Analysis Of The Purposive Approach To Tax Statute Interpretation In Nigerian Courts

By Zhihwi Dauda Esq. (LL. B, B.L, LL.M,  ACE, FCIT) And Jaja Vincent Randolph (LL.B, B.L, AICMC, ACIT)

• INTRODUCTION:

The interpretation of tax statutes is a critical aspect of the administration of tax laws in Nigeria, with significant implications for revenue generation, economic development, and taxpayer rights. The Nigerian government has embarked on a series of tax reforms, introducing new laws and amending existing ones to align with global standards and address emerging issues in the digital economy. The recent enactment of the Nigerian Tax Act, 2025 (NTA) and the Nigerian Tax Administration Act, 2025 (NTAA) represents a landmark overhaul of the country’s tax framework, covering areas such as corporate income tax, value-added tax, capital gains tax, and digital economy taxation. However, the complexity and evolving nature of these laws have given rise to disputes between tax authorities and taxpayers, highlighting the need for effective interpretation and application of tax statutes.

In this context, the Nigerian courts play a vital role in interpreting tax statutes, ensuring that the legislative intent is given effect to while protecting the rights of taxpayers. The judiciary has consistently adopted a strict approach to interpreting tax statutes, refusing to imply words or meanings not clearly expressed by the legislature. This approach is grounded in the principle that tax laws impose burdens on taxpayers and should therefore be construed narrowly to avoid arbitrary or excessive taxation. However, the question arises whether this approach is sufficient to address the complexities of modern taxation, particularly in the context of emerging issues such as digital assets and cryptocurrency gains.

This study examines the purposive approach to tax statute interpretation in Nigerian courts, analysing the extent to which the courts consider the legislative intent, policy objectives, and social context in interpreting tax laws. The study will critically evaluate the strengths and limitations of the current approach, identifying areas where the courts can adopt a more purposive approach to interpretation, while ensuring certainty, equity, and fairness in the application of tax laws. This position was clearly affirmed in FBIR V HALILBURTON (WA) Ltd (2016) 10 TLRN 1 (SC), where the Supreme Court, per Kekere-Ekun , J.S.C.,[1] held that : Taxing statutes are to be strictly construed. There is no room for any intendment. Nothing is the read in, nothing is to be implied. One can only look fairly at the language used. if the words of a tax statue are ambiguous , they must be construed in favour of the subject. This principle remains vital in the current era of expansive tax reforms, ensuring that the pursuit of fiscal modernization does not override the fundamental rule that no tax shall be imposed except by clear and unambiguous law.

• RULES OF INTEPRETATION OF STATUTES:

The interpretation of statutes is a vital judicial function, enabling the judiciary to give meaning to legislative language and effectuate the intention of the legislature. In Nigeria, this process is guided by common law principles and constitutional dictates, requiring courts to balance the need to avoid absurdities and injustice with the prohibition on rewriting laws. Tax statutes, being technical and complex, pose particular challenges, with disputes arising over taxable income, deductions, and assessments. The Nigerian judiciary has developed interpretative rules, including the  Literal Rule, the Golden Rule, the Mischief (Purposive) Rule, Ejusdem Generis, Noscitur a Sociis and the Doctrine of Strict Construction to guide its approach, playing a crucial role in shaping tax law and policy through landmark cases and ensuring effective fiscal policy implementation and taxpayer rights protection, as seen in recent reforms like the Nigeria Tax Act (NTA) 2025 and Nigeria Tax Administration Act (NTAA) 2025. This work will briefly generally examine some of the interpretation rules below:

1. LITERAL RULE : The Literal Rule forms the cornerstone of statutory interpretation. It mandates that words must be given their ordinary, plain and grammatical meaning. The court must adhere to the literal language of the statute and refrain from inferring meanings or intentions not clearly expressed. This principle was firmly established in G of the Federation V Abubakar (2007) 10 NWLR (Pt 1041) 1[2], where statutory words are clear and unambiguous, they must be given their ordinary meaning .The Court reiterated that interpretation is unnecessary where the language of the legislature is plain.

In taxation, this principle ensures predictability and certainty. Tax liability must be clearly imposed by statute. In Shell Petroleum Development Company v FBIR (1996) 8 NWLR (PT.466)256[3], the Supreme Court adopted a literal approach in interpreting the phrase “chargeable profits” under the Petroleum Profits Tax Act. The Court refused to expand the meaning of deductible expenses beyond what was expressly provided by the Act, stating that taxation cannot arise by implication. Similarly, in FBIR v. Halliburton (WA) Ltd (2016) 10 TLRN 1 (SC), the Supreme Court reiterated that taxing statutes must be strictly and literally construed. Kekere-Ekun JSC declared: “Taxing statutes are to be strictly construed. There is no room for any intendment. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. If the words of a tax statute are ambiguous, they must be construed in favour of the subject.”[4] This position aligns with the constitutional guarantee under Section 44(1) of the 1999 Constitution (as amended)[5], which prohibits compulsory acquisition of property including money except by law. Thus, no taxpayer can be made to pay tax except where clearly mandated by statute. The Literal Rule therefore promotes legal certainty and fiscal discipline, both of which are essential for economic governance.

1. GOLDEN RULE : The Golden Rule is a modification of the literal rule. It allows the court to deviate from the ordinary meaning of words to avoid absurdity, inconsistency, or an outcome contrary to the legislature’s intent. This rule reflects judicial prudence: the court respects legislative language but refuses to apply it mechanically where such application would produce injustice. In Adesola v. Abidoye (1999) 14 NWLR (Pt. 637) 28, the Supreme Court explained that the Golden Rule serves as a corrective tool where literal interpretation would yield an irrational result. The Court stated that where adherence to the literal meaning of words would defeat the purpose of the Act, the court must adopt a reasonable interpretation consistent with legislative intent. This rule was crucial in G. Lagos State v. Eko Hotels Ltd (2018) 36 TLRN 1 (SC)[6]. The dispute concerned the overlap between Federal VAT and Lagos State’s Hotel Occupancy and Restaurant Consumption Law. The Court employed the Golden Rule to harmonize both statutes, holding that the Constitution envisages a system of fiscal federalism where both levels of government have defined taxing powers. The Court avoided an absurd interpretation that would have rendered state taxing power meaningless.

The Golden Rule therefore introduces flexibility into tax interpretation, allowing courts to align literal wording with broader constitutional and economic policy objectives. In the era of the Finance Acts (2019–2024) and the NTA 2025, this rule is likely to be invoked where legislative drafting interacts with novel issues such as digital services taxation, cryptocurrency gains, and withholding tax reforms.

1. MISCHIEF RULE: The Mischief Rule requires courts to look at the problem or “mischief” the law was intended to cure and interpret the statute in a manner that suppresses that mischief while advancing the remedy. The rule originates from Heydon’s Case (1584) 3 Co. Rep. 7a[7], which instructed judges to consider:
2. The common law before the Act,
3. The mischief and defect the common law did not address,
4. The remedy Parliament intended, and
5. The reason for the remedy.

In Nigeria, the Supreme Court in Ifezue v. Mbadugha (1984) 5 SC 79[8], adopted the purposive approach to uphold legislative intent over technical literalism. The Court emphasized that where literal interpretation would defeat the law’s purpose, courts must give effect to the true intention of the legislature. This rule has become increasingly significant in the interpretation of modern tax legislation. In Federal Inland Revenue Service v. CNOOC Exploration & Production Ltd & Anor (2020) 17 NWLR (Pt. 1753) 300 (CA)[9], the Court of Appeal considered the objective of the Petroleum Profits Tax Act to ensure tax compliance among oil companies. The Court applied the purposive rule, holding that “chargeable profits” should be interpreted in a way that promotes the statutory purpose of effective tax assessment.

Similarly, with the enactment of the Nigeria Tax Administration Act (NTAA) 2025, courts may apply the purposive approach to interpret provisions governing digital filing, electronic assessment, and cross-border compliance. The NTAA was designed to modernize tax collection and reduce evasion in the digital economy. A narrow literal interpretation would frustrate this legislative intent. The Mischief Rule thus empowers courts to sustain the functional effectiveness of tax laws in a rapidly evolving fiscal environment.

1. EJUSDEM GENERIS RULE :

The Ejusdem Generis Rule (Latin for “of the same kind or class”) applies when general words follow specific words in a statutory list. The general words are interpreted as including only items of the same kind as those specifically mentioned. The Supreme Court in A.G. Bendel State v. Aideyan (1989) 4 NWLR (Pt. 118) 64[10], clarified that the ejusdem generis rule prevents general words from being construed in their widest sense when the legislature’s intent was clearly limited .In taxation, the rule plays a vital role in interpreting provisions concerning deductible expenses, allowable losses, or exempted income.

For example, Section 24 of the Companies Income Tax Act (CITA)[11] lists specific allowable deductions, followed by the general phrase “and other expenses wholly, reasonably, exclusively and necessarily incurred in the production of such profits.” Courts have held that this clause must be read ejusdem generis with the specific expenses listed earlier, preventing taxpayers from including unrelated or capital expenditures as deductions. By applying the ejusdem generis principle, Nigerian courts have prevented the abuse of statutory loopholes and preserved the integrity of the revenue system. The rule ensures that general clauses do not override specific fiscal intent.

1. NOSCITUR A SOCIIS: The maxim noscitur a sociis (“a word is known by the company it keeps”) requires that the meaning of a word or phrase be derived from the context of surrounding words. This rule is particularly useful in clarifying ambiguous statutory terms. In Yabugbe v. C.O.P. (1992) 4 NWLR (Pt. 234) 152[12], the Supreme Court affirmed that the meaning of statutory language must be determined contextually. Words must be understood not in isolation but in light of the words with which they are associated.

In Nigerian tax law, noscitur a sociis is often applied in interpreting compound expressions such as “management or professional fees,” “royalties,” and “technical services” under the Withholding Tax Regulations.  In FBIR v. Halliburton (WA) Ltd (2016)[13], the Court adopted a contextual interpretation of “fees for technical services,” holding that it refers only to services similar in nature to those specifically enumerated in the statute. With the rise of digital service providers and gig-economy taxation under the Finance Act 2023 and NTA 2025, this rule will help determine whether payments for online consultancy, virtual support, or platform services qualify as “management” or “technical” fees for withholding tax purposes.

1. DOCTRINE OF STRICT CONSTRUCTION (Applicable to Tax and Penal Statutes): The Doctrine of Strict Construction applies specifically to statutes imposing taxation, penalties, or criminal liability. It requires that such statutes be construed narrowly and strictly, ensuring that no individual or corporation is subjected to liability unless the statute expressly provides for it. Any ambiguity must be resolved in favour of the taxpayer. This doctrine is deeply rooted in the constitutional principle of legality in taxation. Section 59 of the Constitution of the Federal Republic of Nigeria (1999) (as amended)[14] provides that no tax shall be imposed except as prescribed by law. This reflects the “ maxim nullum tributum sine lege” which implies no taxation without law.

The Supreme Court in A.G. Ogun State v. Aberuagba (1985) 1 NWLR (Pt. 3) 395[15], laid down the foundation for this doctrine, holding that a person cannot be taxed by inference or implication. Similarly, in FBIR v. Halliburton (WA) Ltd (2016) 10 TLRN 1 (SC), the Court restated that “taxing statutes must be strictly construed” and “nothing is to be implied.” In Nigerian Breweries Plc v. Lagos State Internal Revenue Service (2021) 49 TLRN 1 (CA)[16], the Court of Appeal reaffirmed that fiscal statutes must be interpreted narrowly against the revenue authority and liberally in favour of the taxpayer. The Court rejected attempts by the tax authority to impose an assessment without clear legislative backing. The doctrine of strict construction ensures predictability, fairness, and constitutional compliance. In the evolving framework of the Nigeria Tax Administration Act (NTAA) 2025, which introduces new digital compliance obligations and administrative penalties, courts will be required to apply this doctrine to prevent the imposition of unlawful or excessive sanctions.

• RULES OF INTEPRETATION OF TAX STATUES: In Nigeria, the interpretation of tax statutes is a critical issue in the administration of justice and the equitable enforcement of the law. Given the significance of taxation in revenue generation and economic stability, courts are cautious when interpreting taxing provisions. The general judicial attitude in Nigeria is that tax statutes must be interpreted strictly. This means that tax laws must be applied as they are written, and any ambiguity must be resolved in favour of the taxpayer. The judiciary’s role is not to expand or infer tax liabilities beyond what is explicitly stated in the law. This is rooted in the principle that taxation, “a burden on individuals and companies, should only be imposed by clear and express legislative enactments “. Over time, Nigerian courts have adhered to these principles through consistent rulings, emphasising that the liability to pay tax must be clearly imposed by law. Where the statutory language is ambiguous, the interpretation must favour the taxpayer. This principle is essential for promoting fairness, transparency, and certainty in the administration of tax law, as it prevents arbitrary or unjust taxation practices.

1. STRICT INTERPRETATION OF TAXING PROVISIONS : One of the most well-established principles in Nigerian tax jurisprudence is the strict interpretation of tax statutes. This doctrine insists that taxing provisions must be construed against the revenue authorities, and any ambiguity in the statute should benefit the taxpayer. The courts are clear that no person or entity can be made liable to pay tax unless the statute expressly provides for it.

In the landmark case of FBIR v. Halliburton (WA) Ltd (2016) 10 TLRN 1 (SC), the Supreme Court emphasized that tax statutes should be strictly construed. The Court held that if there is any ambiguity or uncertainty in the language of a taxing provision, such ambiguity must be resolved in favour of the taxpayer. The case involved a dispute concerning whether Halliburton was liable to pay certain taxes under the Petroleum Profits Tax Act[17]. The Court held that the tax provision in question was not clear enough to justify imposing the liability on the taxpayer, thus applying the doctrine of strict construction in favour of the taxpayer. Also in the case of A.G. Ogun State v. Aberuagba (1985) 1 NWLR (Pt. 3) 395, the Court reaffirmed the principle that tax statutes must be interpreted with clarity. The Court highlighted that any uncertainty in the statutory language should be resolved in favour of the citizen, thereby preventing the imposition of tax unless the legislature has explicitly enacted it. Strict interpretation is particularly crucial in the context of taxation, as it safeguards citizens and businesses from excessive or unjust tax demands. Given the complexity of tax statutes, especially those involving exemptions, allowable deductions, or unique industry-specific provisions, this principle ensures that no one can be taxed beyond the clear mandate of the law.

1. NO TAXATION BY INFERENCE: Another cardinal principle in Nigerian tax law is the prohibition of taxation by inference. This means that tax liability cannot be imposed unless expressly authorized by law. The courts have consistently held that no tax can be imposed through inference or analogy, and any attempt by tax authorities to extend the scope of the law beyond its clear provisions will be rejected. In Shell Petroleum Development Co. v. FBIR (1996) 8 NWLR (Pt. 466) 256[18], the Supreme Court reinforced this doctrine. The case involved the issue of whether Shell was liable to pay taxes on certain revenue under the Petroleum Profits Tax Act. The Court rejected the claim by the Federal Inland Revenue Service (FIRS) that Shell should be liable to taxes based on an analogy to other provisions of the tax law. The Court held that tax statutes must be interpreted in accordance with their clear wording, and no tax liability can be inferred or imposed by analogy. This principle ensures that the taxpayer’s rights are not subject to arbitrary interpretation by tax authorities. The clear and unambiguous language of tax statutes prevents the expansion of tax liability by analogy or inference, thus safeguarding taxpayers from being subjected to unforeseen tax burdens.

1. INTERPRETATION FAVOURING REVENUE ONLY WHEN STATUTE IS CLEAR: While Nigerian courts consistently favour the taxpayer in cases of ambiguity, there are circumstances where the clear language of the statute will be enforced, even if it results in hardship to the taxpayer. The courts are bound by the principle that they cannot rewrite the law and must respect the legislative intent, provided that the tax provision is clear and unambiguous.

In A.G. Lagos State v. Eko Hotels Ltd (2018) 36 TLRN 1 (SC[19]), the Supreme Court held that where a taxing provision is clear, the Court must give effect to it, even if such an interpretation results in hardship or an unjust outcome for the taxpayer. This case dealt with Lagos State’s Hotel Occupancy and Restaurant Consumption Law[20], and the Court upheld the law’s application despite the burden it imposed on hotel owners. The Court emphasized that where the tax statute is clear, it must be enforced as written, and the courts have no discretion to mitigate the impact on taxpayers, even if it appears inequitable. This principle underscores the need for clarity and precision in tax legislation. Taxpayers must be able to rely on the certainty of tax laws, and the courts will not dilute or alter provisions, even if they seem harsh, unless the statute itself is unclear or ambiguous. Also the case MOBIL PRODUCING (NIG) UNLTD V F.I.R.S [2021] 11 NWLR (Pt. 1788) Pg.505 where the court adopted the decision of Rowlatt J. in the CAPE BRANDY vs IRC (1921) 2K. B. 403 while deciding on Principles guiding the construction of tax legislation. “In construing a tax law, one has to look merely at what is clearly said. There is no room for any amendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read, nothing is to be implied. One can only look fairly at the language used. If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear the judicial mind to be…” (the underlying are mine for emphasis)

1. CONSTRUE THE PROVISION OF THE STATUTE LIBERALLY IN FAVOUR OF REVENUE: The position of law is that, when interpreting revenue-based statutes, courts should adopt a liberal construction in favor of the government, unless explicitly stated otherwise, as this serves the public interest and enables the government to generate revenue for the welfare and development of its citizens.  The PHOENIX MOTORS LTD VS N.P.F.M.B. (1993) 1 NWLR (PT. 272) where the court held thus:  “If a statute is revenue based or revenue oriented, it will be part of sound public policy for a court of law to construe the provision of the statute liberally in favour of revenue or in favour of deriving revenue by government, unless there is a clear provision to the contrary. This is because it is in the interest of the generality of the public and to the common good and welfare of the citizenry for Government to be in revenue and affluence to cater for the people. That is the only way it can distribute wealth to the people to facilitate development to all and sundry. And this is more so in a country such as ours, where most citizens open their mounts with all gluttony to receive assistance and welfare packages from the Government in all sectors of development in our frail and flabby economy. No court of law should lend its hands to a person or body bent on beating the effort of government at collecting revenue…”

• CONCLUSION:

The analysis of the purposive approach to tax statute interpretation in Nigerian courts reveals that the judiciary plays a crucial role in shaping tax law and policy. The courts have consistently adopted a strict approach to interpreting tax statutes, refusing to imply words or meanings not clearly expressed by the legislature. This approach is grounded in the principle that tax laws impose burdens on taxpayers and should therefore be construed narrowly to avoid arbitrary or excessive taxation. However, the courts also recognize the need to consider the legislative intent, policy objectives, and social context in interpreting tax laws. The purposive approach, as seen in cases such as Federal Inland Revenue Service v. CNOOC Exploration & Production Ltd & Anor (2020), allows courts to give effect to the true intention of the legislature and promote the statutory purpose of effective tax assessment. Ultimately, the Nigerian courts’ approach to tax statute interpretation strikes a balance between protecting taxpayers’ rights and ensuring effective fiscal policy implementation.

In conclusion, the interpretation of tax statutes in Nigerian courts is guided by established principles, including the Literal Rule, Golden Rule, Mischief Rule, Ejusdem Generis, Noscitur a Sociis, and the Doctrine of Strict Construction. These rules ensure that tax laws are applied fairly, consistently, and in accordance with legislative intent. The courts’ strict approach to interpreting tax statutes, as seen in cases such as FBIR v. Halliburton (WA) Ltd (2016), promotes legal certainty and fiscal discipline, while the purposive approach allows for flexibility and consideration of emerging issues. As Nigeria’s tax landscape continues to evolve, the courts will play a vital role in shaping the country’s tax policy and ensuring that tax laws are applied in a manner that promotes fairness, equity, and economic growth.

[1] FBIR V HALILBURTON (WA) Ltd (2016) 10 TLRN 1 (SC

[2] A.G of the Federation V Abubakar (2007) 10 NWLR (Pt 1041) 1

[3] Shell Petroleum Development Company v FBIR (1996) 8 NWLR (PT.466)256

[4] Section 44(1) of the 1999 Constitution(as amended)

[5] Adesola v. Abidoye (1999) 14 NWLR (Pt. 637) 28

[6] A.G. Lagos State v. Eko Hotels Ltd (2018) 36 TLRN 1 (SC ).

[7] Heydon’s Case (1584) 3 Co. Rep. 7a

[8] Ifezue v. Mbadugha (1984) 5 SC 79

[9] Federal Inland Revenue Service v. CNOOC Exploration & Production Ltd & Anor (2020) 17 NWLR (Pt. 1753) 300 (CA)

[10] A.G. Bendel State v. Aideyan (1989) 4 NWLR (Pt. 118) 646

[11] Section 24 of the Companies Income Tax Act (CITA)

[12] Yabugbe v. C.O.P. (1992) 4 NWLR (Pt. 234) 152 ,

[13] FBIR v. Halliburton (WA) Ltd (2016

[14] Section 59 of the Constitution of the Federal Republic of Nigeria (1999) (as amended)

[15] A.G. Ogun State v. Aberuagba (1985) 1 NWLR (Pt. 3) 395

[16] Nigerian Breweries Plc v. Lagos State Internal Revenue Service (2021) 49 TLRN 1 (CA)

[17] Petroleum Profit Tax Act 1959

[18] Shell Petroleum Development Co. v. FBIR (1996) 8 NWLR (Pt. 466) 256

[19] A.G. Lagos State v. Eko Hotels Ltd (2018) 36 TLRN 1 (SC)

[20] Lagos State’s Hotel Occupancy and Restaurant Consumption Law

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