by Vernia Legal Practitioners | Feb 24, 2023 | Commercial Law, Tax
INTRODUCTION
The objective of every organized society’s government is to provide fundamental social amenities such as adequate roads, health, and security of people and property, amongst others. It is without any doubt that the government needs money to facilitate the provision of these services and taxation is the mainstay of government revenue. The law makes it compulsory for everyone to pay tax and even provides penalties for non-compliance. The payment of tax in Nigeria is backed by Section 24[f] of the 1999 Constitution of Federal Nigeria [as amended]. It provides that: “It shall be the duty of every citizen to – declare his income honestly to appropriate and lawful agencies and pay his tax promptly.”
The court in the case of Independent Television/Radio v. E.S.B.I.R. [2015] 12 NWLR [Pt. 1474] 442 reiterated the constitutional duty of a citizen to pay tax. It stated that: “Failure of the citizen to pay tax shall strip him of the protection afforded by section 44[1] of the Constitution.”
In Nigeria, the power of the government to impose taxes is statutory and must be anchored on the law. There are sundry legislations in Nigeria of which the major ones are the Personal Income Tax Act, Company’s Income Tax Act, and The Federal Inland Revenue Service Act, amongst others
TAX AVOIDANCE
The 8th Edition of the Black’s Law Dictionary defined Tax Avoidance as “the act of taking advantage of legally available tax-planning opportunities in order to minimize one’s tax liability.” It is a lawful means of altering a person’s taxable income in order to reduce the amount of tax owed. It is usually achieved by claiming tax deductions, tax credits, and positioning for tax incentives. By and large, tax avoidance occurs in a situation where the taxpayer arranges his financial affairs in a manner that would make him pay the least possible amount of tax without infringing the legal rules.
TAX EVASION
This is the unlawful means of concealing taxable income from tax authorities, so as not to remit taxes. It has also been interpreted to mean an illegal practice where a person, organization, or corporation deliberately evades paying their authentic tax liability by deliberately not declaring all taxable income. Some instances of tax evasion are:
- False declaration of one’s financial status.
- Failure to render tax returns as appropriate.
In Independent Television/Radio v. E.S.B.I.R. [2015] 12 NWLR [Pt. 1474] 442 where the taxpayer failed to render tax returns to the relevant tax authority, the court held that was “a despicable way for any taxpayer to act and it is seriously detrimental to the development of any nation.”
LEGAL DIMENSION OF TAX AVOIDANCE AND TAX EVASION
Legislators and tax authorities are very well aware of the way taxpayers seeks to avoid or evade taxes. Therefore, tax legislation and enforcement technique continue to evolve to prevent tax evasion and to ensure tax-avoidance techniques are based on real and reasonable economic activities. Here are some legal measures put in place to prevent tax evasion:
1. Imposition of Sanction: Judicial decisions have recognized deterrence as one of the goals of imposing sanctions. Without the imposition of sanctions for non-compliance with the tax laws, there would be no duty, but an admonition, to pay taxes. It is important to stress that Section 40 of the Federal Inland Revenue Service Act makes tax evasion illegal in Nigeria. Furthermore, obstructing or assaulting any authorized tax officer in the exercise of his responsibilities is a criminal offense under Section 41 of the Act. Any of these infractions attracts a fine or an imprisonment term of three years or both.
2. Tax Audit and Investigation: The law permits tax authorities to conduct tax audits and tax investigations of taxpayers.
3. Deduction at Source: There are two main methods of deducting taxes at source, the Pay-As-You-Earn scheme [PAYE] and the Withholding Tax method. Withholding tax is not a form of tax, but a method of collecting taxes in advance.
4. Reporting and Penalties: Reporting obligations on a controlled transaction or across the N300,000,000 thresholds. Failure to file the necessary disclosure or declaration forms attracts different monetary penalties.
5. The enactment and amendments of existing laws: With the enactment of the new Finance act, it is hoped that these new provisions will bring a lot of changes in the tax administration system.
CONCLUSION
The importance of tax to a nation cannot be overemphasized. It is one of the veritable ways by which the government funds its budget and in Nigeria currently, taxation is one sure way for the government to generate revenue. However, it is rare to find a taxpayer who willingly pays their taxes, and the law is very well aware of that. Hence, legal and regulatory measures are put in place to ensure that any advantages to be gained by a taxpayer over the tax authorities are not artificially induced or illegally procured. While reasons may be advanced to justify avoiding and evading taxes, there is no doubt that in both cases, the government whose anticipated revenue reduces suffers the loss which in turn passes to taxpayers through the increase in tax rates and creation of new forms of taxes.
TEAM VERNIA
52B, Adeyemo Akapo Street,Omole Phase I Estate,
Off Agidingbi Road, Ikeja, Lagos.
+234 813 830 6975
[email protected]
by Vernia Legal Practitioners | Sep 26, 2022 | Commercial Law, Society & Law, Tax
Tax Appeal Tribunal [hereinafter referred to as the “TAT” or “Tribunal”] is established pursuant to SECTION 59 (1), FEDERAL INLAND REVENUE SERVICE [ESTABLISHMENT] ACT, 2007 [hereinafter referred to as the “FIRS Act”]. The TAT replaces the former Body of Appeal Commissioners [BAC] and Value Added Tax [VAT] Tribunals. The TAT is not a Court, but rather an administrative body saddled with responsibilities of handling disputes on taxation; to be specific, taxes accruable to the Federal Government of Nigeria.
Jurisdiction
The 5th Schedule of the FIRS Act states that the TAT has jurisdiction over all matters contained in the 5th Schedule [to the FIRS Act]. These includes: disputes arising from the Companies Income Tax Act [CITA], Petroleum Profit Tax Act [PPTA], Personal Income Tax Act [PITA], Capital Gains Tax Act [CGT], Stamp Duties Act [SDT], Value Added Tax Act [VAT], Taxes and Levies [Approved list for collection] Act as well as other laws, Regulations, Proclamations, Government notices or Rules related to these Acts. Furthermore, it is instructive to note that the Tribunal also adjudicates tax disputes arising from the actions and decisions of state tax authorities provided the disputes relate to any of the Acts listed in the First Schedule to the FIRS Act. There used to be a debate as to which is the appropriate forum to bring federal taxation matters to, whether it is the TAT or the Federal High Court [hereinafter referred to as “FHC”]. Section 251(a) – (c), 1999 Constitution confers upon the FHC exclusive jurisdiction to entertain and adjudicate upon matters related to taxation of the Federal Government or its agencies. Section 59 (2), Establishment Act saddles the TAT with the responsibility of handling disputes relating to taxes due to the Federal Government through the FIRS. Therefore, it begged the question that when there is a grievance, which of the two judicial bodies is the appropriate point of call? Can a complainant bypass the TAT and go straight to the FHC or he must go through the former first? After series of decisions, the Court of Appeal finally put an end to this. In Federal Inland Revenue Service v. TSKJ [Construcoes Internacional Sociadade Unipersoal], [2017] LCN/10279 CA, the Court held that a party must approach the TAT before escalating a grievance to the Federal High Court where a statute prescribes a line of action in resolution of a dispute, all available remedies must be exhausted first before resorting to the halls of a Courtroom. This however, as properly and firmly noted by the same Court of Appeal in the later decision of Skye Bank Plc v. K.S.I.R.S [2021] 12 Nwlr [Part 1789] Page 27], the TAT is not a Court and does not ousts the jurisdiction of a Court.
The TAT Zones
A Tax Appeal Tribunal is located in the Federal Capital Territory, Lagos State and in each of the six geo-political zones of Nigeria.
Initiation of Action
The Tax Appeal Tribunal as defined by the Court of Appeal in Skye Bank Plc v. K.S.I.R.S [supra] is an administrative tribunal set up to determine the correctness of assessment of tax without fixation of formality. When a tax has been imposed on a party, he is free to object to it and lay a complaint to the imposing authority. Upon failure to reach an amicable resolution, such complainant [aggrieved party] has the right to escalate it further by approaching the TAT. The procedures of filing an action under the TAT, like a usual Court, is regulated by procedure and hence the Tax Appeal Tribunal [Procedure] Rules 2021.
According to the FIRS Act and Order 3 Rule 1, TAT [Procedure] Rules 2021, both the taxpayer and relevant tax authority can initiate the appeal process. Rule 2 provides that such complainant shall file the action within a period of 30 days from the date on which the cause of complaint [action, decision, assessment or demand notice] which is being appealed against, was made by the FIRS. However, the Tribunal may still entertain an appeal after the expiration of the said period of 30 days if it is satisfied that there was a reasonable cause for the delay. Going further, Rule 3 says that if the complainant is the FIRS or any relevant tax authority, aggrieved by non-compliance by any person in respect of any provisions of the tax laws referred to in Paragraph 11 of the 5th Schedule to the Act under its administration, it may as in Rule 2 above, file an appeal at the appropriate zone of the Tribunal.
If a party is still dissatisfied with the decision of the Tribunal, Order 1, Rule 1, Federal High Court [Tax Appeal] Rules, 2022 provides that such party can file a Notice of Appeal to the Federal High Court within 30 days after the decision of the Tribunal was given.
Structure
According to Section 2, 5th Schedule, Establishment Act, the TAT has a total of 50 Tax Appeal Commissioners. A Tribunal consists of 5 members appointed by the Honorable Minister of Finance. The Chairman for each zone must be a legal practitioner who has been so qualified to practice for a period of not less than 15 years with experience in tax legislation and tax matters. The Chairman presides at every sitting of the Tribunal and in his absence the members shall appoint one of them to be the Chairman. The quorum at any sitting of the Tribunal is 3 members. Section 4 provides that a Tax Appeal Commissioner is to hold office for a term of 3 years, which is renewable for another term of three years only, from the date on which he assumes his office or until he attains the age of 70 years whichever is earlier.
Responsibilities of The TAT
The Tribunal is responsible for entertaining, determining and adjudicating on all the cases filed before it. The Tax Appeal Commissioners sit on the tribunals to perform these duties. Also, where the cases also have elements of crime, it can refer them to the office of the Attorney General of the States or Federation [as the case may be]; or other law enforcement agencies so the matters can be prosecuted. The decision of the Tribunal [Award or Judgement] will be registered at the Federal High Court and enforced as if it was a Judgment of the Court.
Bottlenecks of Dispute Resolution
As gleaned earlier, appeals from the TAT lie to the Federal High Court. Order 1, Rule 1 Federal High Court Tax Appeal [Procedural] Rules, 2022 is instructive on this. However, this can only be done on points of law. The Act provides that appeal against the decision of the Tribunal lies to the Federal High Court “on points of law” and further appeal lies to the Court of Appeal. No room for an appeal on points of facts is made here. This may appear unconstitutional and could be challenged. However, it would also seem that the approach as universal appeal in matters of tax appeal. In addition, the Rules require a deposit of Judgement Sum. Order 5 Rule 1 mandates a tax debtor who is challenging the decision of the Tribunal [“the Tribunal”] to deposit the judgement debt in an interest yielding amount maintained by the Chief Registrar of the Court. Otherwise, the appeal will not be heard. This is a precondition that must be satisfied. In our opinion, it seems unfair to a party being asked to deposit the same amount of money which he is appealing against, before he can make that appeal. It is nothing but a representation of the popular phrase associated with the military which is “obey before complain”. The essence of appealing is to overrule the lower court and prevent that “obedience” from taking place. However, on the flip side, it is argued that this payment to the Government is imperative for the funding of developmental projects. Failure of parties to pay hinders the tasks the Government intends to carry out. Besides, Paragraph 17, 5th Schedule of the FIRS Act mandates this payment to be made as a condition precedent to further appeal. It should be noted that this approach is not unique to Nigeria. It could be found in other tax jurisdictions to a varying degree.
Furthermore, at the TAT, the commissioners who adjudicate the disputes are experts who have experience in taxation. However, the Judges at the Federal High Court where appeals from the TAT will lie to, might not be vast in the realm of taxation and this undoubtedly can scupper the Court from reaching a sound and robust decision. There have been calls for the establishment of a proper Revenue Court manned by Judges appointed from legal practitioners with verse knowledge of and wealth of experience in tax matters and tax dispute resolution.
Conclusion
The TAT has always been a proper forum to ventilate taxation related grievances. Parties do not need to go to Court and endure all the stressful procedure required just before they can seek redress. The Tribunal saves them that long and tedious process. The aim, like any other body tasked with judicial and adjudicatory powers is to determine rights and liabilities and ultimately grant redress being sought by parties who come before it.
However, the system is not perfect as it is fraught with its own shortcomings. The restriction on appeals only on points of law is a not in the interests of litigants as the very Justice they seek before the Federal High Court is already limited. We strongly opine that a balance be struck in the payment of the Judgement Sum as a pre-condition for appeal, which would reflect equity and fairness. Yes, it looks harsh on parties but also, the Government needs the money too. The Law needs an amendment. Then, to ensure well-grounded decisions, forged from solid jurisprudence are reached, devoid of all the stressful procedure and legalese of the regular Courts, we suggest that there should be the establishment of Revenue Courts in line with the prescription of the revised National Tax Policy Document. In fact, the TATs can be transformed into these proposed Revenue Courts while the Chairmen be elevated to the position of Judges.
TEAM VERNIA
52B, Adeyemo Akapo Street,Omole Phase I Estate,
Off Agidingbi Road, Ikeja, Lagos.
+234 813 830 6975
[email protected]
