TAX APPEAL PROCEDURE IN NIGERIA: REQUIREMENT FOR PAYMENT OF SECURITY DEPOSIT PRIOR TO FILING AN APPEAL AGAINST ADVERSE TAX ASSESSMENTS AND ADVERSE TAX RULINGS

Abstract

Recent legislation and administrative rules now require an aggrieved taxpayer to pay a security deposit prior to prosecuting a tax appeal. It is argued that the tax appeal procedure must not deny an aggrieved taxpayer of his right to a fair hearing under Sections 6(6) and 36 of the 1999 Nigerian Constitution. The method adopted in the Paper is to review all the applicable statutes and the decisions of the Nigeria Tax Appeal Tribunal (TAT), while taking the position that the administrative court rules mandating payment of security deposits are untenable in law, equity, and in practice. The Paper finds that there are multiple statutes providing for payment of security deposit pending tax appeal, to wit- (a) 2007 Federal Inland Revenue Service (Establishment) Act, (b) Federal High Court (Federal Inland Revenue Service) Practice Directions 2021, (c) Tax Appeal Tribunal (Procedure) Rules 2021, and (d) Federal High Court (Tax Appeal) Rules 2022. The constitutionality, scope and extent of the security deposit requirement have become a subject matter of intense discourse, with conflicting TAT decisions in Multichoice v. FIRS, First Bank v Taraba, and Investment Holdings v. FIRS. There are no decisions of the superior courts on these provisions yet. The Paper concludes that security deposit requirement provisions violate the fair hearing rules under the 1999 Constitution and that disputes on taxes payable to the sub-National States (tax revenue accruable to States) are clearly not subject to the security deposit payment rules. The paper recommends the introduction of an amendment for the appointment of a Special Panel to hear tax appeals where there are conflicting cases filed before or decisions issued by coordinate tax appeals/tribunals so as to prevent multiple opinions.