Tax Law 101 Series

By Chukwuemeka Eze

AS THE FEDERAL HIGH COURT (TAX APPEAL) RULES, 2022 KICKS OFF, CONDITIONS PRECEDENT TO FILING TAX APPEALS FROM THE TAX APPEAL TRIBUNAL TO THE FEDERAL HIGH COURT TAKES A NEW TURN AMIDST CACOPHONY OF  VOICES

Last week saw the publication of the Federal High Court (Tax Appeal) Rules, 2022, which commenced on 10th January, 2022 by virtue of Order XI rule 4 of the Rules.

The Rules, which repealed the Federal High Court (Tax Appeal) Rules, 1992 was made by the Chief Judge of the Federal High Court pursuant to the powers conferred on him under section 34(1)(2) of the Federal High Court Act, Laws of the Federation of Nigeria, 2010 and Paragraph 17(5) of the Fifth Schedule to the FIRS Act. The Rules consist of eleven orders, with Order V, which provides for mandatory deposit of the judgement debt by a taxpayer, being the most controversial.

As at today, there are various conditions precedent for all tax appeals:

i. From the decision of a tax authority to the Tax Appeal Tribunal.

These appeals are governed by the Tax Appeal Tribunal (Procedure) Rules, 2021, which came into force in June 2021.

ii. From the decision of the Tax Appeal Tribunal, on point of law, to the Federal High Court.

Such appeals are covered under the Federal High Court (Tax Appeal) Rules, 2022, which commenced on 10th January, 2022.

iii. From the decision of a tax authority directly to the Federal High Court.

These appeals are governed by the Federal High Court (FIRS) Practice Direction, 2021.

Besides these Rules and Practice Direction, there are two other provisions that are relevant when interpreting access to the Tribunal and the Federal High Court for the purpose of tax appeals. These are:

(a) Paragraph 15 (7) of the Fifth Schedule to the Federal Inland Revenue Service (Establishment) Act, 2007, and

(b) Section 77 of the Companies Income Tax Act, Cap. C21, Laws of the Federation of Nigeria, 2004 as amended by Section 13 of the Finance Act, 2021.

In all, therefore, there are 5 legislative provisions a taxpayer must cogitate upon before filing a tax appeal at the Tax Appeal Tribunal or at the Federal High Court. The contents of these provisions have been reproduced below:

1. *Order III Rule 6 of the Tax Appeal Tribunal (Procedure) Rules, 2021*:

“For an appeal against the Service or relevant tax authority under rules 1 and 2 of this Order, the aggrieved person shall –

_(a) pay 50% of disputed amount into designated account of the Tribunal before hearing as security for prosecuting the appeal;_

_(b) file the Notice of Appeal as in Form TAT 1(A), along with a deposition as in Form TAT 1 B.”_

2. *Order V of the Federal High Court (Tax Appeal) Rules, 2022:*

 _(1) (a) Where a tax debtor is appealing against the Decision of the Tribunal, he shall deposit the sum contained in the Decision in an interest yielding account maintained by the Chief Registrar of the Court._

 _(b) The Appeal shall only be heard where there is evidence of deposit of the sum contained in the Decision._

 _(2) Where there is no evidence of compliance with (1) (a) above, the Appeal is liable to be struck out or dismissed._

3. *Order 5 Rule 3 of the Federal High Court (Federal Inland Revenue Service) Practice Direction, 2021:*

 _”Where a Respondent intends to challenge an assessment served on him, he shall pay half of the assessed amount in an interest yielding account of the Federal High Court, pending the determination of the Application.”_

4. *Paragraph 15 of the Fifth Schedule to the FIRS Act, 2007*:

_(7) At the hearing of any appeal if the representative of the Service proves to the satisfaction of the Tribunal hearing the appeal in the first instance that_

_(a) the appellant has for the year of assessment concerned, failed to prepare and deliver to the Service returns required to be furnished under the relevant provisions of the tax laws mentioned in paragraph 11;_

_(b) the appeal is frivolous or vexatious or is an abuse of the appeal process; or_

_(c) it

is expedient to require the appellant to pay an amount as security for_ _prosecuting the appeal, the Tribunal may adjourn the hearing of the appeal to any subsequent day and order the appellant to deposit with the Service, before the day 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, whichever 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 he has appealed shall be confirmed and the appellant shall have no further right of appeal with respect to that assessment._

5. *Section 77 CITA as amended by Section 13 of the Finance Act, 2021*:

_”(1) Tax charged by any assessment which is not or has not been the subject of objection or appeal by the company shall be payable (after the deduction of any amount to be set-off for the purposes of collection under any provision of this Act) at the place stated in the notice of assessment within 30 days after service of such notice upon the company:_

_Provided that the Service, in its discretion, may extend the time within which payment is to be made._

_(2) Subject to the provisions of section 69(3) of this Act, collection of tax in any case where notice of objection or appeal has been given by the company shall remain in abeyance until such objection or appeal is determined, save that the company shall have paid the tax which is not or has not been the subject of an objection or appeal as provided in subsection (1).”_

*Summary*

1. Appeals from a tax authority to the Tax Appeal Tribunal may require payment of half of the undisputed tax debt.

2. Appeals from a decision of the TAT to the FHC requires satisfaction of two conditions:

*The appeal shall be on point of law; and

*The taxpayer will deposit the judgement sum with the FHC in order to be heard.

3. Appeals directly to the FHC requires the taxpayer to deposit 50% of the tax assessment before the application will be heard.

*Conclusion*

Interpretation of the cited various provisions of the laws may pose real challenge.

One thing is, however, clear: Every discerning taxpayer can see that the various stringent provisions have one aim: to make tax appeals unattractive. This dispensation requires taxpayers to take tax compliance as serious business. The door to tax appeal is certainly not completely closed but it is not as open as it used to be, whether the appeal is to the Tax Appeal Tribunal or from the TAT to the Federal High Court or directly to the Federal High Court.

I wish taxpayers a more tax-compliant 2022.

CHUKWUEMEKA EZE is the Lead Legal Adviser of the Chartered Institute of Taxation of Nigeria.

7th February, 2022.