TAXATION 1.7 INTERPRETATION OF TAXING STATUTE
:: Section 44 of the 1999 Constitution vests citizens with the right to own property, however, Section 44(2)(a), 45 and 24 allow for derogations in justified circumstances… tax being one.
:: We have noted earlier that there can be no imposition of tax where it is not provided for in the law. Flowing from this is the maxim; no taxation without representation… which results in the maxim; no equity in taxation meaning that tax statutes are interpreted strictly (literarily), no room for intendment-Brandy Syndicate V IRC. Therefore, a statute which seeks to impose tax must do so in clear and precise terms so that the taxpayers and stakeholders would know who and what is being taxed.
:: Generally, an ambiguous provision is interpreted in favour of the taxpayer. Nothing is intended or filled-in. The legislature should thus ensure that tax is expressly imposed on a subject. Ambiguity is only resolved in favour of the government by subsequent legislative intervention. As Lord Cairns in Partington V AG noted that if a person sought to be taxed falls within the letter of the law, he must be taxed. On the other hand, if the crown cannot bring him within the letter of the law, the subject is free. Also, in Cape Brandy Syndicate V Inland Revenue Commission, the court noted that in a taxing Act, there is no room for intendment. As such, the construction of a tax legislation is a double edged sword which can work in favour of the taxpayer or the taxing authority depending on the circumstances. This position has been adopted in numerous cases like; SA V Regional Tax Board: Aderawos Timbers Trading Company V FBIR: IRC V AEM Insurance Association Ltd: Tennant V Smith: Pryce V Monmouthshire Canal Railway Company, 7up Bottling Company V LSIRB etc…
:: The rationale for the strict interpretation was that tax was seen as a pecuniary burden on citizens.
:: The tide has changed in recent cases. The courts have applied other methods of interpretation. As lord Reid in Greenberg V IRC noted that plain words are seldom adequate to anticipate and forestall the multiplicity of ingenious schemes devised to evade taxation.
In Mobil Oil Nigeria Limited V Federal Board of Inland Revenue, the court (in interpreting Section 30 of the Companies and Allied Matters Act) advocated “The Mischief Rule” where it noted that companies have become more rigorous in their tax avoidance techniques. The court held that if the provision in question is an anti-avoidance one, the interpretation should seek to remedy the ill which the provision sought to curb/remedy.
:: The courts have also invoked the “doctrine of Equity” in the interpretation of taxing statutes. In Shell PDCN Ltd V FBIR, the court invoked the doctrine of equity and public policy to allow certain expenditure (on scholarship and social responsibility) which were ordinarily not allowed by the PPTA.
:: The courts have also advocated for the “liberal interpretation” as was done in Phoenix Motors Ltd V National Prudent Funds Management Board, where the court maintained that a revenue based statute should be interpreted liberally rather than strict/literal.
:: The disadvantage of strict interpretation is that it creates loopholes in the tax law and may be unfair in certain circumstances. The disadvantage of liberal interpretation is that it makes the law uncertain and the decisions would vary according to the judge’s disposition.
:: Anti-avoidance statutes are made more complex and encompassing to forestall likely ingenuous evasion techniques as Lord Reid in Greenberg V IRC noted that “plain words are seldom adequate to anticipate and forestall ingenious evasion techniques”.
:: In interpreting a statute, the courts should have recourse to previous decisions on the same issue, look at the past law and the present amendment and ascertain the purpose and purport of the particular provision in question.
In conclusion, the interpretation of a provision would depend on the relevant facts and circumstances of each case. Whatever style the court chooses to adopt must be in the interest of justice both in the instant case and in future application.