Constitutionality of banks as tax collectors
The Association of Bureau De Change Operators of Nigeria recently raised an alarm over the on-going practice of banks denying their members access to their funds on the strength of a directive purportedly issued by the Federal Inland Revenue Service (FIRS) appointing the banks as collection agents in respect of tax, which it unilaterally determines is due from account-holders in such banks. In notices presently on display in banking halls nationwide, the Tax Czar reportedly took the step pursuant to certain provisions of the Companies Income Tax Act, the Personal Income Tax Act and the FIRS (Establishment) Act.
Before going further, it is important to clarify that banks have, historically, debited customers for sundry fees (and, indeed, tax) arising from the operation of their accounts. While such debits have by no means gone unchallenged in all cases, few, if any, of those protests have been in response to a debit made on account of tax adjudged, not by the bank itself, but by a Relevant Tax Authority (either the FIRS or a State Board of Internal Revenue).
Bases of the directive
As previously stated, the affected accounts were 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, save that references to “the Board” in CITA are replaced in the PITA and the FIRS Act with “the relevant tax authority” and “the Service”, respectively.
It is curious (to lawyers at least) 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., extra-judicially. However, Section 44(1)&(2)(a) of the 1999 Constitution appears 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 effecting 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. Accordingly, the question, which this paper proposes to answer is whether extra-judicial tax recovery is valid. The aforesaid provisions of CITA and PITA suggest that it is. If that is the case, then litigation would be merely an option for recovering tax, in addition to the aforesaid direct approach.
Tax laws – like all expropriatory statutes – are required to be construed strictly against the acquiring authority and sympathetically in favour of the citizen: AFOLABI vs. GOVERNOR OF OYO STATE (1965) 2 NWLR pt. 9 pg. 734 @ 753H. This takes us to the relevant statutory provisions for recovering tax through litigation. These include Section 78(1) of CITA, 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.
Is the directive valid?
Notwithstanding the seeming fiat granted by Section 44(2)(a) of the Constitution, I believe the said directive and its supposed legislative underpinning are inconsistent with the right of fair hearing guaranteed under Section 36 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 constituted in such a manner as to secure its independence and impartiality. A proviso to this law prescribes that any law, which does not give such a person a right of hearing prior to a determination of his civil rights and obligations is nonetheless valid if that determination is not expressed as “final and conclusive”. See BAKARE vs. L.S.C.S.C (1992) 8 NWLR pt. 262 pg. 641.
In relation to the direct debit tax recovery provisions under review, even though the phrase “final and conclusive” does not appear in any of them, however, other relevant provisions in those statutes undeniably have that effect. For example, Section 59(2)(a) of PITA provides 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”. Similar provisions are contained in Section 70(2)(a) of CITA.
It is settled that statutes should be considered as a whole, in that related provisions should be construed together: BELLO vs THE STATE (1986) 17 NSCC pt. II pg. 1257 @ 1285. Accordingly, if an assessment of tax liability cannot be impeached under any circumstances (as provided by Section 59(2)(a) of (PITA) and Section 70(2)(a) of (CITA), that determination cannot but be final and conclusive. This simply means that 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 to collect tax – not banks. 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”.
The conclusion of the tax amnesty offered by the Voluntary Assets Income Declaration Scheme (VAIDS) has given the authorities an opportunity to apply hitherto untested “direct debit” tax recovery legislations. However, there is something distinctly unsettling about a unilateral and peremptory confiscation or acquisition by government of the funds of a citizen on the grounds of an extra-judicial determination that he/she is a tax defaulter.
This is because non-payment of tax is a crime. Under the Constitution, anyone accused of committing a crime is presumed innocent until proven guilty in court – Section 36(6). Section 44(2)(a) of the Constitution is not an exception to this rule, and it has never been. The Post No Debit order simply negates the fundamental right of fair hearing under the Constitution. No one should be condemned unheard. Anyone accused of non-payment of tax should be charged to court and no hush-hush administrative determination of his liability is either permissible or should be condoned. Any law that makes such a provision is invalid: ADIGUN vs. 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.
Sani, a lawyer writes from Kano.