Integrating Alternative Dispute Resolution (ADR) In The Management Of Tax Disputes In Nigeria: Challenges And Way Forward (Series One) By Edim Effiong Edim


Alternative Dispute Resolution (ADR) has come to stay in the Nigerian polity and has now been widely accepted as a quicker and more effective route to the settlement of commercial disputes. ADR has rightly been described in various quarters, as a surrogate to litigation in the Nigerian Judicial System. This description is not strange because the advantages of ADR which include amongst other things – time saving, cost effectiveness and preservation of the pre-dispute relationships, clearly outweighs those associated with litigation.

The extant National Tax Policy has encouraged the use of arbitration in the resolution of disputes. The adoption of this policy notwithstanding, tax authorities have by their conduct, been seen to not embrace the options presented by the said policy.

In view of the aforesaid, questions as to whether or not, ADR can legitimately, effectively and efficiently resolve tax disputes in Nigeria and whether same should be fully integrated into the administration regime of taxation in Nigeria, is what this work seeks to examine.


It is trite that tax disputes are unavoidable in taxation. Tax disputes between a taxpayer and a tax authority may arise from tax assessment, tax declaration, audit and collection. Dispute inhibits efficiency in tax collection, and impairs the relationship between the tax payer and the tax authority.

Litigation which is the traditional mode of resolving disputes in Nigeria has proven not to be the best mode of resolving tax disputes. This is because it is characterised by undue delays and attendant high costs; which has made it unattractive. Alternative Dispute Resolution on the other hand, provides a critical platform that small, medium and large-scale start-ups and established businesses can leverage on to achieve quick tax dispute resolution which would in turn guarantee a smart, competitive, seamless and sustainable investment and business atmosphere. It has therefore become imperative to consider the possibility of adopting other modes of dispute resolution in the resolution of tax disputes.

Tax and ADR practitioners/stakeholders have over the years, been at loggerheads as to the possibility of effective applicability of ADR in resolving tax disputes especially because as a matter of public concern, tax cannot be referred to arbitration and even more importantly because the traditional courts in various pronouncements, have restated that they retain exclusive jurisdiction in disputes of public policy. This paper will discuss the various mechanisms provided by law for the resolution of tax disputes, review the challenges of integrating ADR in tax administration in Nigeria, the way forward, and proceed to recommend mediums through which Alternative Dispute Resolution Mechanisms can be integrated in the resolution of tax disputes for the purpose of creating a seamless tax regime in Nigeria.


Tax regulation or laws are the rules and regulations that stipulate how, when and how much must be paid in taxes to the local, state and federal authorities.

The Nigerian Legislature is vested with the powers to make laws for the good and wellbeing of the citizens of Nigeria and from time to time, make such laws which would then be assented to by the President and subsequently interpreted by the Judiciary whenever the need arises.

The tax administrative sector is not left out in legislative enactment as the National Assembly has over the years, enacted laws that have on one hand, directly regulated the tax process and on the other hand, established agencies and parastatals with the mandate to make policies from time to time, that would lead to a seamless tax administration in Nigeria.

Some of the relevant tax regulations in Nigeria are derived from 1999 Constitution of the Federal Republic of Nigeria. These regulations are as follows;

Capital Gain Tax Act is the Act which regulates Capital Gain Tax – Capital Gains tax is imposed at a flat rate of 10% of chargeable gains, it imposes tax on capital gains derived from sale or disposal of chargeable asset.

Value Added Tax (VAT) Act is the Act which regulates VAT – Value Added Tax Act impose tax on the net sale value of non-exempt, qualifying goods and services in Nigeria. The VAT rate is 7.5% of the value of the supply or sale.

Petroleum Profit Tax Act – Imposes tax on the profit of corporate entities engaged in petroleum operations in Nigeria.

Stamp Duties Act – Imposes duties on instrument executed in Nigeria or brought into Nigeria.

Personal Income Tax Act- Personal Income Tax Act impose tax on income of individuals including partnerships and enterprises.

Company Income Tax – Impose tax at the rate of 30 % on the profit of corporate entities who are registered in Nigeria or derive income from Nigeria.

In vesting the powers to make laws for the regulation of tax administration in Nigeria, the Constitution also specifically established courts to hear and determine disputes that may arise from such enactments viz; the Supreme Court, Court of Appeal, Federal High court, High Court of the Federal Capital Territory, States High court. The Federal Government then proceeded to establish the Tax Appeal Tribunal (TAT) to adjudicate on all tax disputes arising from operation of the various Tax Laws as spelt out in the fifth schedule to the FIRS (establishment) Act 2007(1). It is imperative to state here that the Constitution also vests powers in State Governments to establish for their respective states, Revenue Courts to adjudicate on issues relating to and concerning tax assessment and payment/compliance.

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