Tax Appeal Tribunal Rules: Time for fairness  in tax collection 

Stakeholders have expressed concern over a provision in the recently issued Tax Appeal Tribunal (Procedure) Rules 2021 that empowers the Tribunal to decide what tax payers should pay to government.

Such action abridges the right of an appellant to fair hearing and may impose non-collectable taxes on companies.  

PricewaterCoopers (PwC) insisted that Order 3 Rule 6 of the Tax Appeal Tribunal (Procedure) Rules 2021 conflicts with the provisions of the Federal Inland Revenue Service Act, and susceptible to abuse by tax authorities.

Tax collection is a critical in the life of every government to foster economic growth and secure sustainable sources of funding for its social programmes and investments.

Taxation not only pays for public goods and services, it is also a key ingredient in the social contract between citizens and the economy.

But while government strives to garner enough resources to meet its social and economic contracts with the people, the policy of equity, justice fairness and due process should be followed in order to not kill businesses that generate the tax revenues.

That explains the worry in the faces of business owners and large corporates when the Honourable Minister of Finance, Budget and National Planning, Mrs. Zainab Shamsuna Ahmed on 10 June 2021 approved the Tax Appeal Tribunal (TAT) (Procedure) Rules, 2021, pursuant to her powers under Section 61 of the Federal Inland Revenue Service (Establishment) Act, 2007 (as amended).

The Rules were issued under powers in Paragraph 21 of the Fifth Schedule to the Federal Inland Revenue Service (Establishment) Act, 2007. The Rules replace the 2010 Rules and are intended to guide the practice and procedure of Tax Appeal Tribunal (“TAT“) proceedings. 

On the surface, the TAT Rules,  empowers the Tribunal to deal justly, fairly and expeditiously with appeals and encourages and promote the settlement of disputes among parties.

But many stakeholders have raised the alarm on the possibility of the TAT to carry out its duties daily and equitably, saying the chances of abuse remained high. 

Among the first to raise the red flag against the the TAT (Procedure) Rules, 2021 is the Financial services Consultant, PricewaterCoopers (PwC).

The PwC expressed concern over a provision in the Tax Appeal Tribunal (Procedure) Rules, saying it abridges the right of an appellant to fair hearing. 

The firm also branded Order 3 Rule 6 of the Tax Appeal Tribunal (Procedure) Rules 2021 as one that conflicts with the provisions of the Federal Inland Revenue Service Act, stating that the provision is susceptible to abuse by tax authorities. 

It explained that Order 3 Rule 6 of the TAT rules,  requires a taxpayer disputing a tax assessment to make a security deposit of 50 per cent of the tax bill in dispute before filing an appeal at the tribunal. 

Analysing the provision in Tax Alert published on its website, PwC stated that the 50 per cent requirement to be paid of a yet to be determined tax liability inhibits the right to fair hearing and justice in addition to conflicting with an enabling law.

“One area of contention is the requirement for the payment of 50 per cent of the disputed tax as a condition precedent to filing an appeal. This provision may be challenged on grounds of inconsistency with the Federal Inland Revenue Service (Establishment) Act 2007 since it is established that rules cannot override the provisions of an Act.

”In addition, the provision may also be challenged on constitutional grounds where a taxpayer does not have the cash to deposit, as this would be a bar on access to justice.

There are also concerns that the provision is susceptible to abuse by tax authorities who may raise unreasonable assessments in the expectation that a taxpayer would pay 50 per cent deposit,” PwC stated. 

The PwC also highlighted the modification of some old definitions, and interpretation of additional terms such as “appeal“, “notice of appeal“, “decision of the Tribunal” etc; recognition of service of documents or processes carried out by email or such other electronic means as the Tribunal may permit and introduction of a six-month timeframe from the date of commencement of trial for the TAT to conclude and provide a decision, among others.

“Although the TAT (Procedure) Rules, 2010 is effectively replaced, the Rules allows for “anything done” under the defunct 2010 Rules to remain valid, as long as such is not inconsistent with the provisions of the new Rules, thereby grandfathering existing matters and ensuring a smooth transition,” it said.

According to PwC, the implementation of the new Rules emphasizes the Federal Government’s commitment to improving Nigeria’s tax landscape, which commenced with the enactment of Finance Acts, 2019 and 2020. 

The amendments to the TAT (Procedure) Rules, which is the initial forum for formal tax adjudication in Nigeria, align with changes in global tax administration systems and would ensure that the TAT’s procedures are up to date and give taxpayers increased confidence in the system.

However, it insisted that the introduction of a blanket requirement for taxpayers to make a 50 per cent deposit of disputed amounts to the TAT may act as a clog in the wheels of justice and discourage taxpayers from pursuing recourse from the TAT. 

“This requirement also deviates from the provisions of the Section 15(7) of Federal Inland Revenue (Establishment) Act that permits such deposits only on certain circumstances. Further, there is a risk that the blanket requirement may make the TAT more litigious in its outlook, and takes it away from the less formal dispute resolution framework it was designed to be. It may also increase the risk of tax disputes being resolved based on rules of court or technicality, rather than substantive justice, a weakness of the formal court system which the TAT is set up to provide,” it said.

The PwC added that the role of the Tax Commissioners are not those of “judges” in the constitutional sense and so, rather than becoming a part of the judiciary, the TAT should be preparatory to, and supplementary to the formal judicial system. Therefore, the changes may revive the challenges on the legality of the TAT and its encroachment on the constitutional preserve of the Federal High Court on revenue and taxation issues.

“The Honourable of Minister should, therefore, consider making the TAT Rules less litigious or court-like to ensure the TAT maintains its edge as a speedy and non-litigious tax dispute resolution forum,” it stated.