One features of a tax is that it is a compulsory payment for which no direct benefit is received in return by any tax payer. Perhaps the cliché that “no one pays tax with a smile” is based assumption that no one willingly pays to any tax authorities on a continuous basis. Tax disputes are as certain as tax payments and the manner of resolution of the disputes is a major factor in the revenue base of any Country (irrespective of the tier of government) and also for purposes of driving investments.
The enactment in 2007 of the Federal Inland Revenue Service (Establishment) Act, (“the Act”) did not only usher in a new regime of tax administration in Nigeria, it also revolutionised Nigeria’s tax disputes resolution system. The broad objects of the Act is to create the Federal Inland Revenue Service (FIRS) as an autonomous body and to vest it with the power to control and administer taxes and laws specified under the Act or to be made from time to time by the National Assembly and to account for all taxes collected – this Law forms the basis for any States’ tax laws. The taxes and laws listed under the first schedule to the Act are:
1. Companies Income Tax Act
2. Petroleum Profit Tax Act
3. Personal Income Tax Act
4. Capital Gains Tax Act
5. Values Added Tax Act
6. Stamp Duties Act
7. Taxes and Levies (Approved List for Collection) Act
8. All regulations, proclamations, government notices or rules issued in terms of these legislations.
9. Any other law of assessment, collections and accounting of revenue accruable to the Government of the Federation as may be made by the National Assembly from time to time or regulations incidental to those laws conferring any power, duty and obligation on FIRS.
10. Enactment or laws imposing taxes and levies within the Federal Capital Territory.
11. Enactment or laws imposing collection of taxes, fees and levies collected by other government agencies and companies in the oil and gas industry.
A major aspect of the Act is the establishment of the Tax Appeal Tribunals (TAT), which is vested with jurisdiction to resolve any tax disputes arising from the above-named tax statutes. The fundamental effect of the creation of TAT is the abolition of the Body of Appeal Commissioners (BAC) and the Value Added Tax Tribunal (VAT-T) established by the Companies Income Tax Act and the Value Added Tax Act respectively.
Speedy disposition of tax disputes appears to be the overriding consideration in the establishment of the TAT. Tax disputes, now being resolved by the TAT have hitherto been majorly handled by the Federal High Court by virtue of Section 251 of the 1999 Constitution. But it is commonplace that the traditional or conventional law courts are not only over-burdened with cases, which take long to dtermine, but also some of them lack the requisite skills and competencies to deal with specialized matters like taxation.
Reforms in dispute resolution systems globally are tilting towards specialization of courts. The argument is that specialization is a way of achieving excellence and thoroughness. Judicial specialization in a specific type of conflict has become necessary to improve performance and reach timely, just rulings and judgements in an environment marked by increasing commercial conflicts and economic diversification. The advantages of specialized tribunals can be seen in terms of the problems they are set up to resolve. Consequently, the creation of a specialized tribunal with exclusive jurisdiction over tax disputes could be seen as solving basic problems that have hindered the efficient disposition of tax disputes by high courts. Previously tax cases before the regular courts take long to dispose of, and the courts may be without any benefits of specialization as advocated.
Both the tax payer and tax authority can commence proceedings at the TAT. Section 14 of the 5th Schedule to the Act provides that any person who is aggrieved by an action, assessment or demand notice made on him by the tax authority may appeal against that decision or action or assessment within 30 days of receipt of such action or assessment or demand notice forming grounds of appeal. Where the tax payer fails to comply within the required period and has not given sufficient cause for the delay, the assessment or demand notice or action by the tax authority would become final and conclusive. Similarly, by virtue of Section 14 of the 5th Schedule to the Act, the tax authority, if aggrieved by the non-compliance of a taxpayer, may appeal to the division of the TAT where the taxpayer is resident for the prosecution of the defaulting taxpayer.
A major concern with the new regime of tax disputes resolution is that by the conferment on the TAT of exclusive jurisdiction to settle all disputes arising from the operation of the Act and all other tax statutes administered by FIRS, the high courts are forthwith ceased of jurisdiction to entertain such matters.This concern has caused raging controversies on the constitutionality of TAT, and unfortunately, judicial pronouncements on the issue have, so far, left much to be desired. The gamut of the arguments against the establishment of TAT is that Section 59 of the Act, which established the tribunal offends the overriding provisions of Section 251(1) (a), (b) and (c) of the 1999 Constitution which confers exclusive jurisdiction on the Federal High Court in respect of civil causes and matters relating to the revenue of the Government of the federation. In other words, the matters now being entertained by the TAT fall within the exclusive jurisdiction of the federal high court and unless and until the Constitution is amended, the present arrangement is an illegality.
It is instructive to note that in time past the courts have relied on the arguments above to declare as null and void the provisions establishing BAC and VAT-T; and latest judicial developments on this controversy appears confounding. While some judges have held that the establishment of the TAT is unconstitutional, others have decided contrary. This situation leaves much to be desired and have encouraged forum-shopping among lawyers tax practitioners and litigants in the resolution of tax disputes.
Another concern with the resolution of tax disputes at the TAT bothers on the issue of restriction on the right of appeal against decisions of the Tribunal. 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. This provision implies that no appeal shall lie against the decision of the tribunal to the Federal High Court other than on a point of law. It follows that the intention of the sponsors and the drafters of this Act is to bar appeal on point of facts. The argument against this provision is that it offends the unconstitutional right of a litigant to appeal against the decision of a lower court to a higher court. Interestingly, the Act is also silent on the right to further appeal to the Supreme Court against the decision of the Court of Appeal. Whatever is the intention of the legislature in this regard, it can be validly argued that an express provision for further right of appeal to the Supreme Court may be superfluous as appeal will always lie to the Supreme Court against the decision of the Court of Appeal except where the Constitution itself provides otherwise.
As laudable as the foregoing arguments against the constitutionality of the TAT may seem, if accepted, they act as a drawback on the underlining philosophy behind the establishment of the tribunal and void recent tax reform efforts of the government. TAT was established with the major aim of expediting the resolution of tax disputes in a more informal and friendly fashion. Any argument for return of the jurisdiction over federal tax disputes to the high court on grounds of pardonable legislative lapses is a regressive approach to law reform and economic development.
