Tax dispute resolution is an important part of any modern tax administrative system and an important element of a tax administrative system, is the ability for disputes to be resolved fairly. It is also important for such a system to have the ability to elicit from taxpayers trust in its impartiality and independence of its processes, procedures and decisions.

Fairness, impartiality and justice delivery is the hallmark of any modern and progressive society. In lending credence to this viewpoint, Lord Hewart, an erstwhile Chief Justice of England, remarked in R v Sussex Justices, Ex Parte McCarthy1 that ''Justice must not only be done, but must also be seen to be done''. Fairness in a judicial system is not limited to the law but also extends to the processes and procedures adopted in arriving at judicial, quasi-judicial and administrative decisions.

In this article, we will examine the recent developments in the tax dispute resolution space. We will focus on the critical novel provisions of the Tax Appeal Tribunal (Procedure) Rules 2021 (TAT Rules 2021) and the Federal High Court of Nigeria (Federal Inland Revenue Service) Practice Directions 2021 (FHC Practice Directions 2021). We will also juxtapose the critical novel provisions of the Rules and the Practice Direction with the practice in other jurisdictions, after which, we will analyze the implication of these developments on the Nigerian tax and fiscal space.

Recent Developments in the Tax Dispute Resolution Space

Two key subsidiary legislations were issued in 2021 aimed at improving efficiency in tax administration through modifications to the existing processes and procedures to be adopted in tax appeals at the Federal High Court of Nigeria and the Tax Appeal Tribunal. With respect to the former, the Chief Judge of the Federal High Court on 31st May, 2021 issued the FHC Practice Directions. On 10th June, 2021, the Honourable Minister of Finance, Budget and National Planning issued the TAT Rules 2021.

The TAT Rules 2021 contains robust and commendable innovations. It is a significant improvement on the previous TAT Rules, which was issued in 2010. The new TAT Rules 2021, makes provision for virtual hearings, case stated procedure, documents only procedure and summary appeal procedure, etc. It is expected that these innovative introductions will help expedite the resolution of tax appeals. Notwithstanding these introductions, the provision on payment of provisional tax as a condition for filing a tax appeal, which was introduced, has raised questions amongst taxpayers and tax practitioners. Rules 1, 2 and 6 of the TAT Rules 2021 provide that a party aggrieved with a decision of a tax authority or the Federal Inland Revenue Services (FIRS) can file an appeal, however, the aggrieved party is required to pay 50 percent of the disputed amount into an account designated by the Tribunal before hearing. This payment is intended to act as a security for prosecuting the appeal and effectively reinforces the ''Pay now and argue later'' philosophy in the Nigerian tax dispute administration system.

Although the TAT Rules 2021 does not specify the account that the provisional tax is to be paid into, it grants discretion to the Tribunal to specify the account. A perusal of Form TAT 1B2 indicates that when this provisional tax is paid in the designated account, receipt of payment is to be issued by the FIRS (or any other tax authority, as the case may be). This creates a basis for a presumption to be raised that the account for such deposit is to be made will be the account of the FIRS or any other tax authority.

This pay now and argue later provision may create concern for taxpayers especially in view of the recent ruling of the Tax Appeal Tribunal in the tax appeal of Multichoice Nigeria Limited v Federal Inland Revenue Service3 where the TAT panel made an order for provisional tax to be paid by the Appellant as a condition for continuation of the hearing of the appeal. Another issue of concern to taxpayers, is whether they will be entitled to interest payments if they succeed on the appeal and if the need to refund them arises. The TAT Rules 2021 is silent on this issue.

Regarding the FHC Practice Directions 2021, Order III confers on the FIRS the right to file an exparte application praying the court to grant an Interim Order of Forfeiture on Immovable Property or for Freezing of Bank Account (Post No Debit). Taxpayers have also expressed concern over the fact that such an order can be made on an ex parte basis. This means that an order for forfeiture of their assets or freezing of their account can be made without notifying them and without them exercising the right to put up a defence or to present an argument against such an application. Without doubt, these two provisions appear to raise the stakes against taxpayers. Proponents in support of this model of tax dispute resolution have opined that such provisions will compel taxpayers to become more compliant with tax laws and be more willing to cooperate with tax officials by providing documents during audits and investigations. They argue that if the ''rule did not exist, there would be an incentive for a taxpayer to dispute a tax obligation''4 , which may put the government in financial difficulties.

The Practice in Other Jurisdictions

For context, we have examined the practice in other jurisdictions in order to consider the fairness of the provisions in the TAT Rules 2021 and the FHC Practice Direction 2021.

In Tanzania, a tax objection will be admitted only if the aggrieved taxpayer within a 30 day window from the date of service of the tax assessment, pays any part of the tax assessment which is undisputed or one third of the assessed amount, whichever is greater5 . A taxpayer has the option to approach the Commissioner General (the issuer of the tax assessment) to request a reduction or waiver of the mandatory deposit or to proceed to pay same. A request for reduction or waiver of the deposit can be granted by the Commissioner General if the aggrieved taxpayer furnishes compelling and convincing reasons6 . Any decision taken by the Commissioner General regarding reduction or waiver of a deposit is not appealable, this was the decision in a recent Court of Appeal decision in Tanzania.7

The practice in Uganda is somewhat different from that of Tanzania. Section 15 of the Ugandan Tax Appeal Tribunals Act makes it mandatory for an aggrieved taxpayer to pay a deposit of 30 percent of the assessed amount, before a tax appeal can be validly filed at the Tribunal. However, in a 2020 decision in Fuelex (U) Ltd v Uganda Revenue Authority8 the Constitutional Court of Uganda held that the requirement to make payment of a deposit prior to institution of a tax appeal is unconstitutional because it offends the right to fair hearing enshrined in Articles 21(1) and 126(2)(a) of the Constitution of the Republic of Uganda.

In South Africa, Section 164(1) of the Tax Administration Act provides that when an assessment is raised, the obligation to pay the tax becomes effective and an appeal or objection does not suspend this obligation. In the South African case of Capstone 556 (Pty) Ltd v Commissioner for SARS9 , the Court summarized the ratio behind the above provision, as follows:

''The considerations underpinning the 'pay now, argue later' concept include the public interest in obtaining full and speedy settlement of tax debts and the need to limit the ability of recalcitrant taxpayers to use objection and appeal procedures strategically to defer payment of their taxes.''

Notwithstanding the above clarity in the South African position, it is important to note that payment of the disputed amount is not a condition precedent for initiating a tax appeal, hence, the taxpayer may choose not to pay the assessed amount. However, the implication of commencing an appeal without paying the assessed tax is that interest and penalty will continue to accrue against the taxpayer and the tax authority has the powers to enforce payment of the disputed tax liability at any time, despite the pendency of the tax appeal.

"If the pay now, argue later model is to be implemented, checks and balances should be built into the system. For example the rate of tax to be deposited should be reduced to a maximum cap of between 10 to 20 percent and the applicable rate should be determined on a case by case basis by the Tax Appeal Tribunal. The Rules should also provide an avenue for taxpayers to be able to appeal against the decision of the Tribunal with respect to the applicable rate, in a manner that will not inhibit the hearing of the substantive tax appeal."

Implication of Pay Now, Argue Later on the Nigerian Tax and Fiscal Space

In view of the differing positions, in the three jurisdictions analysed above, it is important to understand the possible implication of the Nigerian model of pay now and argue later on the domestic tax and fiscal environment. This will provide a basis for any proposition to be made for improvements on this model.

One possible impact that the new rule will have is that it may negatively affect the cash-flow of businesses that are assessed to additional tax, if they have to pay half of the assessed amount prior to an appeal, whether the assessment is valid or not. For any business and especially those with low margins and weak cash flow, it can lead to immediate shock and possible collapse of the business depending on the quantum of tax assessed. This in turn can lead to job losses and closure of the business, with adverse social impact on other companies that have linkages to such businesses, including banks, financial institutions and investors that may have provided loans or invested in such businesses.

Furthermore, implementation of these rules may affect the attractiveness of the Nigerian business environment to local and foreign investors and negatively impact our ease of doing business ranking. It can further empower tax officers to become arbitrary in raising additional tax assessments and push taxpayers to settle such arbitrary assessments with tax officers rather than appeal to the tribunal or Federal High Court. Such practices can easily thrive because taxpayers may opt for a cheaper, albeit, off the table options to resolve their tax disputes. Arbitrary assessments can also arise because of the need for tax authorities to meet revenue targets, whether the assessments are valid or not as long as the taxpayer can be made to pay. Finally, recovery of deposits by successful taxpayers after tax appeals may become difficult or impossible given the absence of any provisions in the rules as to how the refunds will be made, where the appeal is successful.


Indeed, there is considerable merit in the argument of both the proponents and opponents of the pay now, argue letter rule. Due to the peculiarities of the Nigerian legal system, there is the need to adopt a more balanced model that factors the benefits of both positions and minimizes the demerits.

If the pay now, argue later model is to be implemented, checks and balances should be built into the system. For example the rate of tax to be deposited should be reduced to a maximum cap of between 10 to 20 percent and the applicable rate should be determined on a case by case basis by the Tax Appeal Tribunal. The Rules should also provide an avenue for taxpayers to be able to appeal against the decision of the Tribunal with respect to the applicable rate, in a manner that will not inhibit the hearing of the substantive tax appeal.

Finally the deposit should be payable to the Tribunal or to an interest yielding account and not to the tax authorities, as there may be concerns by taxpayers that such payment once made will be paid into the relevant revenue accounts and distributed. Where such happens, it is usually a herculean task getting a refund, which then puts the taxpayer at a further disadvantage and creates a feeling of unfairness, which is what the tax appeal process was created to avoid in the first place.


1 R v Sussex Justices, Ex Parte McCarthy [1924] 1 KB 256

2 First Schedule, Form TAT 1B, Tax Appeal Tribunal (Procedure) Rules 2021

3 Multichoice Nigeria Limited v Federal Inland Revenue Service (Appeal No. TAT/ LZ/CIT/062/2021)

4 Carika Fritz, 'Payment Obligations of Taxpayers Pending Dispute Resolution: Approaches of South Africa and Nigeria' (2018) Vol 18(1) African Human Rights Journal. See also Metcash Trading Ltd v Commissioner for the South African Revenue Service 2000 (2) SA 232 (W) 243

5 Section 51(5), Tanzanian Tax Administration Act

6 Section 51(5), Tanzanian Tax Administration Act

7 Panafrican Energy Tanzania Ltd versus Commissioner General (TRA) Court of

8 Appeal of Tanzania at Dar es Salaam, Civil Appeal No 121 of 2018 (Unreported) Fuelex (U) Ltd v Uganda Revenue Authority (CR No. 03 of 2009)

9 Capstone 556 (Pty) Ltd v Commissioner for SARS [2011] ZAWCHC 297 para 9.

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.