As Malami and Banks Turn Tax Collectors . . .
Introduction
In a quiet revolution of sorts, the Attorney-General of the Federation and Minister of Justice, Abubakar Malami, SAN, has reportedly written letters to some blue-chip companies, in which he demanded the repayment of billions of naira, purportedly due to the Federal Government as tax arrears. The most high-profile of the alleged defaulters is mobile phone giant, MTN, which was surcharged in the sum of N2 billion. This development is coming on the heels of the recent appointment by the Federal Inland Revenue Service (FIRS), of some banks as tax “collecting agents” in respect of account holders in such banks. The banks were reportedly directed to issue so-called “Post No Debit” orders on such accounts, “pending the further directives” from the FIRS.
Bureau De Change operators appear to be the first casualties of this directive, as their umbrella Association has publicly criticised it. The obvious questions are, whether both interventions are valid. When did the AGF become a tax collector, or was that not the purpose of his letters? Are those letters within his constitutional remit? Can a tax authority properly delegate the function of tax collection under the law? If so, are banks statutorily recognised to be so authorised? Lets’ find out.
The AGF - Tax Collector or Tax Law Enforcer?
There is no precedent – at least, none that I’m aware of - for Malami’s letters. That does not, by itself, make it wrong, of course. But, what are the limits of his powers under the law? Do those powers include or justify demanding the payment of tax? The office of the AGF, is a creature of the Constitution (Section 150 thereof). His powers are spelt out in Section 174(1) therein as simply “to institute, undertake, takeover, continue/ discontinue” criminal proceedings: See AKINGBOLA v FRN (2012) 9NWLR pt. 1306 pg. 511. However, nowhere in the Constitution (or any other law that I am aware of), do they include demanding the payment of tax - unless his letters can reasonably be construed as incidental or necessary for the exercise of his said prosecutorial powers within the contemplation of Section 10 of the Interpretation Act. Are they? If they are not, then they are clearly ultra vires under the said constitutional provisions, as expressio unius est exclusio alterius: P.C.H.S. v MIGFO (2012) All FWLR pt. 642 pg. 1615 @ 1643. In other words, in that event, Mr. Malami’s letters would be invalid and void, but not otherwise. Banks as Tax Collectors The directive of the FIRS which reportedly appointed banks as tax collectors, is far more worrisome as it has widespread implications not just for bank customers, but for the general public. The affected accounts were reportedly suspended pursuant to Section 31 of the FIRS Act, Section 49 of the Companies Income Tax Act (CITA) and Section 50 of the Personal Income Tax Act (PITA). Accordingly, those provisions deserve close scrutiny. Section 49 of CITA provides that “The Board may by notice in writing appoint any person to be the agent of any company and the person so declared the agent shall be the agent of such company for the purposes of this Act, and may be required to pay any tax which is or will be payable by the company from any monies which may be held by him for or due by or to become due by him to the company whose agent he has been declared to be, and in default of such payment, the tax shall be recovered from him”. Similar provisions are contained in Section 50 of PITA and Section 31 of the FIRS Act.
It is curious that, a law will empower the State to deprive a person of his or her property on account of a supposed debt without due process, i.e., extrajudicially. However, Section 44(1) & (2)(a) of the 1999 Constitution appear to justify the directive. It provides, inter alia, that: "No moveable property or any interest in an immovable property shall be taken possession of compulsorily and no right over or interest in any such property shall be acquired compulsorily in any part of Nigeria except in the manner and for the purposes prescribed by a law ... Nothing in subsection (1) of this section shall be construed as affecting any general law for the imposition or enforcement of any tax, rate or duty"
Can this provision be interpreted to mean that, an account holder can be deprived of his or her funds to settle a presumed tax liability which has not been determined by a court of law?. I believe that a dispassionate examination of other relevant provisions of those laws, as well as the 1999 Constitution would show that, indeed, tax should only be recovered through judicial process. This takes us to the relevant statutory provisions for recovering tax through litigation. These include Section 78(1) of PITA, which provides that “Income tax may be sued for and recovered in a court of competent jurisdiction by the relevant tax authority in its official name with full costs of the action from the person charged therewith as a debt due to the Government of the Federation or to the relevant tax authority”. Similar provisions are made, inter alia, by Section 87(1) of CITA.
Like all expropriatory statutes, tax laws are supposed to be construed strictly against the acquiring authority and sympathetically in favour of the citizen: AFOLABI v GOVERNOR OF OYO STATE (1965) 2 NWLR pt. 9 pg. 734 @ 753H. Notwithstanding the seeming fiat granted by Section 44(2)(a) of the Constitution, I believe the said directive and its supposed legislative bases are inconsistent with the right of fair hearing guaranteed under Section 36(1) & (2) of the 1999 Constitution. This provision entitles a person whose civil rights and obligations are in issue, to fair hearing within a reasonable time by a court or other tribunal.
It is settled that, statutes should be considered as a whole, in that related provisions should be construed together: BELLO v THE STATE (1986) 17 NSCC pt. II pg. 1257 @ 1285. In this regard, I believe that Sections 59(2) (a) & 70(2) of PITA and CITA, respectively, violate the constitutional guarantee of fair hearing. They provide that an assessment of tax payable “shall not be impeached or affected by reason of a mistake therein as to: (i) the name of a taxable person; (ii) the description of his income; or (iii) the amount of any income tax charged or shown to be payable”. If an assessment of tax liability cannot be impeached under any circumstances, it simply means that that determination is final and conclusive. Thus, a Post No Debit order on a bank account, ipso facto, peremptorily deprives the account holder of the funds therein FOR GOOD. I submit that, this evidently makes the aforesaid provisions – and thus, the Post No Debit Directive – unconstitutional.
This is all the more so, because, by virtue of Item 7 of the Concurrent Legislative List of the Constitution, the National Assembly can only empower State Governments or their parastatals – not banks - to collect tax. This is buttressed by Section 2 of the Taxes and Levies (Approved List for Collection) Act, as amended, which provides, inter alia, that “notwithstanding anything contained in any enactment, no person other than an appropriate tax authority shall assess or collect on behalf of the Government, any tax or levy”.
Conclusion The conclusion of the tax amnesty offered by the Voluntary Assets Income Declaration Scheme (VAIDS), has apparently given the authorities an opportunity to intervene through the AGF’s said letters as well as hitherto untested ‘direct debit’ tax recovery legislations. Both are fraught with difficulty. As for the former, unless his letters are a prelude to possible initiation by the AGF of criminal proceedings to recover tax, they are simply untenable. As far as the latter is concerned, there is something distinctly unsettling about a unilateral and peremptory confiscation by Government, of the funds of a citizen, on the basis of an extra-judicial determination that he/she is a tax defaulter.
This is because non-payment of tax is a crime: Sections 92 & 94 of CITA and PITA, respectively. Under the Constitution, anyone accused of committing a crime, is presumed innocent until proven guilty – Section 36(5). Section 44(2)(a) of the Constitution, is not an exception to this rule, and it has never been. The Post No Debit Order, negates the fundamental right of fair hearing under the Constitution. Anyone accused of non- payment of tax should be charged to court, and no hush-hush administrative determination of his liability is permissible: ADIGUN v ATT- GEN. OF OYO STATE (1987) 1 NWLR pt. 53 pg. 645 @ 678.
Much as prompt payment of tax is a civic duty, its recovery ought not to be a pretext to ride rough-shod over civil liberties, particularly the rights of fair hearing and to property.
“THE POST NO DEBIT ORDER, NEGATES THE FUNDAMENTAL RIGHT OF FAIR HEARING UNDER THE CONSTITUTION. ANYONE ACCUSED OF NON-PAYMENT OF TAX, SHOULD BE CHARGED TO COURT, AND NO HUSHHUSH ADMINISTRATIVE DETERMINATION OF HIS LIABILITY IS PERMISSIBLE”