TAT - It Is Illegal To Impose Tax Based On Taxes And Levies Act Without A Primary Taxing Law


Friday, September 13, 2019  /  09:37AM / By  Taiwo OyedeleFolajimi Olamide Akinla and Kenneth Erikume  





The Tax Appeal Tribunal (TAT or Tribunal), in Polaris Bank v. Abia State Board of Internal Revenue has made certain pronouncements in respect of different tax matters including the limitation period for assessments, the position of the Taxes and Levies (Approved List for Collection) Act and final and conclusive assessments.




In 2017, the Abia State Board of Internal Revenue ("ASBIR") issued a demand notice of about N1.5 billion on Polaris Bank ("Bank") with respect to 2006 - 2011 years of assessment.


The assessment included business and development levies charged under the Taxes and Levies (Approved List for Collection) Act 2004 as amended. The Bank objected but admitted a liability of about N39 million which it paid. None of the Bank's objections was addressed by the ASBIR.


Subsequently, ASBIR issued another assessment of about N255 million, directing the Bank to pay this sum as a condition for attending a reconciliation meeting. The Bank did not make the payment. At the reconciliation meeting, ASBIR offered a 20% rebate directing payment within 48 hours otherwise the assessment would become final and conclusive. After the Bank requested for a revised assessment in line with section 58 of the Personal Income Tax Act (PITA), ASBIR reverted to the initial assessment of N1.5 billion and demanded payment within seven days. The Bank appealed the assessment.




Seven issues were distilled by the Tribunal. Some of the most important issues and decisions are summarized below:


1. Whether the procedure followed by ASBIR is consistent with the law

The Tribunal held that ASBIR failed to follow the procedure relating to objections under section 58 of PITA. Particularly, ASBIR did not address any of the objections raised by the Bank. Under section 58 a tax authority can request further information, accept the taxpayer's position and issue a revised assessment or reject the taxpayer's position by issuing a notice of refusal to amend an assessment.


The Tribunal also found that the demand notices issued by ASBIR were invalid as they were not compliant with PITA.


2. Whether the assessment (of the ASBIR) was final and conclusive

The Tribunal held that because the Bank objected within 30 days, the assessment was not final and conclusive.


3. Whether ASBIR can impose Development and Business Premises Levies based on the Taxes and Levies Act

The Tribunal held that the Taxes and Levies (Approved List for Collection) Act is not a primary tax legislation. It merely allocates taxing rights between the three levels of government. Therefore, ASBIR was wrong to rely on it for imposing business and development levies. In the absence of a principal law, ASBIR could not collect the tax. This means where there is no existing primary tax law, the relevant law making body such as the State House of Assembly of a state needs to legislate on the specific tax or levy before the relevant tax authority can administer them.


4. Time limit for a back duty tax audit or investigation

The Tribunal held that by virtue of section 55 of PITA, ASBIR did not have the authority to conduct a tax audit outside six years except on grounds contained in section 55 (fraud, willful default or neglect). Further, even though the exercise was labelled a tax investigation it was a mere audit which could not go beyond six years.




Section 55 requires assessments to be made within 6 years. It does not refer to audits as ruled by the Tribunal. So, a tax authority may carry out audits without any time limitations but must issue limit its assessments to a period of six years except on grounds of fraud, willful default or neglect. Also, tax authorities are required to demonstrate the existence of any of the grounds before going outside the six-year limitation period. It is not enough to merely refer to an audit as an investigation.


More generally, tax authorities need to follow the provisions of the law or face the risk of the Tribunal nullifying their assessments.




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.


Proshare Nigeria Pvt. Ltd.


Related News

1.       Companies Operating In Nigeria To Pay A New Police Fund Levy

2.      FEC Approves Increase In VAT To 7% From 2020, To Seek NASS Approval For Enabling Law

3.      Tax Appeal Tribunal Delivers Landmark Ruling against Abia State Board

4.      The New Migrant e-Registration Guidelines - Nigeria Immigration Service

5.      Tax 101 - How The Proposed VAT On Online Transactions Will Affect You

6.      N311.94bn Generated As VAT in Q2 2019 - NBS

7.      FIRS Issues Final Demand Notice To Companies Whose Bank Accounts Are Under Lien

8.     FIRS Public Notice On Deduction At Source of WHT And VAT On Compensation Paid By Principal Companies

9.      NSE to Resumes Charging VAT on Commissions Applicable to Capital Market Transactions

10.  Tax Tribunal Rules That A Taxpayer Can Object To A Defective Assessment Even If It Has Been Paid

11.   Re-Introduction of VAT on Market Transaction Charges Take Effect From July 25th, 2019

12.  Tariff Hikes and Rising Customs Revenue

13.  Court of Appeal Affirms the Applicability of VAT on Services Rendered by a Non-Resident Company

14.  TAT's judgement on Employer's Obligation to Remit Tax on Voluntary Pension contribution Withdrawals

15.  Tax Appeal Tribunal Rules That Excess Dividend Is Liable To Tax At 30%

16.  Nigeria: A Nation Pauperised by Tax Evasion

17.   Countdown Begins to Expiration of VAT Exemption on Stock Exchange Transactions

18.  COA Upholds FHC's Decision On The Applicability Of VAT To Services Provided Outside Nigeria

19.  LIRS To Issue New Tax Identification Numbers To Taxpayers

20. LIRS to Introduce Unique Biometrics-Based Identifier for Taxpayers



Related News