How To Prove Tax Liability

Introduction

I believe that certain provisions of the Personal Income Tax Act (“PITA”) and the Companies Income Tax Act (“CITA”) which deal with the standard and burden of proof of non-payment of tax are anomalous vis-å-vis the constitutional safeguards for securing fair trials, particularly the privilege against self-incrimination and the principle that, in criminal prosecutions, the onus is on the prosecution to prove the charge beyond reasonable doubt. This is quite apart from the fact that, in my opinion, those provisions are inconsistent with the right to equal protection of the law. Before examining them in greater detail, it is pertinent to investigate . . .

The Legal Framework for Recovering Tax in Nigeria

Non-payment of tax, where it is due, is a serious criminal offence punishable with fines of up to N20,000 or imprisonment for six months; see Sections 92 and 94(1) of CITA and PlTA, respectively. This is in addition to a penalty of 10 per cent of the tax payable as well as interest at bank base lending rate: Sections 76-77 and 85(1)(a)&(b) of PITA and CITA, respectively. Legal action by way of litigation to recover tax may be initiated against the alleged defaulter in a court of competent Jurisdiction as a debt due to the Federal/State Government/relevant ax authority: Section 78(1) of PITA. None of the foregoing is even remotely objectionable.

The problem lies, in my view. with the provisions of Sections 78(3) and 87(3) of PITA and CITA. respectively, which provide somewhat magisterially, that: “In action brought under subsection (1) of this Section, the production of a certificate signed by a person duly authorised by the Chairman of the relevant authority giving the name and address of the defendant and the amount of income tax due, shall be sufficient evidence of the amount so due and sufficient authority for the court to give judgment for the said amount”. Similar provisions are Acts, contained in Sections 94(4)(c) and 92(4)(c) of both Acts, respectively, in respect of penalties for non-payment of tax.

As previously stated, I believe that both sets of provisions are anomalous on at least two levels. Firstly, they violate the right to equal protection of the law, having regard to similar, but not identical, provisions of the Evidence Act, 2011. Secondly, they negate the presumption of innocence/the right to silence under Section 36(5) and (11) of the 1999 Constitution.  At this stage, it is apposite to consider. .

The import of the Tax Recovery Provisions of PITA and CITA

I believe that the effect of the aforesaid provisions of both laws is analogous to accepting that a certificate issued under the authority of the chairman of the EFCC/ICPC. the Director-General of NAFDAC or NDLEA, the Copyright Commission, the Nigerian Standards Organization is sufficient evidence against a person charged with relevant offences under their applicable laws and sufficient authority for the court to pronounce guilt.

Suffice it to say that none of such certificates is ordinarily admissible in a court of law, on the ground that they constitute hearsay evidence under Section 37 of the Evidence Act. Admittedly, that restriction is not absolute as Section 38 of the Act recognizes some exceptions thereto, either under the Evidence Act itself “or any other Act” Assuming without conceding that Sections 78(3) & 94(4)(c) and 87(3) &. 92(4) 2) of PITA and CITA, respectively constitute such exceptions I submit that by virtue of Section 51 of the Evidence Act, such Certificates are not conclusive, but are merely prima facie, evidence of tax liability.

The said provision, i.e., Section 51 of the Evidence Act, provides, inter alia thus: “entries in books of accounts or electronic records regularly kept in the course of business are admissible whenever they refer to a matter into which the court has to inquire; such statements shall not alone be sufficient evidence to charge any person with liability”. The importance of this provision cannot be over-emphasized, given that, in reality, the establishment of tax liability is almost exclusively dependent on the availability of such records.

Generally speaking, by virtue of Sections 135(1), (2) & (3) and 139 (2) of the Evidence Act, the prosecution (the State or the relevant tax authority) bears the burden of establishing tax liability. The last three of these state thus:

• 135(2): “The burden of proving that any person has been guilty of a crime or wrongful act is, subject to Section 139 of this Act, on the person who asserts it, whether the commission of such act is or is not directly in issue in the action.”
• 135(3): “If the prosecution proving the commission of a crime beyond reasonable doubt, the burden of proving reasonable doubt is shifted on to the defendant;
• 139(2): “The burden of proof placed by this part (Sections 131- 144 of the Act) upon a defendant charged with a criminal offence shall be deemed to be discharged if the court is satisfied by evidence given by the prosecution, whether on cross examination or otherwise, that such circumstances in fact exist” The provisions of Section 139(2), in particular, entitle an alleged tax defaulter to test not only the authority and credibility of the author or a Certificate being touted as proof of his tax liability, but also the veracity of the information contained in the Certificate itself. In addition, the requirement that the author of such a Certificate should be available for cross-examination is consistent with Section 55(3) of the Evidence Act which entitles a defendant to request the appearance or authors of similar Certificates in order to testify directly thereon.

It must be pointed out that while both Sections 55 and 56 of the Evidence Act are couched in language similar to that of the said provisions of PITA and CITA, Section 57 of the Evidence Act is far more legitimate, as it is saved by its requirement that a copy of such Certificates should be served on the party sought to be damnified by its production, at least 10 clear days before the date of hearing in Court.

To the extent that both of the said provisions of PITA and CITA lack the saving grace’ of Sections 55(3) and 57 of the Evidence Act, I submit that they violate the rights of alleged tax defaulters to equal protection of the law under Article 3(2) of the African Charter on Human & Peoples Rights contained in the African Charter on Human This is & Peoples Rights (Ratification& Enforcement) Act 1983. because all persons against whom the law permits a Certificate to be tendered as proof of their criminal malfeasance are presumed to be similarly circumstanced. The law forbids discrimination between persons who are regarded as being similarly circumstanced. Any law Which makes such a provision would be invalid under the said provision of the African Charter, See NNPC vs FAWEHINMI (1998) 7 NWLR pt. 559 pg. 598@616.

I Submit that the practical effect of the said provisions of PITA and CITA would be to require an alleged tax defaulter to prove his own innocence. While this is obviously unconstitutional, however, assuming it is not, that possibility is completely foreclosed by the self- same provisions of PITA and CITA which declare peremptorily that mere ‘production’ of a Certificate suffices to establish tax liability and entitles the court, without more, to pronounce an alleged defaulter’s guilt.

Summary and Conclusion

Tax statutes are expropriatory in intent. This necessarily brings them at odds with the citizen’s right to property under Section 44(1) of the 1999 Constitution. While that right is by no means absolute, any statute which purports to detract from it must be consistent with, and not derogate from, the fundamental right of fair hearing under Section 36(5) & (11) of the Constitution.

 An apparent way out of this would be to accord primacy to the said provisions of the Evidence Act 2011 simply on account of their being

latter in time to both PITA (1993) and CITA (1977), on the maxim leges posteriors priores contrarias abrogant: See SALUBI vs. NWARIAKU (2003) 4 S.C.M. 127 and F.R.N. vs. OSAHON (2006) 2 S.C.N.J. 348. The issue is, however, deeper than that, as we have seen, having regard to the right to equal protection of the law under the African Charter and the constitutional right of fair hearing.

Given the anomalies in the procedural mechanisms in both PITA and CITA for recovering tax through litigation, their amelioration through legislative intervention would appear to be an urgent imperative in order to forestall a looming travesty of justice as the Government prepares to commence the prosecution of tax defaulters, in the countdown to the expiration of VAIDS on the 31s of March 2018.

Abubakar D. Sani, Esq.

15th February, 2018