Can the Citizens Impugn the Power of Government to Impose Tax?

A classic definition of tax was rendered by the Privy Council in the case of Lower Mainland Dairy Products Sales Adjustment Committee V. Crystal Dairy Ltd (1933) AC 168 at 175 which was also adopted in the later case of Mathews V. Chicory Marketing Board (1938) 60 CLR 263 at 279, that “tax is a compulsory exaction of money by a public authority for Public purposes, enforceable by law and is not a payment for services rendered.”

Nightingale K. (1997) in his book, Taxation: Theory and Practice, Pitman Publishing, UK, described tax as a compulsory contribution imposed by the government.

In a related manner, the National Tax Policy (made on the authority of the Federal Ministry of Finance in April  2012 under the watch of Dr. Ngozi Okonjo Iweala to provide the guidelines, rules and modus operandi that would regulate Nigeria’s tax system, form basis for tax legislation and tax administration in Nigeria), subscribed to the following definitions of tax:

1. Tax is “a monetary charge imposed by the government on persons, entities, transaction or properties to yield revenue” or;
2. Tax is “the enforced proportional contributions from persons and property, levied by the State by virtue of its sovereignty for the support of government and for all public needs.”
3. Tax “is not a voluntary payment or donation, but an enforced and compulsory contribution, exacted pursuant to legislative authority” and;
4. Tax is “any contribution imposed by government” whether under the name of duty, custom, excise, levy or other name”.

From the foregoing explanations, it is clearly deductible that tax is a compulsory contribution imposed on the citizens by the government. It is not voluntary.

It is also obvious that fees for services rendered, the charge for the acquisition or use of property, penalties and other arbitrary demands are not tax.

There is equally no gain saying the fact that tax system in the government of any civilized society cannot be overemphasized since without the coercive force of the law, most people would not pay their taxes.

For instance, the introduction of tax had led to disorderly behaviors by citizens in so many places, climes and jurisdictions.

The history of the Value Added Tax in Ghana shows that Ghana’s Parliament enacted the Value Added Tax (VAT) in December 1994 with collection to begin on March 1, 1995. The short preparatory period proved fatal with about 85 people losing their lives in civil protest. However, the government of Ghana reintroduced the tax in 1998 and enforced it.

In Nigerian, during the colonial administration, the Aba Women Riot of 1929 was a protest against the imposition of direct taxation and payment of tax by women.

There was also the case of “Ijemo massacre” of 1914 which happened in Abeokuta as a result of the revolt against Egba United Government’s planned imposition of taxation, an incident that led to the abrogation of Egba independence.

In 1990, British people revolted against poll tax or head tax for the inability of Margaret Thatcher administration to consider citizens’ ability to pay.

Incidents of the above nature made it imperative for every conscionable government to put in place effective, efficient, just and equitable tax system.

In McCulloch V. Maryland (1819) 17 US 316, Lord Marshall in a unanimous decision of the U S Supreme Court delivered on 6^th March, 1819, declared that

“The power to tax involves the power to destroy.”

This means that the power to tax includes the power to regulate even to the extent of prohibition or destruction of businesses. It also highlighted that the legislature has the inherent powers to determine who to tax, what to tax and how much tax to be imposed.

Pursuant to this regulatory purpose of taxation, the legislature may impose tax in order to discourage or prohibit things or enterprises inimical to the public welfare.

The fiscal regulatory and life blood basis of taxation to secure the provision of public needs namely: security, health, education and roads, in any modern society, made it important to explore the position of the citizens where taxation is not justly and properly imposed nor administered.

Government at all levels is made up of elected officers and representatives both at the national, state and local governments. This is in tandem with the practice prescribed by the Magna Carta Declaration of 1215 that there should be “no taxation without representation”.

Therefore, considering tax as the lifeblood of the government without which government can neither exist nor endure, legislators at the national and state levels must safeguard and ensure that tax imposed on the citizens always reflect democratic ethos and principles of sound tax system which among other things include: theory of legality, fiscal adequacy, and administrative feasibility, without which the rights of the citizens are neglected, abused or crushed.

Consequently, imposition of tax on the citizens without due regard to the rule of law and the prevailing economic circumstances of the citizens, will definitely be challenged either through the law as it happened in Belgium where the principle of equality was held to prohibit taxing companies providing professional services at the maximum rate.

The Bible in Exodus 30: 14 – 16 warned against unequal taxation on the citizens of Isreal. Tax has also been impugned through self help as illustrated supra in the incidents at Ijemo-Egba and Aba Women among other such ugly incidents in human history.

It is therefore, incumbent on the legislators at all levels of government to safeguard and secure zero incidences of draconian tax regimes or double taxation on both subjects and objects operating in the society at all times.

Government must give impetus to the appropriate tax authorities at the national, state and local government levels to ensure strict compliance and implementation of the Taxes and Levies (Approved List for Collection) Act, Laws of the Federation 2004. This will be one of the enduring ways to control brazen abuse or outright violation of citizens rights by the various tax authorities.

Cases abound of incidents of double taxation which usually manifest in direct duplicate taxation wherein two taxes are imposed on the same subject matter, or object by the same taxing authority, within the same jurisdiction, during the same period, with the same kind or character of tax, even if the purposes of imposing the same taxes are different.

In addition, cases of illegal levies, charges and fines being implemented at the State and local government levels have given rise to citizens or group of citizens successfully challenging the government’s power to impose certain taxes.

A case in point is the recent action by the Enugu State Government through Enugu Capital Development Authority (ECTDA) stopping the three (3) municipal Local Government Councils in Enugu State from collecting assorted building levies which only the state Agency has the authority so to do. This means that taxation must be statutory and objective.

It is also observed that Enugu State government has properly handled the issue of hackney permit payable by motorists through the introduction of E-TICKETS which has nipped in the bud the situation where the state government and municipal Local Government Councils in most states in Nigeria are having frequent clashes over who has the authority to collect the permit.

Another worrisome situation limiting citizens right and capable of destroying tax payers in Nigeria is the recent practice Direction issued on 30^th May, 2021 by the Chief Judge of the Federal High Court Hon. Justice John Tsoho acting under Order 57 Rule 3 of the Federal High Court (Civil Procedure) Rules 2019 which states that 50% of disputed tax amount should be paid into the court’s interest yielding account before a tax payer can challenge tax assessment.

This is one such situation where tax payers rights are abused due to lack of adequate consultation nor proper consideration of extant laws such as the decisions in Western Soundan Exporters Ltd V. FBIR (1973) C.C.H. C.J./1/73@12 and; Joseph Rezcallah & Sons Ltd V. FBIR (1962) 1 All  NLR 1

Thus, citizens can competently challenge the powers of government to impose tax where such powers are exercised without observing the established due process and the rule of law as posited by Frans Vanistendael and Victor Thuronyi in their work on The Legal Framework for Taxation, published in Tax Law Design and Drafting, Vol.1, by the International Monetary Fund in 1996. See also (Pt.1), 2^nd schedule, Exclusive Legislative List), item 59; Section  (Pt.11 Concurrent Legislative List), paragraph D, items 8,9,10 of the 1999 Constitution of the Federal Republic of Nigeria (As Amended).

The power of government to impose tax could also be challenged if there is failure in applying a fair and just consideration of the citizens’ ability to pay tax either in cash or kind and most importantly, the validity of tax assessment and mode of enforcement. This was exactly what played out recent in the National Assembly during the Tinubu Administration’s Tax Policy Review which reviewed the Value Added Tax (VAT) rate, expanded the base and the modality for the administration of its proceeds.

Government should always heed the advice of Jean Baptiste Colbert, the Minister of Finance under King Louis XIV of France (1619 – 1683), that:

“the art of taxation consists in plucking the goose as to get the most feathers with the least hissing”.

Government should also learn from Mahabharata of Ancient India, that in taxing the citizens;

“the ruler should act like the bee which collects honey without causing pain to the plants”.

Therefore, there is need for the people to ensure that our representatives at the parliaments are people with the requisite experience, skill and natural dispositions to engender people oriented legislation. In the same vein, Government should always provide for adequate consultations with the people; adopt democratic standards in legislative matters and always do the extra miles on issues involving taxation. This will guarantee the evolution of realistic tax system that will attract maximal cooperation from the citizens.