JURISDICTION OF THE STATE HIGH COURTS ON TAX MATTERS1
Introduction
By section 272 of the 1999 Constitution of the Federal Republic
of Nigeria (as amended), state high courts have wide jurisdiction
over civil and criminal matters.2 Evidently in line with this
provision, it is quite common for disputes pertaining either to
taxes regarded as “state taxes” or taxes accruing to the
revenue of a state government, to be brought before state high
courts for determination.
Meanwhile, section 251(1)(b) of the 1999 Constitution (supra)
gives exclusive jurisdiction to the
Federal High Court in civil causes and matters “connected with
or pertaining to the taxation of companies and other bodies,
establishments or entities carrying on business in Nigeria and all
other persons subject to Federal taxation”. Apparently in line
with this provision, section 59, and Item 11 of the Fifth Schedule
to the Federal Inland Revenue Service (Establishment) Act (FIRSEA)
both empower the Tax Appeal Tribunal (TAT) to adjudicate disputes
arising from the administration or enforcement of all federal tax
statutes (made by the National Assembly), and subjects appeals from
the TAT to the jurisdiction of the Federal High Court.
Also, some taxes, although provided for in statutes enacted by
the National Assembly, also accrue to the revenue of each state
government and are collected by the internal revenue service of
each of these states. This quickly provokes a question as to the
certainty of the jurisdiction of the state high courts to hear and
determine tax matters, especially as it pertains to fiscal revenue
which although, accruing to the state government, derives from the
administration of a federal legislation.
This uncertainty came to the fore in the conflicting 2018 cases
of Chemiron International Limited v. Lagos State Board of
Internal Revenue (LIRS) on one hand, and Lagos
State Board of Internal Revenue (LIRS) v. Ecoserve Limited
(Ecoserve) on the other hand, both decided by the High
Court of Lagos State. This article briefly examines these decisions
and offers an informed commentary on the jurisdiction of state high
courts on tax matters.
Chemiron International Limited (Chemiron) v. LIRS3
In 2016, LIRS issued a demand notice on Chemiron for
under-deduction and under-remittance of employees’ personal
income tax (PIT) to the tune of over 10 million Naira. In response,
Chemiron went straight to challenge the demand notice at the High
Court of Lagos State without regard to sections 58 and 60 of the
Personal Income Tax Act (PITA) which both provide for the
exploration of internal dispute resolution mechanisms by an
aggrieved taxpayer. For clarity, the relevant sections are
reproduced hereunder:
“58. Revision in case of
objection
(1) If a person disputes an assessment, he may apply to the
relevant tax authority by notice of objection in writing, to review
and revise the assessment, and the application shall state
precisely the grounds of objection to the assessment and shall be
made within thirty days from the date of service of notice of the
assessment.
- The Tax Appeal Tribunal
established pursuant to section 59 of the Federal Inland Revenue
Service (Establishment) Act 2007, shall have the powers to
entertain all cases arising from the operations of this
Act.”
The LIRS challenged the jurisdiction of the court on the grounds
that Chemiron had failed to comply with sections 58 and 60 above
and therefore, was barred from safely invoking the jurisdiction of
the court to determine the action.
In its decision, the court ruled in favour of Chemiron,
upholding the jurisdiction of the State High Court to hear matters
relating to PIT as a court of first instance, citing section 272 of
the 1999 Constitution (supra) which grants the said court general
jurisdiction over civil and criminal matters. In addition, the
court noted the internal dispute resolution mechanisms provided for
under PITA but held that every citizen has the right to approach
the court to air their grievances and seek redress and that a court
of law should not allow the provisions of an enactment to be
construed in such a way as to deny citizens their inalienable right
of access and audience to Courts.
Lagos State Board of Internal Revenue (LIRS) v. Ecoserve
Limited
In 2013, LIRS instituted an action at the Lagos State High Court
for non-remittance of PIT and Withholding Tax (WHT). Ecoserve on
its part filed a counterclaim against the LIRS seeking, inter
alia, the setting aside of demand notices issued by the LIRS
as premised on wrong calculations. In response, the LIRS contended
that Ecoserve’s right to counterclaim was unripe and not
exercisable as it had no exhausted all statutory remedies for tax
disputes provided under sections 58 and 60 of PITA – objecting to
assessments by the LIRS and instituting an action at the TAT.
The court agreed with the LIRS and held that the appropriate
mechanism of redress available for a taxpayer is to object to an
assessment by the LIRS and have the objection considered by the
relevant tax authority (RTA), after which it may then be heard by
the TAT. More incisively, the Court further held that the state
high court had no specific original jurisdiction on complaints
relating to PIT assessments and subsequently struck out the
counterclaim.4
Brief Commentary/Conclusion
The two decisions of the high court of Lagos State above point
to a lingering problem of non-specificity of tax jurisdiction. To
bring it out simply but clearly, the Constitution gives the Federal
High Court exclusive jurisdiction to hear matters pertaining to
“revenue accruing to the Federal Government“.
The same Constitution clothes the state high courts with original
and general jurisdiction to hear all civil matters not expressly
provided for by the Constitution or an Act of the National
Assembly. The FIRSEA meanwhile provides for the original
jurisdiction of the TAT to hear disputes arising from the
administration of PITA, to the exclusion of the state high courts.
A fortiori, appeals from the TAT lie solely to the Federal High
Court, which constitutionally has jurisdiction to hear only tax
matters pertaining to revenue accruing to the Federal
Government.
Meanwhile, a combined and objective perusal of sections
251(1)(b) and 272 of the 1999 Constitution (supra) of the first
part, sections 58 and 60 of PITA of the second part, and section 59
and Item 11 of the FIRSEA of the third part, would reveal that
nothing in any of these laws ousts or partially negatives the
jurisdiction of state high courts to adjudicate tax issues not
related to federal fiscal revenue, especially PIT. Indeed, this
legal reasoning aligns with the decision of the Court of Appeal in
Access Bank Limited v. Edo State Board of Internal
Revenue5 where the court
ruled that the Federal High Court does not have the constitutional
or statutory jurisdiction to hear any matter pertaining to or
connected with the revenue of a state.
It is submitted that PIT which accrues to the government of a
state (as against those accruing to the government of the
federation such as personal income taxes paid by persons employed
by the Nigerian Armed Forces [Army, Navy and Air Force], the
Nigerian Police Force, officers of the Nigerian Foreign Service and
persons resident outside Nigeria who derive profit or income from
Nigeria) would form part of the “revenue of a state” in
determining the jurisdiction of the court. This submission is
predicated on the fact that the clause “revenue of the
Government of the Federation”6 appears better determined, not by
recourse to the tier of government that enacts an enabling law,7 but by
the tier of government that specifically administers and receives
the revenue in its coffers. Certainly, the fact that PITA is a
federal enactment does not automatically mean that all PIT revenues
would accrue to the Federal Government. Indeed, only PIT paid by
persons employed by the Nigerian Armed Forces [Army, Navy and Air
Force], the Nigerian Police Force, officers of the Nigerian Foreign
Service and persons resident outside Nigeria who derive profit or
income from Nigeria, accrues to the Federal Government; any other
PIT revenue accrue to the coffers of the state government.
The above submission is further buttressed by the authority of
NPA v. Eyamba8 where the court held
that the exclusive constitutional jurisdiction of the FHC contained
in section 251(1)(a) of the 1999 Constitution (as amended) extends
only to “civil causes and matters relating to the revenue of
the Government of the Federation”. In describing the meaning
and scope of Federal Government revenue, the Court further
explained in the following way:
“It is clear to me that the payment of rents as claimed by
the respondents will obviously be a deduction from the purse of the
appellant who admittedly is an agent of the Federal Government.
Therefore, the claim of the respondents relate (sic) in
essence to the revenue of the Federal Government.
I am fortified in my view by the decision in F.H.A. v. John Shoy
International Ltd. (2005) 1 NWLR (Pt. 908) 637 at 650 where this
court held that:
‘Whatever proceeds, revenue or whatever name one would call
it, accruing to the appellant, or is being paid to others by the
appellant, must . be regarded to be addition to or deduction from
the purse of the Federal Government. It relates in essence, to the
revenue of the Federal Government.'”9
From the excerpt, it is abundantly glaring that the
determination of the meaning of revenue accruing to the government
of the federation (especially in the determination of the
jurisdiction of the FHC) would not necessarily depend on the tier
of government that enacts the law in question (federal or state),
but on the tier of government to which the fiscal revenue (tax) in
question would lawfully accrue.
Therefore, as seemingly inferable as the jurisdiction of the
state high courts to determine disputes pertaining to or connected
with the fiscal revenue of a state government is, there is an
urgent need to clearly settle any controversy that may arise
therefrom by way of a legislative review. It seemed clear that the
FIRSEA as a federal enactment emerged to settle any jurisdictional
controversy by conferring original jurisdiction to the TAT (whose
appeal goes to the FHC), thereby expressly removing the high court
of a state in the scheme of things. However, the very fact that the
Constitution confers wide/general jurisdiction to hear civil and
criminal matters on the state high courts makes the controversy
unabated.
Until any form of legislative review is undertaken, it is
advisable for individuals and corporates to consistently seek the
professional advice of both tax legal practitioners and competent
dispute resolution advisors. The subject of jurisdiction as it
pertains to PIT has clearly become the task of actors from both the
fields of taxation and dispute resolution.
Footnotes
1.
Olukolade Ehinmosan, Associate, Real Estate and
Succession Department, SPA Ajibade & Co, Lagos,
Nigeria.
2. The
provision makes it subject to section 251 of the 1999 Constitution
of the Federal Republic of Nigeria (as amended) (“CFRN”).
As such, the wide jurisdiction of State High courts is in respect
of matters not covered by the said section 251 CFRN (supra), such
as the revenue of the government of a state.
3.
https://andersentax.ng/lagos-state-high-court-rules-on-power-to-determine-matters-relating-to-personal-income-tax/#:~:text=On%2020%20June%202018%2C%20in,a%20court%20of%20first%20instance
accessed on 2nd December 2020 at 5:52 pm.
4. https://mikedugeri.wordpress.com/2019/01/14/tax-tax-appeal-tribunal-has-original-jurisdiction-to-determine-matters-relating-to-personal-income-tax/
accessed on 1st December 2020 at 9:41 am.
5. (2018)
LPELR-44156(CA).
6.
Section 251(1)(a), CFRN 1999 (as amended).
7. In
this case, PITA.
8. (2005)
12 NWLR (Pt. 939) 411.
9.
(supra) p. 441, paras. C-E.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Source: www.mondaq.com
