11th September, 2021
Prof. M.T. Abdulrazaq
The Multichoice (Nigeria) Ltd case before the Tax Appeal Tribunal confirms that we are in interesting tax times. The Tax Appeal Tribunal in the Lagos Zone held at Lagos recent ruling raises fundamental doubts and issues of taxation in Suit No: TAT/LZ/CIT/062/2021 dated the 24th day of August 2021.
In the quest to resolve the issues and doubts three fundamental and basic tax issues as stated by the following judicial decisions needs to be restated and noted. What are they? First, in Karam v. Commissioner of Income Tax (1946-1949) 12 WACA 331 at 333, 336 it was held that “Statutes which impose pecuniary burdens on subjects are interpreted strictly “See also Alhaji Ibrahim Ahmadu & Anors V Governor of Kogi State (2002)2 NWLR (PT 755) Pg 502 at 522 and Federal Board of Inland Revenue v. Nigeria General Insurance Company Ltd (1966) LLR 88 at 95. In 7UP Bottling Company PLC v, Lagos State Internal Revenue Board (2000) 3 NWLR (Pt 650) 565 at 591 paras H-A, Nzeako JCA held that “It has often been the view of courts here and elsewhere that if a person sought to be taxed, comes within the letter of the law, then such a person must be taxed, on the other hand, if the tax authority is seeking to recover tax from a person is unable to bring him within the letter of the law, the person will be free. However apparently, within the spirit of the law, his case ought to otherwise appear to be.”
Secondly, in the case of Okupe v. Federal Board of Inland Revenue (1992) 1 NTC 321 at 330. It was held that while the Federal Board of Inland Revenue is entrusted with the duty to operate the tax law of the country, in doing so the legislature provides safeguards for the liberty of the taxpayer and in particular safeguards from arbitrary and capricious assessments which are not made bona fide or which are perverse.
Thirdly, in Azikwe v. FEDECO (1981) 1 PLR at 561 the court held that the tax affairs of everyone is a very secret and confidential matter between the tax authorities and the tax payer. No one is entitled to be informed what his neighbour pays by way of tax. This judgment is supported by the provisions of Section 50 of the Federal Inland Revenue Service Establishment) Act of 2007 on official secrecy and confidentiality in tax matters.
What do all these mean? They simply mean in the words of the Court in the English case of Cape Brandy Syndicate v. Inland Revenue Commissioners (1921) 12 Tax Cases 358 that “In a taxing act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.”
In other words, the Nigerian tax process must be done in accordance with the strict provisions of the Nigerian tax laws and statutory provisions. What therefore was the ruling of Tax Appeal Tribunal about? The facts are fairly straightforward. Multichoice Nigeria Limited filed an appeal against the Companies Income Tax and Value Added Tax assessment notice of the Federal Inland Revenue Service on several grounds. MultiChoice Nigeria objected to the FIRS assessment, which it alleged was based on an alleged deemed turnover figure. MultiChioce Nigeria made it clear that they provided an audited financial statement prepared by a well-known reputable global firm, which they stated was duly attached to their annual tax return filed at the FIRS. They also complained about the FIRS press release of July 8, 2021 and a post no debit directive to banks and lastly about the breach of the statutory limit of six years for tax audits and investigations as stated in section 66 of the Companies Income Tax Act.
The FIRS response to the above grounds were that they had the power under Section 65 of CITA to issue a best of judgment assessment on any taxpayer, including MultiChoice Nigeria. They alleged that they were denied access to the database of MultiChoice Nigeria. They further alleged that the financial statement of the parent company in South Africa, which is publicly available showed that about 34% of the group revenue came from Nigeria but that this was not reflected in the tax payment of MultiChoice Nigeria. The FIRS also alleged that MultiChoice Nigeria was owing One Trillion, Eight Hundred and Twenty-Two Billion, Nine Hundred and Twenty Tree Million, Nine Hundred and Ninety-Nine Thousand, Three Hundred and Thirteen Naira, Ninety-Four Kobo (N1,822,923,909,313.94).
In furtherance of this at the Tax Appeal Tribunal, the FIRS brought a motion on notice pursuant to paragraph 15(7) (b) and (c) of the 5th schedule to the Federal Inland Revenue Service (Establishment ) Act No. 13 of 2007; Section 91(b) of the Evidence Act 2011; Section 44(2)(k) of the Constitution of the Federal Republic of Nigeria 1999 (as amended) and under the inherent jurisdiction of the Tax Appeal Tribunal for an order of accelerated hearing of the appeal, an order to produce integrated annual report and the management account statements of Multichoice Group Limited (its parent company) for the tax years 2012 – 2020 revenue chart showing the business of Multichoice Group Limited and inventory of the subscribers database of Nigerian subscribers who constitute 34% of its business revenue in Nigeria and more importantly to direct Multichoice Nigeria to deposit as security for prosecution, the sum of Ninety One Billion, One Hundred and Forty Six Million, One Hundred and Ninety Five Thousand, Four Hundred and Sixty Five Naira, Sixty Nine Kobo (N91,146,195,465.69).
The TAT in its ruling granted the order that MultiChoice Nigeria deposit with the FIRS before the date of the adjourned hearing an amount on account of the tax charged by the assessment under appeal, equal to the tax charged upon the appellant for the preceding year of assessment or one half of the tax charged by the assessment under appeal, which is the lesser plus a sum equal to ten percent of the said deposit and if the appellant fails to comply with the order, the assessment against which MultiChoice Nigeria appealed shall be confirmed and the appellant shall have no further right of appeal with respect to that assessment.
It must be stated that this ruling has very wide legal implications. There are also serious issues of the constitutionality of the decision with regards to fair hearing and burden of proof in the application of paragraph 15 (7) of the FIRS (Establishment) Act towards the person who will be affected by the decision. See GCHQ (1985) AC 374. To ask a party in a tax dispute to pay such a humongous amount as security to enable a further hearing is a failure by an administrative tribunal to observe procedural rules that are expressly laid down in the legislative instrument by which its jurisdiction is conferred and a miscarriage of justice from denial of fair hearing. See FBIR v. Halliburton (WA) Limited (2015) 17 TLRN and Access Bank Plc v. Edo State Board of Internal Revenue 2018 LPECR – 44156(CA). See also Igbinedion v. Edo State Board of Internal Revenue (2017) 161265 LRCN 69 at 85-86. The decision on fair hearing in the Access Bank case is instructive to the effect that where there is a breach of fair hearing, the decision cannot stand having been made in violation of the provisions of section 36 of the Constitution of the Federal Republic of Nigeria. The application of paragraph 15(7) as a basis for the TAT ruling raises serious doubts as it did not include a consideration of 15(7) (a) whether MCN has for the year of assessment concerned, failed to prepare and deliver to the FIRS returns required to be furnished under the relevant provisions of the tax laws.
Was it proven that MCN did not deliver to the FIRS returns required to be furnished under the law? Did MCN not file their tax returns for the year of assessment? Were the conclusions based on facts? On whom is the burden of proof in the application of 15(7)? MCN had alleged a violation of compliance with the laid down procedure under the Companies Income Tax Act and Part V of the FIRS (Establishment) Act before the notice of assessment was issued by the FIRS. It is apparent that onus of proof was on the FIRS, which applied for the accelerated hearing and not MCN, which complained that the FIRS had failed to carry out the steps for assessment as provided for under the law and held in the case of Federal Board of Inland Revenue v. Ibadan Bus Services (1992) 1 Nigerian Tax Cases 165 at 166.
There is no doubt that the coming days would be interesting times as we await the application of the mechanism of justice and fair hearing in Nigerian taxation.
Abdulrazaq, a professor of Taxation, Faculty of Law, Lagos State University, writes from Lagos