An Appraisal Of Internal Mechanism For Tax Disputes Resolution In Nigeria

By Zhihwi Dauda Esq.

ABSTRACT

Virtually in every human endeavour, disputes arise and even taxation is not immune from this. Tax disputes cannot be totally eradicated in any tax jurisdiction. One of the features of a tax is that, it is a compulsory payment imposed by law which is not necessarily linked to a direct benefit in return to the tax payer. That is why few persons, if any at all, are willing to pay tax to the state on a continuous basis, hence the saying ‘no one pays tax with a smile’.[i] The over dependence on oil revenue by the Nigerian government and the resultant effect of the fall in the international price of crude oil coupled with the outbreak of Covid-19 global pandemic, has made the federal government to rely more heavily on tax as a major source of revenue in financing the national budget. This has inadvertently put the tax authority on a blistering seat as the pressure mounts with the increase of their yearly target by federal government.[ii] In view of this, Federal Inland Revenue Service (FIRS) has intensified efforts on its tax collection drive. It is therefore difficult to experience smooth relationship without disputes between Taxpayers and Tax Authorities. Having considered the high number of tax cases in the Nigerian Courts and Tax Appeal Tribunals every year, I cannot deny the fact that tax disputes is equally one of the factors that impede the increase in tax revenue generation in Nigeria. It is the aim of this research to look at the various internal mechanisms for resolution of tax disputes in Nigeria. The research shows that there are various sources of tax disputes: aside tax dispute arising from procedure for exercise of statutory powers vested on FIRS, failure by the Taxpayers to keep records as required by law, inconsistency in the provisions of the tax laws which subjects it to different interpretations and inconsistencies in Tax Authorities’ position on certain tax matters.[iii] Tax disputes may also arise where the tax payer disagrees with assessments and decides to object. Similarly, where the tax authority refuses to allow certain expenditure as allowable deduction due to lack of sufficient supporting documentary evidence tax disputes may arise. The research will also show that the internal mechanism set out for settlement of tax disputes are open to both parties (Tax Authority and the Tax Payer) and this includes: Reconciliation meeting with Tax Authority, adjudication of tax disputes by the Tax Appeal Tribunal (TAT) and Federal High Court, imposition of decision by Joint Tax Board (JTB) etc. The scopes of the research work will not extend to other mechanisms for resolution of tax disputes under Double Taxation Agreement (DTA), The African Continental Free Trade Agreement (AFCFTA), the ECOWAS Trade Liberalization Scheme (ETLS) and under the Transfer Pricing Regulations of FIRS. My finding will show that the major challenge is inadequate skill in the field of taxation on the part of the Judges of the Federal High Court that adjudicates over the tax disputes. Conclusively, I will be recommending amongst others that Federal High Court judges should be trained by experts in the field of taxation and tax payer’s education should be invigorated and if possible a Tax Court should be established.

1.0     INTRODUCTION:

Historically, the internal mechanism for resolution of tax dispute in Nigeria can be appraised adequately if examines from its conceptual development as it relates to the history of modern taxation in Nigeria. This is traceable to the reform initiated in the first decade of the 20^th Century in Northern Nigeria by the High Commissioner of the then Northern protectorate, Sir Fredrick Lugard, who issued the Stamp Duties Proclamation of 1903 and the Native Revenue Proclamation of 1906. After the amalgamation of the Northern and Southern protectorates in 1914, the Colonial Governor re-issued the Native Revenue Proclamation as the Native Revenue Ordnance of 1917, which is still applicable to Northern Nigeria and was later extended to Western Nigeria in 1918 and Eastern Nigeria in 1927. In the year 1943, the Nigerian Inland Revenue Department was carved out of the Inland Revenue Department of British West Africa.[v]

The Inland Revenue Department was subsequently renamed Federal Board of Inland Revenue (FBIR) under the Income Tax Ordinance No.39 of 1958 and this was repeated in the Companies and Income tax Act No. 22 of 1961 which established of the Body of Appeal Commissioners (BAC) as the first point of call in the resolution of tax disputes between taxpayers and the Board concerning assessment and payment of tax.[vi] Suffice to say that aside the regular Courts established under the Constitution, the Body of Appeal Commissioners (BAC) is the first internal mechanism established by statute for the resolution of tax disputes in Nigeria. Later, the Nigerian government introduced Value Added Tax (VAT) on 24th August 1993 as a federal tax by virtue of the Value Added Tax Decree No.102 of 1993 now known as the Value Added Tax Act. CAP. V1 L.F.N. 2004.[vii] In order to manage tax disputes that may arise from the operations of the VAT Decree, the Value Added Tax Tribunal (VATT) was established by virtue of Section 20(2) of VAT Decree,[viii] (this is the second internal mechanism established for tax disputes resolution). However, the tribunal was later declared illegal, null and void by the Court and was later replaced with the Tax Appeal Tribunal.

The Income Tax Management Act (1961) created the Joint Tax Board (JTB) and charged it primarily with the responsibility to ensure uniformity of standards and application of Personal Income Tax in Nigeria. This provision was later retained in the Section 86 of Personal Income Tax Act (PITA)[ix].  The JTB serves as an internal mechanism for dispute resolution between two states in Nigeria with regards to who has the right to collect PAYE over a person that has dual residency (i.e. he resides in more than one state (This is the third internal mechanism established for tax dispute resolution in Nigeria). In 1993, some major changes took place with the passage of the Finance (Miscellaneous Taxation Provision) Act.[x] While Decree No.3 of 1993 reviewed the composition of the FBIR and also established the Federal Inland Revenue Service (FIRS) as the operational arm of the FBIR Decree 104, among other things reviewed the functions of the Joint Tax Board.

There has been several tax reforms in Nigeria aimed at transforming the tax system, enhancing tax compliance and resolving tax disputes in a globally acceptable way. The enactment in 2007 of the Federal Inland Revenue Service (Establishment) Act, No.13 of 2007 (“the Act”) did not only usher in a new regime of tax administration in Nigeria, it also revolutionized the nation’s tax disputes resolution system. The broad objective 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 to be made from time to time by the National Assembly and to account for all taxes collected.[xi] Section 59 of FIRSEA 2007 No.13 established the Tax Appeal Tribunal (This is the 4^th internal mechanism established for tax disputes in Nigeria).  

            The background facts that led to tax reforms mentioned above and the conceptualization of the internal mechanism for resolution of tax dispute in Nigeria, is mainly because of the fact that most companies in Nigeria have continually cited the inefficiency and other problems associated with the tax system as their reasons for relocating to neighboring countries to do business, thereby leaving the shores of Nigeria and depriving the country of major source of revenue. These problems which stem from the Nigerian tax operations necessitated the need for a new National Tax Policy.[xii] Chapter five (5)he New National Tax Policy has equally provided for Fiscal Dispute Resolution (Appeal) Mechanisms. (This is the 5^th internal mechanism established for tax dispute in Nigeria).  

            Tax dispute is not limited to Tax payers or Tax Authorities.  To Taxpayers; Tax disputes has in several occasions have put them in precarious situations as they are faced with a commercial dilemma of making prompt business decisions in the face of uncertain tax positions. Thus, speedy resolution of tax disputes is critical to any business.[xiii]   On the part of Tax Authority; Tax disputes have led to excessive tax evasion which has prompted successive governments to continually try to improve on the Nigerian tax systems with a view of having a tax system that will encourage voluntary compliance, reduce tax evasion to the barest minimum, instill public confidence on the integrity of the tax system and bring about a fair, uniform and impartial administration of relevant tax laws.[xiv]

This research will attempt to examine comprehensively the various mechanisms or apparatus in operation for resolutions of tax dispute in Nigeria. Taking into cognizance the fact that, “tax disputes” which more often than not, are between taxpayers and tax authorities within a given tax jurisdiction, and in some situation between two different tax authorities within a given country’s tax jurisdiction such as tax dispute between two States’ tax Authority within Nigeria mostly on who collect PAYE under the PITA. It may also be between the different levels of Government or between their respective tax agencies. It is pertinent to note that tax disputes may in some circumstances take international dimensions under the Double Taxation Treaty or Agreement; hence most of the DTAs contain clauses that operate as internal mechanism for resolution of tax disputes that may arise therein. This research will also attempt to appraise conceptual clarifications of some terms as it relates to the topic, legal framework on internal mechanism for tax dispute resolution  in Nigeria, various internal mechanisms for resolution of tax dispute in Nigeria, identify the  challenges  facing the internal mechanism for tax dispute resolution  in Nigeria and make some Recommendations. It is therefore my desire that at the end of this study, the readers (official of different tax Authorities, tax consultants, tax payers, professional in the fields, academia and general reader will get a mental grasp of various internal mechanisms for resolution of tax disputes in Nigeria.

2.0  CONCEPTUAL CLARIFICATIONS OF TERMS

2.1     Tax Dispute: Means any dispute arising or in connection with tax matters, it can be between tax payer and tax authority as to the tax liability payable or between two tax authorities.

2.2     Resolution: Means the determination of issues with the aim of resolving it.

2.3     Tax Authority: Means Federal Inland Revenue Service (FIRS) and as regard to Personal Income Tax includes State Board of Internal Revenue (SBIR).

2.4     Tax Appeal Tribunal (TAT) Tax Appeal Tribunal established under Section 59 of FIRSEA to adjudicate on Federal Tax Disputes including States tax disputes as it regards to Stamp Duties Act and Personal Income Tax Act.

2.5     Joint Tax Board (JTB) is an institution established under Section 86 of Personal Income Tax Act (PITA) saddled with the responsibilities of Promoting uniformity both in application of personal income Act and in the incidence of tax. Imposing its decision on matters of procedures and interpretation of Personal Income Tax on any State for the purpose of conforming to agreed procedures or interpretation.

2.6     Private Opinion (PO): This is the expression of an opinion by tax authority regarding the likelihood of tax liabilities in accordance with the relevant tax laws as it relates to a particular transaction presented to the tax authority for an opinion by any tax payer.

3.0     LEGAL FRAMEWORK FOR THE FIRS INTERNAL MECHANISM FOR                      TAX DISPUTE RESOLUTION IN NIGERIA.

The law governing the internal mechanism for resolution of tax disputes in Nigeria are as contained in Section 6, 251, & 36 of the Constitution of FRN 1999 as Amended, Section 59 & 5^th Schedule to Federal inland Revenue Service (Establishment) Act 2007 (FIRSEA), Companies Income Tax Act (CITA) Cap C21 LFN 2004, Personal Income Tax Act,(PITA) as amended 2011 Cap P8 LFN, 2004, Petroleum Profit Tax Act (PPTA)Cap P13, LFN 2004, the Valued Added Tax Act (VATA)Cap V1 LFN 2004, Capital Gain Tax Act (CGTA)Cap C1 LFN 2004, TETFund Act No 17 2003, Cap E4 LFN 2004, Tax Appeal Tribunal Rules 2010, Federal High Court Rules 2009 as amended, National Tax Policy (NTP) and any other regulation issued under FIRSEA Act, and Case law (Judicial precedent).

3.1     CAUSES OR INSTANCES OF TAX DISPUTE

          Every Nigerian citizen, who is a taxpayer, has a constitutional duty to declare his income honestly and appropriately to the relevant Tax Authorities and pay his/her tax promptly.[i] Hence, disputes may naturally arise where the tax payer failes to discharge this constitutional obligation or if he/she discharged such obligation fraudulently. The Tax Authority having the statutory duty to collect the maximum tax for Government[ii] will step in to ensure that the taxpayers pay the right tax by issuing him the appropriate tax assessment for his actual tax liability. The tax payer may disagree with the assessment of his tax liability; disputes will arise.

It is pertinent to note that the various tax laws in Nigeria have provisions that relates to rights and obligations of the tax payers as well as the duties of Tax Authorities at different levels of government. Hence, when the right and obligations are not in agreement, it will naturally become a cause for tax disputes.[iii] Furthermore, there are numerous instances of tax dispute situations some of which are enumerated below:

 

1. Tax disputes may arise from ambiguity and complexity of tax laws, in that certain provision of the Nigerian tax laws are complex in nature, and in many instances, the laws are archaic. This is mainly attributed to the fact that many of these laws were foreign laws passed down by the colonial masters, while some were drafted with intricacy to meet demands of the day as the society is dynamic and changes with time. In addition, the economic activities that are subject to tax are evolving with time, hence complexity in the economy resulting in complex tax laws.[i] Where the tax payers or tax consultants do not understand the provision of any tax laws, they may tend to apply it wrongly in preparing their tax returns thereby giving rise to tax dispute because the tax authority may have different interpretation to the same tax law.
2. Tax dispute may arise from assessment where the Tax Authority (that is, FIRS) issues to the taxpayer an administrative/government assessment,[ii] or additional assessment after carrying out tax investigation or audit pursuant to the relevant tax law.[iii] A taxpayer may disagree with such an assessment and decides to issue a Notice of Objection in accordance with the relevant laws[iv]
3. Tax dispute may also arise where a tax payer has objected to an assessment by issuing a Notice of Objection and, the Tax Authority refuses to amend the assessment Notice and goes ahead to serve the taxpayer with Notice of Refusal to Amend (NORA);[v] there is already a tax dispute in such case.
4. Tax dispute may arise during a tax audit exercise whereby the tax authority refuses to allow certain expenditure as allowable deduction due to lack of sufficient supporting documentary evidence, the tax payer may disagree with the decision and this may result in a tax dispute.
5. Tax dispute may equally arise where the tax payer filed its self assessment return in accordance with Tax Administration (Self Assessment) Regulations[vi] but understated his/her income or over stated his/her expenditure. The relevant tax authority will not agree with such fraudulent self assessment return.[vii]
6. Tax dispute may arise where the Tax Authority issue an assessment notice to a taxpayer and he fails to object or comply with it after 30days,[viii] the tax Authority may proceed to recover such tax liability and this will result to a tax dispute.

7. Tax dispute may also arise as a result of inconsistency in the position the Tax Authorities have on tax issues.  (Donald  2019)[ix] aptly explained it in his article; where he stated thus:

“Where the tax authorities adopt an inconsistent approach in dealing with tax issues, taxpayers are put at risk and this could result in tax disputes. In the case between Federal Board of Inland Revenue (FBIR) v Halliburton West Africa Limited (2014), the FIRS reneged from its earlier published circular on the tax treatment of recharges by non-resident companies and this resulted in a major tax dispute.
Although the Court of Appeal resolved the issue in the favour of the FIRS, stating that the FIRS’ earlier position could not supersede the law, taxpayers still rely largely on the decisions and positions of the tax authorities to make certain business decisions. Where the tax authority is not consistent in its position, there is bound to be dispute.”

8. Tax disputes may arise when taxpayer disagrees with the Tax Authority on how the law was applied in arriving at his tax liability, i.e. whether the tax authorities had followed the due process laid down by the relevant law in assessing the taxpayer’s liabilities.

9. Tax Dispute may arise where two tax Authorities disagree over who has the legal right to collect tax under PITA in cases where the tax payer has dual residency (i.e. he resides in more than one state).

10. Tax Dispute may equally arise where a tax payer failed to register or file its annual tax return with the relevant Tax Authority and the Tax Authority exercised its statutory power and issued a Best of Judgment Assessment (BOJ)[x] on such tax defaulter and there after proceeds to freeze their account(s) in accordance with the relevant law.[xi]

 

4.0     VARIOUS INTERNAL MECHANISM FOR TAX DISPUTE RESOLUTION  IN NIGERIA

 

4.1     RECONCILIATION MEETING WITH TAX AUTHORITY:

Whenever tax disputes arise in any of the instances aforementioned in paragraph 3.1 above, the tax payer may write formally to the relevant Tax Authority requesting for a reconciliation meeting in respect to his tax liability or outcome of tax Audit report.  The tax payer/Tax Authority reconciliation meeting has always played a role in solving many tax disputes. Reconciliation meeting are of two kinds, they are:

 

• Reconciliation meeting before the issuance of Assessment Notice. This occurs when tax dispute arose during the pre-audit meeting or during audit exercise or post Audit Exercise and even after the final Audit Report is issued by the relevant tax Authority. A Taxpayer can write to the Tax Authority requesting for a reconciliation meeting to resolve any area of contention in other to determine the actual tax liabilities an Assessment Notice is issued. The Tax Authority can call for a meeting with a tax payer, when in the opinion of in the opinion of the Tax Authority the  self assessment return filed by the Taxpayer does not reflect the true state of his income or profit.

 

• Reconciliation meeting after the issuance of Assessment Notice. This usually occurs where there is a tax dispute after the issuance of a Government Assessment or additional assessment which the taxpayers disagree and exercise his right of Objection to the Assessment Notice stating his reasons for the Objection. He may formally request for a reconciliation meeting to enable him assert his objection within the time allowed by laws 30 days under Companies Income Tax Act (CITA) and Personal Income Tax Act (PITA) and  21 days under Petroleum Profit Tax Act(PPTA)[i]

 

In any human transaction; there must be an end. Likewise reconciliation meetings in resolving tax dispute must have an end. A tax payer cannot arbitrarily continue to request for reconciliation meeting with a Tax Authority over a matter they have already decided without introducing fresh or additional documents or information which hitherto the Tax Authority did not review. It should also be noted that, once the time allowed by statute within which a tax payer can object to any Assessment Notice served on him has elapsed, such Assessment Notice becomes conclusive;[ii] the tax liability in such cases can be regarded and recovered as a debt[iii] under the undefended List Procedure in line with Order 12.[iv] Worthy of note also is that, Even after this; the tax payer may still utilized others internal mechanism available in resolving their dispute with the Tax Authorities.

 

4.2     ADJUDICATION OF TAX DISPUTES BY TAX APPEAL TRIBUNAL (TAT)

One of the characteristic of a good tax system is certainty; consequently, a good tax system should unequivocally set out the tax obligations of all stakeholders and consequences of non-compliance as well as a clear framework for tax administration. An effective mechanism for tax dispute resolution is also one of the features of a good tax system.

As a process of tax reform toward enhancing tax compliance and strengthening the internal mechanism for resolution of tax dispute in Nigeria, the Government of Nigeria  established the Tax Appeal Tribunal (TAT) pursuant to Section 59(1) of Federal Inland Revenue Service (Establishment Act).[v]  The TAT formally took off pursuant to the Tax Appeal Tribunals Establishment Order 2009 issued by the Minister of Finance, Federal Republic of Nigeria as published in the Federal Government Official Gazette No 296, Vol. 96 of 2nd December, 2009.[vi] The fundamental effect of the creation of Tax Appeal Tribunal 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 Decree No. 102 of 1993 respectively.[vii] This gave effect to the judgments of Court in the case of Stabilini Visioni Ltd v FBIR,[viii] and Cadbury (Nig.) Plc v FBIR,⁶⁰ Where the Court of Appeal sustained Cadbury’s objection, and held that the VAT Tribunal had no jurisdiction to entertain VAT issues since such Tax issues touched on the exclusive jurisdiction of Federal revenue, conferred solely upon the Federal High Court. According to Mr. Mahmoud Isa-Dutse[ix]

Since the inauguration of the Tax Appeal Tribunal in 2009 up to 2018, about 489 appeal cases had so far been filed with 409 concluded, also TAT has 209 live  tax appeal cases amounting to 18.8 billion dollars, 0.8 million Euros and N205.6 billion which are pending across the TAT zone as at third quarter of 2018…..the tribunal was one of the windows provided in Nigeria’s tax administration system which offers an aggrieved party the opportunity to explore other dispute resolution mechanisms before gaining access to the law Courts…..TAT  helps to reduce the caseload of the over-laden regular courts by providing less formal fora for quicker, cheaper and expert resolution of tax disputes in the public interest…..the tribunal had a mandate to resolve disputes arising from the operations of the tax laws and regulations as specified in the first schedule to the Federal Inland Revenue Service (FIRS) establishment Act, 2007.

The TAT is clothed with the power to settle disputes arising from the operation or application of all the tax laws listed in the 1^st schedule to the FIRSEA[x]by handling disputes between aggrieved tax payers and tax authorities. According to Prof. C.J Amaseki [xi].

the philosophy behind the Establishment of Tax Appeal Tribunal (TAT) is basically to resolve disputes and controversies relating to tax issues between the parties who appear before the TAT which invariably means the Tax Authority and the Tax Payer as quickly and as friendly as possible.

Paragraph 11(1) of the 5^th schedule of FIRSEA[xii] provides that the

Tax Appeal Tribunal is to exercise jurisdiction, power and authority                              conferred on it by 5th schedule to the FIRS (Establishment) Act, 2007. By                              this it shall have power to settle dispute arising from the following taxes;                     (a) Companies Income Tax, (b) Petroleum Income Tax (c) Personal Income              Tax (d) Value Added Tax (e) Capital Gains Tax and(f) Any other law                              contained in or specified in the 1st schedule to the Act or other laws made                from time to time by the National Assembly.”

Before the establishment of the Tax Appeal Tribunal, all tax matters where before the Federal High Court by virtue of Section 251 of the 1999 Constitution as amended, but it had long been realized that the traditional and conventional Law Courts are not only over burdened with cases which on the average take over 12years before they are concluded, and additionally the Court does not have the skill and competences to deal with specialized matters like taxation.[xiii]  Hence Speedy disposition of tax disputes appears to be the overriding consideration in the establishment of the TAT, Dugure.[xiv] This position was further articulated by Deloitte[xv] when he observed that “the TAT is meant to ensure fairness and transparency of the tax system, minimize the delays and bottlenecks in adjudication of tax matters in the traditional court system and generally improve taxpayer’s confidence in the tax system in Nigeria.”

The Tax Appeal Tribunal has Eight (8) Zones, they are located in each of the six geo-political zones, Abuja and Lagos with areas of jurisdiction as stated below.[xvi]

1. North East Zone Tax Appeal Tribunal– Bauchi covers Adamawa, Borno, Bauchi, Gombe, Yobe and Taraba States.
2. North West Zone Tax Appeal Tribunal-Kaduna covers Kaduna, Kano, Katsina, Kebbi, Jigawa, Sokoto and Zamfara States.
3. North Central Zone Tax Appeal Tribunal– Jos covers Benue, Nasarawa, Niger, Kogi, Kwara and Plateau States.
4. South West Zone Tax Appeal Tribunal– Ibadan covers Ekiti, Ogun, Ondo, Osun and Oyo States.
5. South East Zone Tax Appeal Tribunal– Enugu covers Abia, Anambra, Ebonyi, Enugu and Imo States.
6. South South Zone Tax Appeal Tribunal– Benin City covers Akwa Ibom, Bayelsa, Cross River, Delta, Rivers and Edo States.
7. Abuja Tax Appeal Tribunal– Abuja covers Abuja, Federal Capital Territory only.
8. Lagos Tax Appeal Tribunal– Lagos covers Lagos State only.

Each TAT zone is headed by a Chairman and four (4) Commissioners/members who do not necessarily have to be lawyers but must be vast in the knowledge of tax laws, regulations, norms, practices and operations of taxation in Nigeria, as well as capacity in the Management of trade or business.[i] What you find out invariably is that most Commissioners are however lawyers. All Chairmen are not just lawyers, but lawyers of long standing at the Bar and with deep and vast knowledge of tax laws, tax administration and practice. The quorum for every sitting is three with the Chairman presiding and in his absence; an acting chairman would be appointed by the commissioners present.[ii]

All appeals before the Tax Appeal Tribunal are held in public.[iii] All parties to a tax dispute are entitled to fair hearing as provided by the Constitution;[iv]this fact was upheld by the Court in the case of Ola V Federal Board of Inland Revenue (FBIR).[v] It is also imperative to note that, Paragraph 15(9) of the 5^th schedule of FIRSEA[vi] requires that every decision of the tribunal shall be recorded in writing. A certified true copy of such decision shall be supplied to the appellant or Tax Authority. Where in the course of its proceeding, the Tax Appeal Tribunal discovers evidence of crime, it would decline jurisdiction since its jurisdiction is limited to civil matters. It will report such crime or fraud to the appropriate law enforcement agency, through the Attorney General of the Federation.[vii] Therefore, any person aggrieved by an assessment or demand notice made upon him by the tax authority or aggrieved by any action or decision of such tax authority under the provisions of the relevant tax laws, may appeal to the TAT against such action, decision, assessment or demand notice within 30 days.[viii] This is because, where the tax payer failed to comply within the period allowed, 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, hence, the tax authority may go after him or her to recover the outstanding tax liability with interest and penalties where necessary.[ix]

4.3     ADMINISTRATIVE PROCEDURE OF TAX APPEAL TRIBUNAL BEFORE      HEARING

The process for filing processes by the Appellant is commenced by a Notice of Appeal as in Form TAT 1 at the tribunal Zone where the action complained about emanated. The Notice of Appeal shall state the following:

1. The ground of Appeal,
2. Whether the whole or part only of the decision is contested,

• The exact nature of relief sought,

1. The names and addresses of all parties directly affected by the appeal,
2. The address for service on the Appellant and Respondent must be endorsed on the Notice of Appeal.[i]

The Notice of Appeal shall be filed along with list of witness to be called at hearing of the Appeal, written statement on oath of the witnesses and copies of every document to be relied on at the trial.[ii] It must be noted that all persons who have an interest or some right in the subject matter of an Appeal may jointly file an Appeal as co-appellant. Similarly where the complaint is against several persons, the appeal may be filed jointly against such several persons as co-respondent.[iii]

The Secretary to the TAT of the zone shall upon receipt of the Notice of Appeal, stamp the copies received with an official stamp showing the date on which the document was received and a copy is served on the Respondent his representatives. The Respondent shall within thirty (30)days of receiving the Notice of Appeal acknowledge receipt of it by completing form TAT 3 stating in the reply whether the Respondent  intends to contest the appeal or not. Where he/she is contesting, he/she is enjoined to give reasons for so doing. Where the Respondent desires to rely on evidence at the hearing of the appeal, he shall file along with the Respondent’s reply list of witnesses to be called at the hearing of the Appeal, written statement on oath of the witnesses and copies of every document to be relied on at the hearing. All processes shall be signed by the respondent or his Legal Practitioner, Chartered Account or Adviser.[iv]

The Tribunal Secretary shall upon receiving the memorandum of appearance or reply of the respondent, stamp the process as received and record it in the Cause Book, and cause a copy of it to be served on the appellant. At this stage, the appeal is ripe for hearing and determination.[v] The Secretary, upon the direction of the Chairman, shall fix hearing dates for appeals and issue hearing notices as in Form TAT 8 of the First Schedule to these Rules.[vi]

4.4     HEARING OF APPEAL AT TAX APPEAL TRIBUNAL.

In hearing Appeals at the Tax Appeal Tribunal, the TAT is guided by a number of laws and rules which include but are not limited to the Nigerian constitution, the FIRS Act, the relevant Tax Laws and TAT rules of procedure. The TAT rules are like typical High Court Civil Procedures Rules, which most common law jurisdictions are used to. The Tribunal shall have the power to conduct its proceedings in a manner it deems fit to ensure speedy dispensation of justice. The hearing of an appeal shall  commenced by the Appellant presenting documents and statements which he intends to rely on as well as any witnesses he desires to call. The Respondent or his representative may in like manner present any document or statement he intends to rely upon as well as any witnesses he desires to call.[i]

At the hearing of an appeal, the Tribunal shall admit all relevant evidence, oral or documentary, adduced by the appellant or the respondent or any person appearing on their behalf.[ii]

(1)The oral examination of a witness during his evidence in chief shall be limited to confirming his written deposition and tendering in evidence all documents or other exhibits referred to in his deposition.

(2)Thereafter the other party may cross-examine the witness who may then be re-examined. And Where the Tribunal deems it necessary, it may call upon or, as the case may be, permit any party to produce any additional document or call additional witnesses or file any affidavit to enable it to issue proper directions or orders.

It is important to note that, the TAT conducts its proceeding in a manner that ensures speedy dispensation of justice thus placing more emphasis on substance rather than form or technicalities. At the close of hearing by both parties, where the Tribunal deems it fit, it shall order the parties to file and adopt their written addresses and may also grant them leave to make oral arguments to emphasize and clarify their written addresses after which the Tribunal would then determine the Appeal by given its Decision/Judgment or ruling based on the evidence presented before it.

4.5     DECISION/JUDGMENT OF THE TAX APPEAL TRIBUNAL

The Tribunal can only give its decision /judgment after the hearing of all the evidence and adoption of the written address of the parties if any. Where the negotiation or out of tribunal settlement option is adopted, it dispenses  with leading evidence, except in so far as to state that the terms of settlement were freely entered into, cross-examination, re-examination, written addresses etc. This decision/judgment may be unanimous or taken by a majority of the commissioners and it shall be recorded as such. Where there is a tie, the Chairman would have a casting vote. [iii]

The Decision/Judgment of the tribunal may confirm, reduce, increase or annul the assessment in contention or make any such orders(s) as it deems fit. Every Decision/Judgment or Ruling shall be recorded in a document which except in instances of decision by Consent Judgment, shall contain a statement of the reason for the decision and it shall be signed by the Chairman. The Chairman is the only person empowered by statute to sign judgments. Every interested party may apply to the secretary of the zonal tribunal for a certified true copy of the judgment or ruling within thirty (30) days of the date of the Judgment/Decision.

4.6     ENFORCEMENT OF THE JUDGMENT OF TAX APPEAL TRIBUNAL

Order 10 Tax Appeal Tribunal (Procedure) Rules 2010 provides that “the enforcement of a decision of the Tribunal shall be in accordance with the provisions of the Act (FIRSEA).” Furthermore, Paragraph 16(2) of the 5^th Schedule to FIRSE Act[iv] provided that:

An award or judgment of the Tribunal shall be enforce as if it were a judgment of the Federal High Court upon registration of a copy of such award or judgment with the Chief registrar of the Federal High Court by the party seeking to enforce the award or judgment.

Once the Judgment of TAT is duly registered in accordance to the above statute, the judgment creditor can enforce it following the same procedure for enforcement of Judgment of Federal High Court by applying via exparte motion for the issuance of writ of attachment against the movable property of the Judgment debtor in accordance with the provision of the law.[v] However, most often than not, the Judges of the Federal High Court would request Motion on Notice  to be issued and put the other parties on Notice. The judgment creditor may enforce the judgment of TAT via Garnishee proceeding through an exparte Motion under Sheriffs and civil process Act [vi]  seeking the Order of Court directing all the Bank in custody of the judgment Debtor’s fund to cease it and transfer it as may be directed by the Court.

It is praiseworthy to note that, where the tax authority or any person is dissatisfied with a decision/judgment of the tribunal an appeal against such decision/judgment on point of law lies to federal High Court upon giving notice in writing to the secretary to the Zonal tribunal within (30) days after the date on which the decision was delivered. The Secretary shall upon receipt of the Notice of Appeal ensure the notice to be given to Chief Registrar of the Federal High Court along with the exhibits tendered at the hearing before the tribunal. Paragraph 17(4) of 5^th schedule to FIRSEA Where a party is dissatisfied with decision/judgment of the federal High Court, he/she may appeal to Court of Appeal and may even go up to Supreme Court of Nigeria

4.7     CONTROVERSY OF JURISDICTION BETWEEN THE TAX APPEAL TRIBUNAL      AND THE FEDERAL HIGH COURT

The inauguration of the Tax Appeal Tribunal has not only presented problems as to the powers of the executive arm in providing and vesting the Tribunal with adjudicatory power as a mechanism for the resolution of tax disputes in Nigeria but, the seeming similarities with the jurisdiction of the Federal High Court as provided for under Section 251 of the Constitution of the Federal Republic of Nigeria has provided the highlights of controversies between the Tax Appeal Tribunal and the Federal High Court.[vii] Tax practitioners are quite apprehensive as to whether the Nigerian Tax Appeal Tribunal (“TAT”) would suffer a similar fate as the defunct Value Added Tax (VAT) Tribunal, which suffered premature extinction post the 1999 Constitution of Nigeria.

The Constitutionality of the jurisdiction of Tax Appeal Tribunal to hear Tax matter which is within the exclusive jurisdiction of Federal High Court was tested on 30^th  October, 2013 when Justice Adeniyi Ademola of the Abuja FHC in TSKJ II Construces Internationals Sociadade LDA v FIRS,[viii]  Struck down the existence or legality of the TAT, on the ground that, the Federal Inland Revenue Establishment Act No. 13 of 2007 (“FIRSEA”) and the Tax Appeal Tribunals (Establishment) Order of November 25th, 2009 (TAT Order) under which the TAT was established conflicted with the exclusive jurisdiction of the FHC conferred by section 251 of the Constitution. This was the first challenge that TAT faced until it was rescued by the subsequent decision of the same Federal High Court n the case of Nigerian National Petroleum Corporation (NNPC) V Tax Appeal Tribunal (TAT) (Lagos zone) and 3 Ors,[ix] the Court held that “the Tax Appeal Tribunal’s Jurisdiction did not interfere with the exclusive jurisdiction of the Federal High Court but was only an administrative body set up to determine preliminary matters before proceeding to the Federal High Court…”  The court further held that:

…by examining Section 251 (1) which provides thus: ‘Notwithstanding anything to the contrary contained in this Constitution and in addition to such other jurisdiction as may be conferred upon it by an Act of the National Assembly, the Federal High Court shall have and exercise jurisdiction to the exclusion of any other court in civil causes and matters…..’ the tenor of the first portion of Section 251 is to the effect that the National Assembly may make laws from time to time, so as to confer additional powers and jurisdiction on the FHC, and that the intent of this provision is to enable the Legislation expand the jurisdiction of the FHC, and in no way can this provision be construed as empowering the National Assembly to remove, or restrict the original jurisdiction of the FHC”

“Para 24(1) of the 2nd Schedule to the VAT Act provided for an appeal from the VAT Tribunal to the Court of Appeal. In contrast, the TAT was created as an administrative framework by which taxpayers could resolve their tax disputes with the FBIR (now FIRS) before resorting to the FHC by invoking the FHC’s appellate jurisdiction….the administrative framework did not derogate from the FHC’s original jurisdiction but rather “serves as a condition precedent to bringing an action before the Federal High Court”.

“The Court rely on Section 41 of the Petroleum Profits Tax Act and Paras 13(1) & 17(1) of the 5th Schedule to the FIRSEA 2007 N0. 13, and  noted that neither of those statutes provided for a direct appeal to the Court of Appeal, unlike the VAT Tribunal which proposed to usurp, and sidestep Section 251’s exclusive jurisdiction to FHC.”

 “…. the Legislature was right to have added an appellate jurisdiction to the FHC, in accordance with Section 28 of the Federal High Court Act which provides that: ‘The Court shall have appellate jurisdiction to hear and determine appeals from- (a) the decision of Appeal Commissioners established under the Companies Income Tax Act and the Personal Income Tax Act in so far as applicable as Federal law..’ …..since the TAT did not attempt to usurp the original jurisdiction of the FHC, its constitutionality was affirmed.

However, it is undeniable that the Tax Appeal Tribunal has overlapping jurisdiction with the Federal High Court in the sense that the matters are cases concerning revenue.[x] Until the Court of Appeal decides or the Supreme Court decides, the decision of Justice Idris Buba in Nigerian National Petroleum Corporation (NNPC) v Tax Appeal Tribunal,  remains valid.[xi]

4.8     ADJUDICATION OF  TAX DISPUTES BY FEDERAL HIGH COURT

It is anticipated that there would be disputes between tax payers and Tax Authorities or organs of Government. This is typical in any society and our laws therefore provide detailed processes for resolving such disputes. In this regard, the Nigerian Constitution recognizes the right of every Nigerian to submit disputes to the Courts for adjudication, whether he is a taxpayer or not. Other than such general disputes, there are specialized processes relating to the resolution of tax or fiscal disputes between tax payers and Tax Authorities. Therefore, the Tax Appeal process is available to every tax payer, who is aggrieved or dissatisfied with a decision or ruling made by the tax authority, relating to the tax status of such taxpayer, the interpretation /application of tax laws, and such other matters affecting the rights and status of the taxpayer.

Section 251 of the 1999 Constitution[xii] provides for the exclusive jurisdiction of the Federal High Court to the exclusion of any other Court, on matters relating to revenue of the nation. Federal High Court was then known as the Federal Revenue Court which was established by the Federal Revenue Act 1973[xiii] Although the need was noted during the Constitutional Conference leading to Independence[xiv] for the establishment of a High Court for the determination of causes and matters within the Exclusive Legislative list, as is customary in countries with the Federal System of Government, no step was taken in that regard until the promulgation of the Federal Revenue Court Decree in 1973 No. 13. This Decree created the Federal Revenue Court.

The Federal Revenue Court began its operation with a President (as the Head of the Court was then called) and four Judges.[xv] From the inception of the Federal High Court, controversies over its jurisdiction followed every step of the Court’s jurisdiction. However, such controversies were finally settled with the enactment of Section 230(1)[xvi] The Section was replicated in the Federal High Court Decree (Amendment) 1991 Cap (60)[xvii] which amended Section 7 of the Federal High Court Act (1973); and conferred exclusive jurisdiction on the Court in relation to the subject matters covered by section 7 of that Act, as amended. Therefore, it was  Section 228 (1) and 230 (2)[xviii] that renamed the Federal Revenue Court as  the “Federal High Court”.  Section 7 of the Federal High Court (Amendment) Act, 1991 has now been reenacted as Section 251 (1) (a) to (s).[xix] Its jurisdiction on criminal matters are as provided in Section 251 (2) and (3) of the 1999 Constitution and in such matters as the National Assembly may by Act, confer jurisdiction on it.

Notwithstanding the above provision it is instructive to note  as held by Justice A Bello of the Federal High Court Abuja Division in the case of NNPC V Tax Appeal Tribunal (TAT) (Lagos zone) and 3 Ors;[xx]  

the exclusive jurisdiction conferred on this Court in respect of revenue matters is not by accident in view of the historical evolution of the Federal High Court which was initially established  as Revenue Court by The Federal High Court Act with the sole responsibility of dealing with matters connected with the Federal Government revenue. It became a Superior Court of record under the 1979 Constitution and remains so under the 1999 Constitution. Its jurisdiction is conferred under Section 251 of the 1999 Constitution to which all the parties in case have made reference.  I refer in particular to Section 251 (1) (a) & (b) of the 1999 constitution. It provides as follows:

• Notwithstanding anything to the contrary contained in this constitution and in addition to such other jurisdiction as may be conferred upon it by an Act of National Assembly, the Federal High Court shall have and exercise jurisdiction to the exclusion of any other Court in civil causes and matters.
• Relating to the revenue of the Government of the Federation in which the said Government or any organ thereof of a person suing or being sued on behalf of the said Government is a party.
• Connected with or pertaining to the taxation of companies and other bodies established or carrying on business in Nigeria and all other persons subject to Federal taxation.

It is clear that the above provisions are all encompassing and leaves no one in doubt that this Court has the exclusive jurisdiction in any dispute relating to the revenue of the Federal government of the Federation in which the said Government or any organ thereof or a person suing or being sued-on behalf of the government of the Federation is a party. And in any dispute connected with or pertaining to the taxation of Companies and other bodies established or carrying oil business in Nigeria and all other person subject to federal Taxation”

Thus while the FIRSE Act by Section 59[xxi] established the Tax Appeal Tribunal and since the Federal High Court entertained an Appeal against the Decision of TAT under its appellate Jurisdiction, that does not in any way remove the exclusive original jurisdiction conferred on it by Section 251 (1)(a)(b) of the 1999 Constitution. Hence any Tax payer or Tax Authority that is aggrieved with any tax dispute can evoke the original Jurisdiction of the Federal High Court. This was the decision of the Federal High Court Per Justice A. Bello of in the case of FIRS V NNPC and four Ors ^[xxii] at page 40 to 41

…The mechanism provided for resolution of such disputes under Section 41 is to Tax Appeal Commissioner and thereafter an Appeal can come to this Court under Section 42 of the same Act against the decision of the Tax Appeal Commissioners. The appeal from the Tax Appeal Commissioners/Tribunal comes to the Federal High Court in the exercise of its appellate jurisdiction but that does not preclude a party from invoking the Original Jurisdiction of the Court on Tax Issues conferred by Section 251(1)(a) and (b) of the 1999 constitution of the Federal Republic of Nigeria”

4.9     OUT OF COURT SETTLEMENT DURING THE PENDENCY OF THE CASE OR           AFTER COURT OR TAT’S JUDGMENT

Settling of tax disputes out of Court is far less expensive than a trial. Unless you know for a fact that you have an iron clad case, you stand the risk of spending large amounts of money and getting nothing in return. No satisfaction, no restitution, nothing. The best first step of any potential tax lawsuit is to try to work out your disagreement with the Tax Authority outside of court. The Federal High Courts and the Tax Tribunal agree with this wholeheartedly and in some instances require some sort of dispute resolution before you can even bring a case to trial. Even if you do have an ironclad case, you need to weigh the costs of litigation with the potential award you might (or might not) get after a trial.

Out of Court settlement therefore means the resolution of a dispute prior to the rendering of a final decision by the trial Court.[xxiii] Under the Tax Appeal Tribunal rules as well as the Federal High Court Rules, the Court and the Tribunal respectively are encouraged to promote out of Court settlement among the disputed parties before it. This is not different with tax disputes. ORDER 18 (1) and (2)[xxiv]

(1) When a matter comes before the Court for the first time, the Judge shall in circumstances where it is appropriate, grant to the parties, time, not more than thirty days within which parties may explore possibilities for settlement of the dispute.

• Where parties fail to settle within thirty days or such other period as the Court may grant, the case shall without more, proceed to trial.

Parties to tax dispute before any Court or Tribunal are at liberty to settle their dispute out of Court at any stage of the proceeding before judgment. It is in furtherance to this right and in line with the objectives of the National Tax Policy, that many Tax Payers have decided to settle their tax dispute cases out of Court. Example of which are:

1. The case of Orchid Nigeria Ltd v Nigerian Customs Service (NCS)  and  Federal Inland Revenue Service (FIRS) where the Orchid Nigeria Ltd  had taken the NCS and  FIRS to the Tax Appeal Tribunal in Abuja over non-refund of N3.5million Value Added Tax (VAT). Orchid averred that under the first schedule of the VAT Law No. 102 of 2007 (as amended), books and educational materials were exempted from VAT. The appellant stated that upon clearing the items, it was erroneously charged VAT to the tune of N3.5 million contrary to the provision of the tax law, but midway to the proceeding of the Appeal, Parties have agreed to settle the N3.5 million tax disputes between them out of court.[1]
2. Recently, in the case of Ashaka Cement Plc vs. FIRS[2] where Ashaka Cement Plc dragged the FIRS before the Tax Appeal Tribunal North West Zone over a =N=1.38 Billion Tax dispute.[3] However, the Parties had agreed to go back to the drawing board and re-open audit of the company’s tax Liability. Accordingly, the Appellant’s Counsel[4] filed a Notice of discontinuance dated 10^th July, 2015 and the Appeal was struck out on 29^th July, 2015.

I make bold to say that the window of out of Court Settlement in operation under the relevant laws of Nigeria operates as one of the internal mechanism used for resolution of tax disputes in Nigeria. In my opinion, it is one of the effective mechanisms that should be encouraged by express enactment in our various tax laws.

5.0     IMPOSITION OF DECISION BY JOINT TAX BOARD (JTB) ON STATE TAX           AUTHORITIES

          The Joint Tax Board (JTB) was established pursuant to the provisions of the Personal Income Tax Act (PITA). Under section 86 of the PITA,⁸⁷ the JTB is vested with power amongst others, “to use its best endeavor to promote uniformity both in the application of this Act in the incidence of tax on individual throughout Nigeria and impose its decisions on matters of procedure and interpretation of this Act on any state for purposes of conforming with agreed procedure or interpretation”.

          As earlier stated, there may be instances where the tax dispute may not only be between tax payers and tax authorities but between two tax Authorities over who has the legal right to collect tax under PITA. The personal Income Tax Act has made some rules for settlement of dispute that may arise in the determination of the physical residence of individuals.⁸⁸ As articulated by J.A  Arogundade⁸⁹

i. Where an individual disputes the determination of his residence by a tax Authority, he can furnish the ground of his objection to the tax authority who will forward the objection with its comments to Join Tax Board (JTB).

ii. Where the dispute is between two or more Tax Authorities and the individual has not been assessed, any Tax Authority that is a party to the dispute can refer the case to the JTB.

iii. Where an assessment has been raised on the individual, the facts of the case may be referred to the JTB by any Tax Authority with vested interest in the case In any of these circumstances, the secretary to the relevant Tax Authority is to notify all the parties and individual to the dispute and those to be affected by the determination of the grounds of the dispute. All parties to the dispute are to be given a period of not less than 40 days within which to respond to the grounds of dispute.

The secretary to the JTB may call for further information before the determination of the residence for the assessment year. The Notice of the determination is to be given to all parties to the dispute in writing. The determination is binding on all parties but may be challenged in the High Court of the state that has raised the assessment and then to the Court of Appeal. Any assessment which is not in accordance with the determination is to be discharged.90

In the pursuit of internally generated revenue ‘IGR’, States’ Tax Authorities were not limiting their operations to their respective tax jurisdictions. This may lead to tax dispute between many States’ Tax Authorities on the competency of one state tax authority to collect tax on individuals that work within their tax jurisdiction but reside outside their jurisdiction. Example of such cases are:

i. Lagos State and Ogun State’s tax authorities, in respect of taxation of individuals who work in the commercial capital of Lagos but reside in the border settlement of Ogun State (such as Sango-Ota,Ojodu, Acute,Ifo, Ijoko, Olambe Etc).

ii. FCT IRS, Niger and Nasarawa State’s tax authorities in respect of taxation of individuals who work in the Federal Capital Territory Abuja but reside in the border settlement of Nasarawa State (such as Mararaba, Karu, Nyanya, Auta Balaifi, Masaka and One man Village. And even Suleja in Niger State)

iii. River State and Bayelsa State’s tax authorities in respect of taxation of individuals who work in Port Harcourt (as their place of work) but reside in Yenagoa the capital city of Beyelsa (place of residence)

iv. Bauchi state and Plateau State’s tax authorities in respect of taxation of individuals who work in Jos State capital of Plateau (as their place of work) but reside in the capital city of Bauchi (place of residence)

It is important to note that one of the internal mechanisms for resolving tax dispute is the JTB which was established under PITA. The JTB will in most cases, step in such situations mentioned in paragraphs 5.0 (i) to (iv) above if any tax Authority applies for its decision over the matter and imposes its decision after determination as stated in paragraphs 5.0 (i) to (iii) and bring the tax dispute to an end.

6.0     FISCAL DISPUTE RESOLUTION (APPEAL) MECHANISMS UNDER THE           NATIONAL TAX POLICY

In the course of frequent interaction and engagement between the various levels and tiers of Government, and between Government and the tax payer, or between tax payers, it is expected that disputes would arise from time to time. Such disputes may extend to general fiscal issues, of which taxation is a key component. In the little or no efforts were made to promptly address and resolve such issues. In addition, there are usually weak formal and informal structures and in some cases, complete absence of a workable and acceptable structure or framework for the resolution of such disputes.[5] The Tax Policy therefore seeks to address this challenge and provide a general framework for the resolution of such disputes as discussed below.

6.1     TAX DISPUTE BETWEEN FEDERAL AND STATE GOVERNMENTS

The Nigerian Constitution provides that disputes between Federal and State Governments in Nigeria on certain matters (which taxation is a key component) shall be referred to the Supreme Court as a Court of first and final instance. It is therefore not the intention of the Tax Policy to detract from this constitutional provision.

However, it is expected that resort to the Supreme Court shall be the final option and that all necessary avenues shall be explored for the resolution of such disputes before there is a resort to litigation. Such avenues which may be explored include:[6]

i. The Governor’s forum, where the Federal Government may be invited to deliberate on such disputes with the affected State or State Governments.
ii. Deliberations at the National Economic Council, where the affected Federal, State or Local Governments may be invited to resolve the issues in dispute;
iii. Deliberations at the Federal/State Executive Council, where the affected Federal/State/Local Government Ministry, Department or Agency may be invited to resolve the issues in dispute;
iv. Deliberations at the Council of State level, which is a more formal process than (i) to (iii) above; and
v. Mediation by other State Governments or Federal Government agencies / other organs of Government, such as the Judiciary. However, where the Judiciary is involved, mediation shall be carried out in a manner as not to affect the independence or impartiality of the Judiciary, given that the dispute may subsequently be referred to the judiciary for adjudication.

Once disputes are referred to the Supreme Court and a decision is reached, it is expected that all parties shall comply strictly with the decision of the Court and such a dispute would be deemed as fully resolved. In no instance should any party to a dispute resort to extralegal methods to resolve such disputes.

6.2      TAX DISPUTE BETWEEN TWO OR MORE STATES GOVERNMENTS The     Nigerian Constitution also provides that disputes between State Governments (which taxation is a key component) shall be referred to the Supreme Court for adjudication. However, as stated above such option shall be deemed as the final option when all other dispute resolution mechanisms may have been exhausted according to Section 5.2 Chapter five of National Tax Policy.⁹⁰ In this regard, avenues, which may be explored include:

i. Deliberations between the State Governments, by their Attorney Generals, Commissioners of Finance or any other relevant State officials or agency;
ii. Deliberation at the level of the Governor’s forum;
iii. Deliberation at the level of the National Economic Council;
iv. Deliberations at the level of Council of States, which would be a more formal process than (i) to (iii) above; and
v. Mediation by other State Governments, Federal Government agencies / other organs of Government, such as the Judiciary. However, where the Judiciary is involved, mediation shall be carried out in a manner as not to affect the independence or impartiality of the Judiciary, given that the dispute may subsequently be referred to the judiciary for adjudication.

Once disputes are referred to the Supreme Court and a decision is reached, it expected that all parties shall comply strictly with the decision of the Court and such a dispute would be deemed as fully resolved. In no instance should any party to a dispute resort to extra-legal methods to resolve such disputes.

6.3     TAX DISPUTES BETWEEN STATESs AND LOCAL GOVERNMENTS

Disputes between State and Local Governments (which taxation is a key component) shall as much as possible be resolved informally without resort to litigation. This is particularly important given the close relationship and interdependence between States and Local Government and the potential dislocation and distraction to Governance which such disputes may trigger.

It is expected that all available avenues, such as deliberations between relevant officials, mediation by traditional rulers and other State and Local Government organs and other relevant stakeholders at State and Local Government levels would be considered.⁹¹

Where all alternative dispute resolution mechanisms fail, disputes may be submitted for judicial adjudication as a last resort. Once disputes are referred to the Judiciary and a decision is reached, it expected that all parties shall comply strictly with the decision of the Court and such a dispute would be deemed as fully resolved. In no instance should any party to a dispute resort to extra-legal methods to resolve such disputes.

7.0     CHALLENGES

Having examined the internal mechanism for tax dispute resolution in Nigeria, it is observed that the administration of internal tax dispute resolution in Nigeria is cumbered by many factors. These factors/challenges are highlighted below.

1. The challenge of inadequate tax education on the existence of the various internal mechanism for the resolution of tax disputes, education on tax payer’s rights to object to any unjustified Assessment Notice served on them and to have access to Tax Appeal Tribunal to challenge same if aggrieved

2. It is obvious that the Jurisdiction of Tax Appeal tribunal (TAT) in light of Section 251 of the 1999 Constitution will continue to be the subject matter of litigation. The two conflicting Judgments of Federal High Court Abuja and Lagos Division is now subject matter of Appeal at the Court of Appeal. Until the Supreme Court pronounces on this issue, it will continue to affect the performance of the TAT as one of the internal mechanisms for resolution of tax disputes in Nigeria.

3. Lack of adequate skill in the field taxation on the part of the Judges that adjudicate over the tax disputes particularly judges of the Federal High Court.

4. Conflicting decision of the Courts on tax matters, particularly Federal High Court

7.1     RECOMMENDATIONS

In view of the observations and challenges discussed above, the following recommendations are hereby made.

1. Tax authorities should carry out tax education in the form of an enlightenment campaigns on the availability of the Tax Appeal process, so that all tax-payers, large or small, corporate entities and individuals are aware that they have a right to submit their disputes for adjudication whenever they are aggrieved at the Tax Appeal Tribunal.
2. FIRS should use its corporate communication department in partnership with Chartered Instituted of Taxation of Nigeria (CITN) to establish a Colum on tax matters in at least two national newspaper where tax education will be carried out weekly on the duties of the tax payers and their respective rights under the different type of tax administered by FIRS.
3. Federal Government should take the opportunity of the ongoing Constitutional Amendment to insert a Section in the Constitution for the establishment of a special Court called “Federal Tax Court” as a superior Court of record to handle all tax related matters exclusive of any other Court; and such matters be equally removed from the exclusive jurisdiction of FHC under Section 251 of the 1999 Constitution. This will reduce the over burden and load placed on FHC on all federal matters and will put to rest all controversy on the legality or otherwise of the tax tribunal vis-a-vis the FHC.
4. Before the creation of the proposed “Federal Tax Court”. Federal High Court’s Judges should be trained by experts in the field of taxation yearly; this will enhance their skills in the field of taxation.
5. There is need for the Federal government and the tax authority to simplify, re-engineer, straighten and create more mechanism for tax dispute resolution to promote speedy resolution of tax disputes and reduce the longer time spent in court adjudication over tax mater.
6. The FIRS should established a Unit of at least 10 person under the Executive Chairman’s office comprising of expert from Tax Operation, Tax Policy and Legal Department for the sole purpose issuing “private opinion” in accordance with the relevant tax laws to any tax payer who requested to know his company’s likely tax liability in any proposed transaction.

7.2       CONCLUSION

            The internal mechanism for resolution of tax disputes in any Tax jurisdiction is an integral part of a good tax system; if it is neglected it will have a multiplying negative effect on the tax revenue generation of such tax jurisdiction. Hence, in Nigeria, the Federal Government and the Tax Authority need to intensify effort in reengineering its smooth application. Efforts should be made in strengthening the administrative internal mechanism for resolution of tax disputes without resort to Court in order to make it faster and attractive to tax payers so that tax disputes can be dispensed quicker thereby removing some hindrances in tax collections.

Written By Zhihwi Dauda Esq. (LL.B, B.L, LLM & ACIT), E-mail: daudathihwi@gmail.com Phone: 08059538671

[1]Vanguard News paper  on line of March 10^th, 2013, https://www.vanguardngr.com/2013/03/tax-dispute-firs-agree-n3-5m-out-of-court-settlement-with-firm/ (Accessed on 20/7/2020)

[2] Ashaka Cement Plc vs. FIRS, Appeal No: TAT/NWZ/KD/CIT/004/15

[3] The Nation News Paper  July 7^th , 2015 page 28 also The Guardian Newspaper of 7th July,2015 page 48

[4] Barrister A. Dauda of (A. Dauda & Co) No 134 Ladan Borno House ran-gate Bauchi, Bauchi State

[5] Section 5.1 chapter five of National Tax Policy, (Final draft copy of the National Tax Policy that was approved on April,2012 but gazette on 21^st September,2012 www.firs.gov.ng./Tax…./tax20legislation/National%20Tax%20Policy(Accessed on 21/7/2020)

[6] Ibid 89 Section 86(9)(d)and (e) Personal Income Tax Act (PITA) Amended 2011 Cap P8 LFN 2004

90 Paragraph 10, First schedule to personal income tax Act 2011 & S.8(7),15 and 27

91 Joseph Ajibola Arogundade

92 Section 5.2 Chapter five of National Tax Policy

[i] Order XV Rule (1)(2) Tax Appeal Tribunal (Procedure) Rules 2010

[ii] Order XV Rule (1)(2) Tax Appeal Tribunal (Procedure) Rules 2010

[iii] Order XIX Tax Appeal Tribunal (Procedure) Rules 2010

[iv] Paragraph 16 (2) 5^th schedule of FERSEA,2007 No.13

[v] S. 20 (1) and (2) Sheriffs and civil process Act, Cap S6 LFN Revised Edition 2010 and order viii rule (5) Tax Appeal Tribunal (procedure) rules 2010.

[vi] S. 83 Sheriffs and civil process Act, Cap S6 LFN Revised Edition 2010

[vii] A.J. Aladi Achor “Tax Dispute Resolution in Nigeria: A Storm in a Tea Cup” journal of Law, Policy and Globalization www.iiste.org ISSN 2224-3240 (Paper) ISSN 2224-3259 (Online)Vol.29, 2014 page 147

[viii] TSKJ II Construces Internationals Sociadade LDA v FIRS, NO; FHC/ABJ/TA/8/12 Judgment delivered On 30^th Oct,2013,Reported In Tax Law Report of Nigeria (TLRN)  (2013) Vol 13 Page 1-23

[ix] Nigerian National Petroleum Corporation (NNPC) V Tax Appeal Tribunal (TAT) (Lagos zone) and 3 Ors (2013) per I N Buba  J of Lagos division of FHC delivered  on 3^rd December, 2013 in the SUIT NO: FHC/L/CS/630/2013  Reported In Tax Law Report Of Nigeria (TLRN) (2013) Vol 13 Page 39-94

[x] Ibid Foot Note No.62

[xi] Note that Justice Buba’s Judgment in Nigerian National Petroleum Corporation (NNPC) V Tax Appeal Tribunal (TAT) (Lagos zone) and 3 Ors supra is presently the subject matter of Appeal before the Court of Appeal (Lagos Division). Appeal No:CA/L/745/14   Similarly the Judgment of Justice Adeniyi Ademola of the Abuja FHC in TSKJ II Construces Internationals Sociadade LDA v FIRS supra is equally a subject matter of Appeal before Court of Appeal Abuja Division. Appeal No:CA/A/122A/2014

[xii] Section 251 of the 1999 Constitution as Amended

[xiii] Federal Revenue  Act 1973 No.13.

[xiv] Nigeria gained independence from colonial rule in 1960

[xv] http://www.fhc-ng.com/about.htm (Accessed on 20/7/2020)

[xvi] Section 230(1) of 1979 Constitution of FRN

[xvii] Now called Federal High Court (Amended) Act 2005 LFN 2004 Act  Revised edition 2010 Cap F12

[xviii] S. 228 (1) and 230 (2) 1979  Constitution of the Federal Republic of Nigeria

[xix] S. 251(1)(2) and (3) of 1999 Constitution of FRN As Amended

[xx] Nigerian National Petroleum Corporation (NNPC) V Tax Appeal Tribunal (TAT) (Lagos zone) and 3 Ors (2013) per I N Buba  J of Lagos division of FHC delivered  on 3^rd December, 2013 in the SUIT NO: FHC/L/CS/630/2013  Reported In Tax Law Report Of Nigeria (TLRN) (2013) Vol 13 Page 39-94

[xxi] S.59 FIRSEA 2007 No.13

[xxii] FIRS V NNPC and four Ors Per Justice A Bello delivered on 29^th February,2012 reported  in TLRN (2012) 6  page 1 ratio 12 particularly at page 38 to 39

[xxiii] http://www.thefreedictionary.com/out-of-court+settlement (Accessed on 20/7/2020)

[xxiv] ORDER 18 (1) and (2) Federal High Court (Civil Procedure) Rules 2009

[i] Order III rule (4) Tax Appeal Tribunal (Procedure) Rules 2010

[ii] Order III rule (5) Tax Appeal Tribunal (Procedure) Rules 2010

[iii] Ibid Foot Note N0.34

[iv] Order VIII rule (1)-(4) Tax Appeal Tribunal (Procedure) Rules 2010

[v] Order VIII rule (5) Tax Appeal Tribunal (Procedure) Rules 2010

[vi] Order XVI Tax Appeal Tribunal (Procedure) Rules 2010

[i] Paragraph 2 and 3 of the 5^th schedule of FIRSEA,2007 N0.13

[ii] Paragraph 2(4) of the 5^th schedule of FIRSEA, 2007 N0.13

[iii] Paragraph 15(5) of the 5^th schedule of FIRSEA, 2007 N0.13

[iv] S. 36 1999 Constitution of FRN as amended.

[v] Ola V Federal Board of Inland Revenue (FBIR) (2011)5 TLR 138

[vi] Paragraph 15(9) of the 5^th schedule of FIRSEA^, 2007, No. 13

[vii] Paragraph 12 of the 5^th schedule of FIRSEA, 2007 No. 13

[viii] Paragraph 13(1)(2) of the 5^th schedule of FIRSEA, 2007 No. 13

[ix] Paragraph 13 (3) of the 5^th schedule of FIRSEA, 2007 No. 13

[i] Section 69(2)CITA 58(1) PITA 38(2) PPTA

[ii] Paragraph 13(3) of the 5^th schedule of FIRSEA, 2007 No.13

[iii] S. 34(1) FIRSEA 2007, No.13

[iv]Order 12 Federal High Court Rules 2009.

[v] S. 59(1) of Federal Inland Revenue Service (Establishment Act) 2007 N0.13

[vi]  http://tat.gov.ng/executive-brief/  (Accessed on 18^th of July, 2020)

[vii] Ibid Foot Note No. 1

[viii] Stabilini Visioni Ltd v FBIR, (2009) 13 NWLR (Pt 115) 200

[ix] Mr. Mahmoud Isa-Dutse the Permanent Secretary, Ministry of Finance on Monday in Abuja, at the inauguration of commissioners of the Tax Appeal Tribunal (TAT) published in the guardian newspaper on line of 5^th November, of 2020 https://guardian.ng/news/tax-appeal-tribunal-209-cases-still-pending-fg/ Accessed on 20^th July, 2020.

[x] FIRSEA 2007 N0.13

[xi] Prof. C.J Amaseki , Chairman Tax Appeal Tribunal South East Zone(SEZ) in his article “Tax Appeal Tribunal Perspective” page 1

[xii] 5^th schedule of FIRSEA, 2007 N0.13

[xiii] Ibid Foot Note No. 34

[xiv] Ibid Foot Note No.1

[xv]  Deloitte Nigeria (Akintola William)published on 24 June 2014 Article  titled “what is the fate of Tax Appeal Tribunal” http://www.mondaq.com/Nigeria/x/322466/tax+authorities/What+Is+The+Fate+Of+The+Tax+Appeal+Tribunal ( Accessed on 20^th July, 2020)

[xvi] http://tat.gov.ng/executive-brief/  (Accessed on 18^th of July, 2020)

[i] S. A. Donaldson, “The Easy Case Against Tax Simplification,” Virginia Tax Review, vol. 22, p. 645, Spring 2003; David F. Bradford, Untangling the Income Tax, Harvard University Press, 1986, p.226; https://www.jct.gov/publications.html?func=startdown&id=4738 (Accessed on 16^th July,   2020).

[ii] Per A Idigbe FJ in Onuigbo v Commissioner of Inland Revenue (2011)4 TLRN 149 at 154

[iii] S. 35 of Federal Inland Revenue Service (Establishment) Act 2007, S. 45,46,48,54 and 55 of Personal Income Tax Act (PITA) 2011.

[iv] S. 69(1) CITA 2004, S. 58(1) PITA 2011, S. 38(2) PPTA 1999

[v] S. 69(5) CITA 2004, S. 58(3) PITA 2011, S.38(6)PPTA 1999

[vi]  Tax Administration (self Assessment) Regulations No.41 of 2011, come into force on 12^th December,2011, made pursuant to FIRSEA 2007

[vii] Ibid foot Note No.18 (Section 3)

[viii] Paragraph 14 of the 5^th schedule of FIRSEA 2007 N0.13

[ix]O. Donald “Reasons For Tax Disputes In Nigeria” https://www.trendingaccounting.com/2019/04/reasons-for-tax-disputes-in-nigeria.html (Accessed on 16th July, 2020)

[x] S. 30(1)(a) and 65(3) of Companies Income Tax Act Cap C21 LFN 2004

[xi] S.8(1)(g) of Federal Inland Revenue Service (Establishment Act) 2007 N0.13

[i] S. 24(j) 1999 Constitution of FRN as Amended 3^rd alteration.

[ii] S. 8 of Federal Inland revenue service (Establishment) Act 2007.

[iii] Tettehfio J.H.M. Esq in his paper presented to the staff of FIRS titled “dispute resolution technique

[i] M.Dugeri “the challenges of resolving tax disputes in Nigeria”   https://mikedugeri.wordpress.com/2014/06/24/the-challenges-of-resolving-tax-disputes-in-nigeria/ (Accessed on 15th July, 2020)

[ii]  https://punchng.com/firs-getsn8-5tn-revenue-target-for-2020/ (Accessed on 15th July, 2020)

[iii] Andersen Tax LP, “Tax Dispute Resolution in Nigeria: Challenges And Practical Steps” published online. https://www.mondaq.com/nigeria/tax-authorities/798522/tax-dispute-resolution-in-nigeria-challenges-and-practical-steps (Accessed on 15th July, 2020)

[iv]https://www.mysalaryscale.com/company/federal-inland-revenue-service-firs#:~:text=In%20the%20first%20decade%20of%2020th%20century%20in,it%20with%20the%20Native%20Revenue%20Proclamation%20in%201906.(Accessed on 21/7/2020)

[v] O.O Ifueko “ Federal Inland Revenue Service and Taxation Reforms in Democratic Nigeria “ published 2012 page ix.

[vi] Ibid foot note 4

[vii] This was because, government was dissatisfied with the then existing tax structure on Sales tax. Before the coming into effect of the VAT Decree, Sales tax was under the jurisdiction of the States and generally poorly administered with marginal contribution in terms of revenue.

[viii] S. 20(2) of VAT Decree 102 1993 and its second schedule(the old VAT decree now amended twice)

[ix] S. 86 of Personal Income Tax Act (PITA)  Cap P8 LFN 2004 (as amended) by No: 20 2011

[x] Finance (Miscellaneous Taxation Provision) Act No, 3 and Decree 104 of 1993,

[xi]   A.J Aladi Achor “Tax Dispute Resolution in Nigeria: A Storm in a Tea Cup” Journal of Law, Policy and Globalization www.iiste.org ISSN 2224-3240 (Paper) ISSN 2224-3259 (Online) Vol.29, 2014 page 147-156 https://iiste.org/Journals/index.php/JLPG/article/viewFile/15934/16402 (Accessed on 16^th July,   2020).

[xii] D. Philips, “The Nigerian Tax Reforms in 2003 and Beyond: Main report of the study group on the Nigerian Tax System.” Cited by O.O Ifueko Foot Note No.4

[xiii] Ibid Foot Note No. 3

[xiv] Abubakar Yusuf Mahmud, “Tax policy in Nigeria” www.Buzzle.com (Accessed on 10^th July,   2020).