral Commission."

This section provides for the constitution and powers and functions of Provincial and Local-level Governments. It also makes provisions for the way in which these governments are to be funded or can raise funds to carry out their powers and functions. The first subsection provides that an organic law shall provide for such governments’ constitution, powers and functions. The next subsection provides as to the type of government these governments should be. The membership of such governments is the subject of the next subsection. The subsection under consideration in this case follows that, which concerns the finances of these governments. The one immediately following that subsection provides for the devolution of some of the powers and functions of the National Government to these governments. The last three remaining subsections (6), (7) and (8) respectively provided for the legislative powers of these types of government, questions of adequacies in relation to the matters provided for in subsections (3), (4), (5), and (6) are non-justiciable and that elections to these governments are to be conducted in accordance with the Organic Law on Elections by the Electoral Commission.

Clearly therefore, the whole of section 187C concerns the composition, powers, functions and the finances of Provincial and Local-level Governments. The whole intent in my view therefore, is to provide for these aspects of Provincial and Local-level Governments in an organic law. There is no reference to the National Government in any of these provisions. The only provision that might arguably come closer to concern the National Government is subsection 5. That is only to the extent that it provides for:

"the devolution and delegation to each Provincial Government and Local-level Government of substantial powers of decision-making and substantial administrative powers in respect of matters of direct concern to the province and to the local-level government area."

But, as the Deputy Chief Justice said in the Agiru case at p. 30, the devolution and delegation here can only mean devolution and delegation to Provincial and Local-level Governments. It does not mean a withdrawal of such powers from them and be vested in the National Government except with the expressed authority of a provision in the Constitution.

I now return specifically to subsection 4 of section 187C of the Constitution. That provision in so far as is relevant says "an Organic Law shall make provision for and in respect of … the imposition and collection of taxation by Provincial Governments and Local-level Governments" (emphasis supplied). These words must be given their fair large and liberal meaning so as to give effect to the purpose or intent behind it in the context of the whole of s.187C.

Sections 100 and 109 of the Constitution vests the National Government through Parliament wide powers to legislate subject only to the Constitution. Part of that power has however, been delegated or devolved to Provincial and Local-level Governments pursuant to the authorization under subsections 4 and 5 of s.187C of the Constitution. There is no where to be found in subsection 4 or the whole of s.187C of the Constitution or anywhere else that makes this authorization concurrent with the National Government. In other words, there is no provision in the Constitution either in section 187C (4) or any where else that authorizes the OLPLLG or any other organic law to provide for concurrent powers in the National Government and the Provincial and Local-level Governments to impose and collect taxes once those powers have been devolved or delegated to the latter forms of governments. This accords well with the principles that govern delegated responsibilities. Once one who originally has a power or function has delegated it to another, it cannot exercise it unless the delegation has been withdrawn.

The State’s argument on this aspect runs contrary to the clear intent and purpose behind the provisions of s.187C of the Constitution generally and more specifically subsections 4 and 5 of that section. There is no expressed authorization for a withdrawal of powers and functions vested in Provincial and Local-level Governments once they have been vested with such powers in accordance with the relevant provisions of s.187C or any other provision of the Constitution. As the State argues, making the taxing power of the Provincial and Local-level Governments concurrent defines or limits that power. There is no expressed authorization for that in the Constitution.

For these reasons, I have no hesitation in finding that s.86 (1A) of the OLPLLG is not authorized by any provision in the Constitution. Similarly, I find the provisions of s.85 (2) to the extent that it seeks to acknowledge that the National Government has a concurrent power to impose and collect taxes of the kind spoken of in s.86 (1) of the OLPLLG also unauthorized. The authorization in s.187C (4) is only for Provincial and Local-level Governments to impose and collect taxes.

Ultimately therefore, I answer question number 6 in the negative. The rest of the questions 7, 8, and 9 are answered in the affirmative. Consequential on these answers, I would declare that ss.86 (1A) and 85 (2) of the OLPLLG are unconstitutional and therefore invalid to the extent that they confer powers of concurrency of taxation to the National Government. It hence follows that the VAT Act is without any foundation in the Constitution. Accordingly, I would also declared it invalid.

Order of the Court:

(1)	Sections 86 (1A) and 85 (2) of the OLPLLG are unconstitutional and are therefore invalid to the extent that they confer power of concurrency of taxation to the National Government.

(2)	The VAT Act that has been enacted under those unconstitutional and invalid sections 86 (1A) and 85 (2) of the OLPLLG is also unconstitutional and invalid.

(3)	Costs of this reference is awarded to the referror.
_________________________________________________________________
Lawyers for the Referror:			Pato Lawyers
Lawyers for the Respondent:			Henaos Lawyers