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Abstract
The judicial interpretation of the Associated Gas Re-injection Act (Nigeria) with regard to the legality of tax deductions, which are based on the payment of gas flaring fees or penalties, illustrates some of the inconsistencies between the legality of tax action under the literal terms of the statute and the purpose of the statute to achieve a desired ethical environmental conduct. This article will examine the context and cases of gas flaring fees and their interpretation for tax purposes, and will highlight the potential role of judicial interpretation which could take into account contextual factors, through purposive interpretation. The fees for flaring gas and its assessment for tax liabilities are an exemplar of potential contradictions that present a challenge for legal interpretation and (ir)responsible action. The use of relevant interpretation approaches may help deal with issues that arise from contradictory overlaps – even if these approaches may themselves be subject to dispute. The paper suggests a purposive two-step test that takes into account the specific purposes of the legislation and the general context of gas flaring and corporate responsibilities.
Acknowledgements
The author wishes to thank the two anonymous reviewers for their excellent feedback. She also wishes to thank Maxwell Ukpebor, Editor-in-Chief, Tax Law Reports of Nigeria, for access to the case reports.
Notes
1 See FI Ibitoye, ‘Ending Natural Gas Flaring in Nigeria’s Oil Fields’ (2014) 7(3) Journal of Sustainable Development 13: ‘While non-associated gas can be left underground until needed, associated gas is unavoidably lifted together with crude oil, and must either be harvested or disposed of on site as an unwanted by-product of oil’. See also EC Ubani and IM Onyejekwe, ‘Environmental Impact Analysis of Gas Flaring in the Niger Delta Region of Nigeria’ (2013) 4(2) American Journal of Scientific and Industrial Research 246: ‘Gas flaring is the burning of natural gas and petroleum hydrocarbons in flare stacks by upstream oil companies in oil fields during operations’.
2 ‘Associated gases released during oil-gas production mainly contain natural gas. Natural gas is more than 90 per cent methane (CH4) with ethane and a small amount of other hydrocarbons; inert gases such as N2 and CO2 may also be present’. See EA Emam, ‘Gas Flaring in Industry: An Overview’ 57(5) Petroleum and Coal 532 at 534.
3 See Z Ebrahim and J Friedrichs, Gas Flaring: The Burning Issue, 3 September 2013, www.resilience.org/stories/2013-09-03/gas-flaring-the-burning-issue accessed 22 October 2020.
When you drill for oil, you also get gas. In an ideal world this associated gas would be sold to consumers, or it would be used to generate power and then resold as electricity. But this requires costly investment into pipelines, power plants, and other infrastructure. Therefore, in practice, some oil producers opt to sell the oil and burn the gas. This is known as gas flaring.
4 Ibitoye (n 1) 13 points out:
firstly, domestic demand for natural gas was not large enough to utilise all the associated gas, if recovered; secondly, there was the price tag on recovery of associated gas, which happened to be much higher than that of non-associated gas … and thirdly, inadequate domestic gas infrastructure to distribute gas to potential consumers.
5 Nigeria has a population of 200 million.
6 KPMG, Nigeria’s Oil and Gas Industry Brief 2014 (KPMG Nigeria, June 2014), 5 www.blog.kpmgafrica.com/wp-content/uploads/2016/10/Nigerias-oil-and-gas-Industry-brief.pdf accessed 30 September 2019.
7 DPR, 2018 Nigeria Oil and Gas Industry Annual Report <www.dpr.gov.ng/index.php> (11 per cent of total produced gas).
8 Ibid 54.
9 AR Brandt, ‘Accuracy of Satellite-Derived Estimates of Flaring Volume for Offshore Oil and Gas Operations in Nine Countries’ (2020) 2(5) Environmental Research Communications 051006 at 3. They note: ‘In one case – Nigeria – no government geospatial data are available, so field outlines were generated from hand-produced geo-rectified composite of 3 maps obtained of the offshore Niger Delta region’.
10 Gas flaring volumes (2014–2018), in billions of cubic metres. See World Bank, ‘Top 30 Flaring Countries (2014–2018) Ranked by 2018 Flare Volume’ http://pubdocs.worldbank.org/en/645771560185594790/pdf/New-ranking-Top-30-flaring-countries-2014-2018.pdf accessed 22 October 2020; see also The World Bank (WB) Global Gas Flaring Reduction Partnership (GGFR), Global Gas Flaring Report July 2020 http://pubdocs.worldbank.org/en/503141595343850009/WB-GGFR-Report-July2020.pdf accessed 22 October 2020, which features Nigeria as a case study.
11 Ibid; AE Ite and UJ Ibok, ‘Gas Flaring and Venting Associated with Petroleum Exploration and Production in the Nigeria’s Niger Delta’ (2013) 1(4) American Journal of Environmental Protection 70.
12 ‘The volume of gas flared by Nigeria per annum is more than enough to power the nation’s energy demand. Despite Nigeria’s huge gas reserves, the country still suffers chronic energy shortages’. See Ubani and Onyejekwe (n 1).
13 Emam (n 2) at 533.
14 Ite and Ibok (n 11).
15 TE Ologunorisa, ‘A Review of the Effects of Gas Flaring on the Niger Delta Environment’ (2001) 8(3) International Journal of Sustainable Development and World Ecology 249.
16 Environmental Rights Action (ERA) and Friends of the Earth, Gas Flaring in Nigeria – A Human Rights, Environmental and Economic Monstrosity (Netherlands, June 2005); see also www.foei.org/resources/publications/publications-by-subject/climate-justice-energy-publications/gas-flaring-in-nigeria accessed 22 October 2020. The Friends of the Earth point to the apparent double standards in the writings of the British Trade Officials; see 6–7. For an interesting overview of oil exploration in colonial Nigeria, see P Steyn, ‘Oil Exploration in Colonial Nigeria, c. 1903–58’, (2009) 37(2) The Journal of Imperial and Commonwealth History, 249.
17 BP Statistical Review of World Energy (2019) www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energy-economics/statistical-review/bp-stats-review-2019-full-report.pdf at 30 accessed 22 October 2020.
18 KPMG (n 6) at 5: ‘Estimates of Nigeria’s undiscovered gas reserves range from 300 to 600 TCF. Nigeria has therefore been described largely as a gas province with some oil. The gas quality is high – particularly rich in liquids and low in sulphur’.
19 Question contained in Memorandum of 21 June 1960 given to the then Secretary of State to the Colonies, Lord Home by Mr Edmund de Rothschild: ‘There might be wastage of energy and resources going on which one day those giving advice to Nigeria (i.e. the British could be reproached’ This was cited in the Friends of the Earth report above (n 16) and a source given as: ‘Natural Gas in Nigeria’ File DO35/10500 UK National Archives.
20 Friends of the Earth (n 16) at 7.
21 AGRA 1979. Cap A25 Laws of the Federation of Nigeria 2004.
22 Y Omorogbe, ‘The Legal Framework for the Production of Petroleum in Nigeria’ (1987) 5 J Energy & Nat Resources L 273.
23 S 15 Petroleum Act 1969 Cap. P10 Laws of the Federation of Nigeria (LFN) 2004.
24 DPR (n 7) at 10–11.
25 CD Elvidge and others, ‘The Potential Role of Natural Gas Flaring in Meeting Greenhouse Gas Mitigation Targets’ (2018) 20 Energy Strategy Reviews 156.
26 DPR (n 7) at 11, Figure 1 – The Nigerian Oil and Gas Industry.
27 Cap. P10 Laws of the Federation of Nigeria (LFN) 2004.
28 The current minister of petroleum Resources is the president, as he vested that office in himself. See SI Nwatu and EO Wingate, ‘Determining the Limits of the Ministerial Discretion to Renew Petroleum Leases in Nigeria – Shell v Minister of Petroleum' (2020) 38(3) Journal of Energy & Natural Resources Law 329
2. (1) Subject to this Act, the Minister may grant – (a) a licence, to be known as an oil exploration licence, to explore for petroleum; (b) a licence, to be known as an oil prospecting licence, to prospect for petroleum; and (c) a lease, to be known as an oil mining lease, to search for, win, work, carry away and dispose of petroleum.
29 The NEITI reports are a good source of material for the overall framework of oil and gas in Nigeria. The details of NEITI as a transparency initiative and links to CSR are fully discussed in the next section; this section attempts to highlight some of the legislative context to the gas cases and gas flaring. See NEITI Financial Report Final 2006–2008, issued July 2011 https://neiti.gov.ng/index.php/neiti-audits/oil-and-gas/category/164-oga-2006-2008-report at 5–6.
30 www.nnpcgroup.com/About-NNPC/Pages/Corporate-Information.aspx accessed 22 October 2020. The creation of a state oil company is in line with the Oil Producing and Exporting Countries (OPEC) ideology and the permanent sovereignty over natural resources; see SM Ghanem, OPEC: The Rise and Fall of an Exclusive Club (Routledge 2016, originally published in 1986).
31 ‘Exploration and Production, Gas Development, Refining, Distribution, Petrochemicals, Engineering, and Commercial Investments’ www.nnpcgroup.com/About-NNPC/Pages/Corporate-Information.aspx accessed 22 October 2020. In the upstream, it acts through National Petroleum Investment Management Services (NAPIMS). In the downstream, the Nigerian gas company was established to ‘efficiently gather, treat, transmit and market Nigeria’s natural gas and its by-products to major industrial and utility gas distribution companies in Nigeria and neighbouring countries’. NNPC in 1988 had 11 subsidiaries of its own, but was restructured in 2016 and reduced to five commercial entities. See www.napims.com/aboutus.html; https://ngc.nnpcgroup.com/pages/about-us.aspx accessed 22 October 2020.
32 DPR (n 7) at 54, Figure 1 – The Nigerian Oil and Gas Industry.
33 NEITI Report 2016 issued January 2019 https://eiti.org/sites/default/files/documents/neiti-oil-gas-report-2016-full-report-211218_1.pdf at 29, accessed 22 October 2020.
34 DPR (n 7) at 23, Figure 5 – Distribution of Nigeria concession by lease contract type.
35 DPR (n 7) at 26, Table 5 – List of Marginal Fields.
36 Although NNPC had usually been the 60 per cent partner, Omorogbe (n 22) notes that the IOC partners are always designated operators. There have also been perennial issues with government cash call arrears. U Inifome, ‘IBA – The Burden and Benefit of the Joint Operating Agreement Framework to the Nigerian Government’ (28 November 2019) Oil and Gas Law Committee Publications www.ibanet.org/LPD/SEERIL/Oil_Gas_Law/Publications.aspx accessed 22 October 2020.
37 Omorogbe (n 22) 279.
38 NEITI report 2016 (n 33) at 70: ‘Under the PSC, the license is held by the Nigerian State. The state contracts a company to explore and produce oil and gas resources using the company’s expertise, technology, human and capital resources with a guarantee from the state on the recovery of investment and a share of the associated profit when crude is produced’.
39 TA Ogunleye, ‘A Legal Analysis of Production Sharing Contract Arrangements in the Nigerian Petroleum Industry’ (2015) 5(8) Journal of Energy Technologies and Policy 1.
40 Cap D3, LFN 2004 (Amendment Law).
41 NEITI 2018 Oil and Gas Report https://neiti.gov.ng/index.php/neiti-audits/oil-and-gas/category/203-oga-2018-report at 29, accessed 22 October 2020. For an analysis of ownership of gas under old JV contracts, see AI Chukwuemerie, ‘Ownership of Associated and Discovered Gas in Nigeria Under the Old Joint Venture Contracts’, (2003) 27(1) OPEC Review: Energy Economics & Related Issues 9.
42 [L.N. 69 of 1969].
43 Cap P10 LFN2004.
44 S. 25:
Prevention of pollution: The licensee or lessee shall adopt all practicable precautions, including the provision of up-to-date equipment approved by the Director of Petroleum Resources, to prevent the pollution of inland waters, rivers, watercourses, the territorial waters of Nigeria or the high seas by oil, mud or other fluids or substances which might contaminate the water, banks or shoreline or which might cause harm or destruction to fresh water or marine life, and where any such pollution occurs or has occurred, shall take prompt steps to control and, if possible, end it.
45
39. Production of crude oil and natural gas: The licensee or lessee shall use approved methods and practices acceptable to the Director of Petroleum Resources for the production of crude oil or natural gas from any pool or reservoir, and shall in particular take all necessary steps.
46
43. Utilisation of natural gas: feasibility study. Not later than five years after the commencement of production from the relevant area, the licensee or lessee shall submit to the Minister any feasibility study, programme or proposals that he may have for the utilisation of any natural gas, whether associated with oil or not, which has been discovered in the relevant area.
47 A copy of the act is available on the government agency website: www.ngfcp.gov.ng/media/1065/associated-gas-reinjection-act.pdf accessed 22 October 2020.
48 O Adewunmi, ‘Gas Flaring Charges in Nigeria’ 20 November 2018 www.mondaq.com/nigeria/oil-gas-electricity/756460/gas-flaring-charges-in-nigeria accessed 22 October 2020.
49 Emam (n 2).
50 The national gas company is a subsidiary of NNPC. See the company website at https://ngc.nnpcgroup.com/Pages/Home.aspx accessed 22 October 2020.
51 The West African Gas Pipeline is a limited success as it supplies natural gas to Benin, Togo and Ghana. See the company website at www.wagpa.org/ accessed 22 October 2020.
52 See the company website at http://nlng.com/Our-Company/Pages/Profile.aspx accessed 22 October 2020. It states:
Nigeria LNG Limited was incorporated as a limited liability company on 17 May 1989 to harness Nigeria’s vast natural gas resources and produce Liquefied Natural Gas (LNG) and Natural Gas Liquids (NGLs) for export. The establishment of NLNG is backed by the NLNG Act. The company is owned by four shareholders, namely, the Federal Government of Nigeria, represented by Nigerian National Petroleum Corporation (49 per cent); Shell (25.6 per cent); Total Gaz Electricite Holdings France (15 per cent) and Eni (10.4 per cent).
53 Nigerian (LNG) (Fiscal Incentives & Assurances) Act Cap N87 LFN 2004.
54 For information on the 2008 Gas Master Plan, see the NNPC website www.nnpcgroup.com/NNPC-Business/Midstream-Ventures/Pages/Nigerian-Gas-Master-Plan.aspx accessed 22 October 2020.
55 Currently in Nigeria, this is vested in the President.
56 For the website of the national gas flare commercialisation programme, see www.ngfcp.gov.ng/resources/regulations/ngfcp-regulations/ accessed 22 October 2020.
57 Flare Gas (Prevention of Waste and Pollution) Regulations 2018 are available from the website of the NGFCP https://ngfcp.dpr.gov.ng/media/1120/flare-gas-prevention-of-waste-and-pollution-regulations-2018-gazette-cleaner-copy-1.pdf accessed 22 October 2020.
58 T Ojuawo, ‘The Flare Gas (Prevention of Waste & Pollution) Regulations 2018 – A Summary’ 27 August 2019 IBA Oil and Gas Law Committee Publications www.ibanet.org/Article/NewDetail.aspx?ArticleUid=8F173D4A-10AB-43CF-B6E4-D141A246D9BB accessed 22 October 2020.
59 See section 1 of the regulations (n 57).
60 ‘[T]he federal government takes natural gas produced with oil free of cost at flare and without payment of royalty’ – Section 2 section 44(3) of the Constitution of the Federal Republic of Nigeria:
Notwithstanding the foregoing provisions of this section, the entire property in and control of all minerals, mineral oils and natural gas in under or upon any land in Nigeria or in, under or upon the territorial waters and the Exclusive Economic Zone of Nigeria shall vest in the Government of the Federation and shall be managed in such manner as may be prescribed by the National Assembly.
61 See sections 2 and 3 of the regulations (n 57).
62 See section 13(1) of the regulations (n 57).
63 The tax break was granted in 1990, when Nigeria was under military rule, though it did not kick in until 1999. After the standard five-year holiday, there was an unusual five-year extension and a rollover of certain allowances, which ActionAid says resulted in the consortium not paying corporate income tax until 2012. See M Leftly, ‘Shell Attacked for Its Extraordinary Part in the £2.3 Billion Nigerian Tax Break’ (The Independent, 20 January 2016) www.independent.co.uk/news/business/news/shell-attacked-for-its-part-in-extraordinary-23bn-nigerian-tax-break-a6822061.html accessed 22 October 2020; see also the report by NGOs SOMO/ActionAid ‘How Shell, Total and Eni Benefit from Tax Breaks in Nigeria’s Gas Industry – The Case of Nigeria Liquified Natural Gas Company (NLNG)’ January 2016 www.somo.nl/how-shell-total-and-eni-benefit-from-tax-breaks-in-nigerias-gas-industry/ accessed 22 October 2020.
64 See SOMO/ActionAid report (n 63) 28.
65 Sections 15–18.
66 See Regulations (n 24); see also I Aye and EO Wingate, ‘Nigeria’s Flare Gas (Prevention of Waste & Pollution) Regulation 2018’ (2019) 21(2) Environmental Law Review 119.
67 Ojuawo (n 58) points out that ‘The Ministry of Finance condemned the practice pointing out that the FGN loses billions of dollars in potential revenue and stating that the government was approaching lawmakers to amend the AGRA to use the word “penalty” in describing gas flare fees. However, the 2018 Regulations do not change the nature of the charge. As such, the characterisation of the gas flare fees may not necessarily be affected by the steep increase’.
68 C Katsouris, ‘Buhari’s Second Chance at Oil and Gas Reform in Nigeria’ (Chatham House, 4 April 2019) www.chathamhouse.org/expert/comment/buhari-s-second-chance-oil-and-gas-reform-nigeria accessed 22 October 2020.
69 Deloitte reports on the re-submission of the bill by the President to the Senate in September 2020. It highlights that one of the latest provisions would make the gas flare penalties explicitly non-tax deductible; see ‘Petroleum Industry Bill 2020 Submitted to the National Assembly’ (Deloitte Nigeria Blog, 1 October 2020) http://blog.deloitte.com.ng/petroleum-industry-bill-2020-submitted-national-assembly accessed 22 October 2020.
70 For details see EO Ekhator, ‘Public Regulation of the Oil and Gas Industry in Nigeria: An Evaluation’ (2016) 12(1) Annual Survey of International & Comparative Law Article 6; see also BR Konne, ‘Inadequate Monitoring and Enforcement in the Nigerian Oil Industry –The Case of Shell and Ogoniland’ (2014) 47 Cornell International Law Journal 181.
71 This list is contained in the NEITI 2016 report (n 33) at 77.
72 NEITI report 2016 (n 33) at 78, emphasis added.
73 Section 10 PPTA No.15 1959 & Cap P13 LFN 2004.
74 NEITI Executive Summary Report 2006–2008 (July 2011) https://neiti.gov.ng/phocadownload/executive-summary-report-final-300112.pdf at 28, accessed 22 October 2020.
75 P Utting and K Ives, ‘The Politics of Corporate Responsibility and the Oil Industry’ (2006) 2(1) St Anthony’s International Review 11, at 12.
76 Gbemre v Shell Petroleum Devt Co. of Nigeria Ltd & Others (2005) Unrep FHC/B/CS/53/05; see also B Faturoti, G Agbaitoro, and O Onya, ‘Environmental Protection in the Nigerian Oil and Gas Industry and Jonah Gbemre v Shell PDC Nigeria Limited: Let the Plunder Continue?’ (2019) 27 African Journal of International and Comparative Law 225.
77 This case was not utilised in the tax cases under consideration, as the law remains unchanged in this regard.
78 JD Sachs and AM Warner, ‘The Curse of Natural Resources’ (2001) 45(4–6) European Economic Review 827; R Auty, Resource Abundance and Economic Development (Oxford University Press, 2001).
79 G Soros ‘Foreword’ in JE Stigilitz, M Humphreys, and JD Sachs (eds), Escaping the Resource Curse (Columbia University Press, 2007) at xi–xv, xi.
80 Ibid.
81 Ibid at xii.
82 H MahDavy, ‘The Patterns and Problems of Economic Development in Rentier States: The Case of Iran’ in MA Cook (ed), Studies in the Economic History of the Middle East: From the Rise of Islam to the Present Day (University of London, 1970) 428; also cited in DA Yates, The Rentier State in Africa, Oil Rent Dependency and Neo-Colonialism in the Republic of Gabon (Africa World Press, 1996).
83 The EITI was launched in 2003 in London, following the publication of an undelivered speech by Tony Blair. The speech was intended for the 2002 World Summit on Sustainable Development in Johannesburg; see the EITI website (2014) ‘History of EITI’ http://eiti.org/eiti/history accessed 22 October 2020.
84 Ibid.
85 The EITI standard was updated in 2013 to include a clear seven-step requirement which includes the effective oversight by the multi-stakeholder group, timely publication of reports, production of comprehensive EITI reports, and verification of such reports through a credible assurance process. The reports are now required to include contextual information about the extractive industry and to be comprehensible and publicly accessible. Finally, the multi-stakeholder group (MSG) is tasked with acting on lessons and reviewing outcomes. EITI (2013) The EITI Standard EITI International Secretariat 11 July 2013. Also see latest EITI Standard 2019 https://eiti.org/document/eiti-standard-2019#toc accessed 22 October 2020.
86 EITI, principle 12.
87 M Abutudu and D Garuba, ‘Natural Resource Governance and EITI Implementation in Nigeria’ (2011) Current Africa Issues 47 Nordiska Afrika Institutet (Nordic Africa Institute, Uppsala) www.diva-portal.org/smash/get/diva2:471319/FULLTEXT01.pdf accessed 31 July 2014.
88 NEITI Act 2007. The adoption of EITI in Nigeria can be fully credited to the reform programme of the past President Olusegun Obasanjo; see N Shaxson, ‘NEITI: Just a Glorious Audit’ (Chatham House, London, November 2009) www.chathamhouse.org/sites/files/chathamhouse/public/Research/Africa/1109neiti.pdf accessed 22 October 2020.
89 EITI (2012) ‘Nigeria EITI: Making Transparency Count, Uncovering Billions’ (Case Study, 20 January 12) http://eiti.org/document/case-study-nigeria accessed 22 October 2020; NEITI began with an influential chair prominent in anti-corruption issues (Dr Oby Ezekwesili), who conducted audits which at that time went beyond the requirements of the global EITI.
90 See reports until 2015 on the NEITI website: https://neiti.gov.ng/index.php/neiti-audits/oil-and-gas accessed 22 October 2020. The 2016 Oil and Gas audit report is available on the EITI website: https://eiti.org/nigeria accessed 22 October 2020.
91 Ibid.
92 This was specifically noted in the cases discussed in the later section.
93 NEITI Executive Summary Report (n 73).
94 https://eiti.org/sites/default/files/documents/neiti-oil-gas-report-2016-full-report-211218_1.pdf accessed 22 October 2020.
95 AO Ajugwo, ‘Negative Effects of Gas Flaring: The Nigerian Experience’ (2013) 1 Journal of Environment Pollution and Human Health 6.
96 2007 Act No. 25.
97 Section 2 NESREA (Establishment) Act 2007.
98 Section 7 NESREA (Establishment) Act 2007, emphasis added.
99 See NESREA (Establishment) Amendment Act 2018, Act No. 26.
100 NOSDRA – National Oil Spill Detection and Response Agency (Establishment) Act 2006 Act No. 15 2006.
101 Environmental Impact Assessment Act.
102 www.dpr.gov.ng/egaspin/ accessed 22 October 2020.
103 www.iea.org/policies/8676-environmental-guidlines-and-standards-for-the-petroleum-industry-in-nigeria-egaspin accessed 22 October 2020.
104 DS Olawuyi and Z Tubodenyefa, Review of the Environmental Guidelines and Standards for the Petroleum Industry in Nigeria (EGASPIN) (Institute for Oil and Gas Energy, Environmental and Sustainable Development (OGEES), November 2018) www.iucn.org/sites/dev/files/content/documents/2019/review_of_the_environmental_guidelines_and_standards_for_the_petroleum_industry_in_nigeria.pdf accessed 22 October 2020.
105 Ibid 5.
106 (Tax Appeal Tribunal initial hearing) Mobil Producing Nigeria Unltd v FIRS no.4 (2015) 18 TLRN 115 17 March 2015 (Appeal no: TAT LZ/033/2013).
107 Shell Petroleum Development Company Nig Ltd v FIRS (2016) 21 TLRN 86 27 October 2015 (Appeal no: TAT/LZ/040/2013).
108 Chevron Nigeria Ltd v FIRS (2016) 22 TLRN 1 30 October 2015 (Appeal no: TAT/LZ/045/2013).
109 Ernst & Young (EY) Global Tax Alerts 29 June 2018, ‘Nigeria’s Federal High Court Rules that Minister’s Approval Is Required for Tax Deductibility of Payment’s Made on Gas Flares’ www.ey.com/gl/en/services/tax/international-tax/alert--nigeria-s-federal-high-court-rules-that-minister-s-approval-is-required-for-tax-deductibility-of-payments-made-on-gas-flare accessed 22 October 2020; see also EY Tax Insights ‘Nigeria’s FIRS Provides Updates on Tax Administration in Nigeria’ (the updates were provided on 6 September 2018 by the FIRS chairman at a stakeholder meeting) https://taxinsights.ey.com/archive/archive-news/nigeria%E2%80%99s-firs-provides-updates-on-tax-administration-in-nigeria.aspx accessed 22 October 2020.
110 http://tat.gov.ng/ accessed 22 October 2020. Established by virtue of section 59 (1) Federal Inland Revenue Service (Establishment) Act 2007.
111 The Court of Appeal (Nigeria) clarified the jurisdiction of the tribunal and the appeal process over tax disputes in the case of CNOOC Exploration and Production Nig. Ltd & Anor v NNPC & Anor (2017) 32 TLRN 34 at 56, which states that:
The procedure for resolving claims and objections such as in the instant matter, are spelt out. When an assessment is made and the party is not satisfied, it can serve a Notice of refusal to amend the assessment as desired where it disagrees with FIRS. The party may also then appeal against the assessment to the Tax Appeal Tribunal, then it can approach the Federal High Court, the Court of Appeal and the Supreme court.
112 (Tax Appeal Tribunal initial hearing) Mobil Producing Nigeria Unltd v FIRS no.4 (2015) 18 TLRN 115 17 March 2015 (Appeal no: TAT LZ/033/2013).
113 Other recent cases filed at the Tax Appeal Tribunals level on this issue include Shell Petroleum development Company Nig Ltd v FIRS (2016) 21 TLRN 86 27 October 2015 (no: TAT/LZ/040/2013) & Chevron Nigeria Ltd v FIRS (2016) 22 TLRN 1 30 October 2015 (no: TAT/LZ/045/2013).
114 Originally 1959 Cap P13 LFN 2004, emphasis added.
115 Shell Petroleum Development Company v Federal Board of Inland Revenue (1996) 8 NWLR (Part 466) 256 per Uwais CJN.
116 Mobil Producing Nigeria Unltd v FIRS no.4 (2015) 18 TLRN 115 17 March 2015 (Appeal no: TAT LZ/033/2013); also see https://pwcnigeria.typepad.com/files/tat-ruling-on-deductibility-of-gas-flaring-payment.pdf at 8, accessed 22 October 2020.
117 See ibid.
118 Shell Petroleum Development Company Nig Ltd v FIRS (2016) 21 TLRN 86 27 October 2015 (no: TAT/LZ/040/2013) & Chevron Nigeria Ltd v FIRS (2016) 22 TLRN 1 30 October 2015 (no: TAT/LZ/045/2013).
119 The appeal to the Federal High Court – FIRS v Mobil Producing Nigeria Unltd (2018) 37 TLRN 1 26 March 2018 (Case suit no: FHC/3A/2017).
120 FIRS v Mobil Producing Nigeria Unltd (2018) 37 TLRN 1 26 March 2018 (Case suit no: FHC/3A/2017) at 21.
121 See section 13 (1a) PPTA.
122 See FIRS v Mobil Producing Nigeria Unltd (2018) 37 TLRN 1 26 March 2018 (Case suit no: FHC/3A/2017) at 23; see also section 4(1) AGRA which provides for penalty ‘4. (1) where any person commits an offence under section 3 of this Act, the person concerned shall forfeit the concessions granted to him in the particular field or fields in relation to which the offence was committed’.
123 Deloitte ‘Gas Flaring Charge in Nigeria – Is FHC’s Decision in Mobil v FIRS Good Law?’ (25 September 2018) http://blog.deloitte.com.ng/gas-flaring-charge-in-nigeria-is-fhcs-decision-in-mobil-v-firs-good-law/?utm_source=Mondaq&utm_medium=syndication&utm_campaign=View-Original accessed 22 October 2020.
124 N Lee, ‘A Purposive Approach to the Interpretation of Tax Statutes’ (1999) 20(2) Statute Law Review 124, at 126.
125 G Davidov, A Purposive Approach to Labour Law (Oxford University Press, 2016) at 16–17.
126 1 NCLR 1, emphasis added; see also T Esan, ‘The Shift in Interpretation of Tax Statutes’ (The Cable 7 April 2017) www.thecable.ng/shift-in-interpretation-of-tax-statute accessed 22 October 2020.
127 (1996) 8 NWLR (Pt. 466) 256 (Supreme Court).
128 See also Court of Appeal Nigeria 7-up Bottling Company plc v Lagos State Inland Revenue Board (2003) 3 NWLR (Pt. 650) 565–91:
Taxation provisions are strictly interpreted … . If a person sought to be taxed comes within the letter of the law, then such a person must be taxed. On the other hand, if the tax authority seeking to recover tax from a person is unable to bring him within the letter of the law, the person will be free, however apparently within the spirit of the law his case ought otherwise to be.
129 11 TLRN 84 at 112. The judge also cites Okupe v FBIR (1974) 4 SC 93 & Peenok Investments v Hotel Presidential (1999) 11 NWLR (Pt. 628) 543 for support; see also Esan (n 125).
130 Haliburton case, emphasis added.
131 1982 AC 300.
132 Ibid at 323, emphasis added; it also stated further (at 323–24) that
While obliging the court to accept documents or transactions, found to be genuine, as such, it does not compel the court to look at a document or a transaction in blinkers, isolated from any context to which it properly belongs. … It is the task of the court to ascertain the legal nature of any transaction to which it is sought to attach a tax or a tax consequence and if that emerges from a series or combination of transactions, intended to operate as such, it is that series or combination which may be regarded.
133 This case concerned a gas pipeline in the Irish Sea and tax deductions; see (2004) UKHL 51.
134 Barclays Mercantile Business Finance Limited vs Mawson para 32–33, emphasis added.
135 (2016) UKSC para 95: ‘This point illustrates the need to apply the Ramsay approach with sensitivity to the particular fiscal context which is relevant: the conditions have to be disregarded for the purpose of deciding whether the shares were restricted securities, since that is necessary in order to apply Chapter 2 as Parliament intended; but they do not have to be disregarded for the purpose of assessing the value of the perquisite, since ordinary taxation principles require the tax to be based on its true value’.
136 For a narrow interpretation of intention, see Lord Reid IRC v Hinchy (1960) AC 748 at 767:
But we can only take the intention of Parliament from the words which they have used in the Act, and therefore the question is whether these words are capable of a more limited construction. If not, then we must apply them as they stand, however unreasonable or unjust the consequences, and however strongly we may suspect that this was not the real intention of Parliament.
137 See arguments made in N Lee, ‘A Purposive Approach to the Interpretation of Tax Statutes’ (1999) 20(2) Statute Law Review 124, at 137. They suggest the use of parliamentary materials as a yardstick; however, it is unhelpful in my opinion for the courts to limit itself in that manner.
138 See more details on proposed purposive tests in SW McCormack, ‘Tax Shelters and Statutory Interpretation: A Much Needed Purposive Approach’ (2009) University of Illinois Law Review 697.
139 ‘In the Area of Statutory Construction, Context Is Critical’ R v Massey (2007) EWCA 2664 Toulson L J para 15.
140 SW McCormack, ‘Tax Shelters and Statutory Interpretation: A Much Needed Purposive Approach’ (2009) 2009 U Ill L Rev 697, at 714.
141 LD Brandeis, Other People’s Money and How Bankers Use It (1914).
142 For more on Bentham, see the UCL project www.ucl.ac.uk/bentham-project/who-was-jeremy-bentham/panopticon accessed 22 October 2020.
143 J Kemper and D Kolkman, ‘Transparent to Whom? No Algorithmic Accountability Without a Critical Audience’ (2018) 22(14) Information, Communication & Society 2081.