October 5, 2021
Tax dispute resolution is an important part of any modern tax administrative system and an important element of a tax administrative system, is the ability for disputes to be resolved fairly. It is also important for such a system to have the ability to elicit from taxpayers trust in its impartiality and independence of its processes, procedures and decisions.
Fairness, impartiality and justice delivery is the hallmark of any modern and progressive society. In lending credence to this viewpoint, Lord Hewart, an erstwhile Chief Justice of England, remarked in R v Sussex Justices, Ex Parte McCarthy1 that ‘‘Justice must not only be done, but must also be seen to be done’’. Fairness in a judicial system is not limited to the law but also extends to the processes and procedures adopted in arriving at judicial, quasi-judicial and administrative decisions.
In this article, we will examine the recent developments in the tax dispute resolution space. We will focus on the critical novel provisions of the Tax Appeal Tribunal (Procedure) Rules 2021 (TAT Rules 2021) and the Federal High Court of Nigeria (Federal Inland Revenue Service) Practice Directions 2021 (FHC Practice Directions 2021). We will also juxtapose the critical novel provisions of the Rules and the Practice Direction with the practice in other jurisdictions, after which, we will analyze the implication of these developments on the Nigerian tax and fiscal space.
Recent Developments in the Tax Dispute Resolution Space
Two key subsidiary legislations were issued in 2021 aimed at improving efficiency in tax administration through modifications to the existing processes and procedures to be adopted in tax appeals at the Federal High Court of Nigeria and the Tax Appeal Tribunal. With respect to the former, the Chief Judge of the Federal High Court on 31st May, 2021 issued the FHC Practice Directions. On 10th June, 2021, the Honourable Minister of Finance, Budget and National Planning issued the TAT Rules 2021.
The TAT Rules 2021 contains robust and commendable innovations. It is a significant improvement on the previous TAT Rules, which was issued in 2010. The new TAT Rules 2021, makes provision for virtual hearings, case stated procedure, documents only procedure and summary appeal procedure, etc. It is expected that these innovative introductions will help expedite the resolution of tax appeals. Notwithstanding these introductions, the provision on payment of provisional tax as a condition for filing a tax appeal, which was introduced, has raised questions amongst taxpayers and tax practitioners. Rules 1, 2 and 6 of the TAT Rules 2021 provide that a party aggrieved with a decision of a tax authority or the Federal Inland Revenue Services (FIRS) can file an appeal, however, the aggrieved party is required to pay 50 percent of the disputed amount into an account designated by the Tribunal before hearing.
This payment is intended to act as a security for prosecuting the appeal and effectively reinforces the ‘‘Pay now and argue later’’ philosophy in the Nigerian tax dispute administration system. Although the TAT Rules 2021 does not specify the account that the provisional tax is to be paid into, it grants discretion to the Tribunal to specify the account. A perusal of Form TAT 1B indicates that when this provisional tax is paid in the designated account, receipt of payment is to be issued by the FIRS (or any other tax authority, as the case may be).
This creates a basis for a presumption to be raised that the account for such deposit is to be made will be the account of the FIRS or any other tax authority. This pay now and argue later provision may create concern for taxpayers especially in view of the recent ruling of the Tax Appeal Tribunal in the tax appeal of Multichoice Nigeria Limited v Federal Inland Revenue Service where the TAT panel made an order for provisional tax to be paid by the Appellant as a condition for continuation of the hearing of the appeal. Another issue of concern to taxpayers, is whether they will be entitled to interest payments if they succeed on the appeal and if the need to refund them arises. The TAT Rules 2021 is silent on this issue.