CITN vs ICAN......BATTLE OVER?

The intendment of this presentation is to examine the controversy between the parties to the suit (suit no.M/476/2005:CITN vs ICAN) on the regulation of Tax practice in Nigeria

This presentation shall also seek to determine the extent to which the decision in the above suit has helped in resolving the dispute. This paper shall also suggest views on the way forward.

Given the fact that taxation practice is a fairly new or better still ,an emerging practice area in Nigeria, it is only natural that there be uncertainty as to appropriate professional body that regulates the tax profession and practise.

The importance of regulation in any given profession can not be over-emphasized.It would be difficult to have a well-functioning tax system without tax advisors. Becausemost taxpayers are not familiar with the intricacies of the tax laws, tax advisors are needed sothat taxpayers can fulfill their complicated tax obligations. As informed members of the public, tax advisors also provide input to the formulation of legislation and regulations.

By counseling taxpayers on how to comply with their legal obligations, tax advisors servean important public interest; the state has an interest in fostering and protecting this role. Therole of tax advisors, however, differs from that of the tax authorities in that their primary loyalty is to their client, not to the state. An important function of the regulation of tax advisors is to help strike an appropriate balance between loyalty to the system and loyalty to the client.

Regulation also has the goal of protecting clients from unscrupulous or incompetent tax advisors. Here, the regulatory interest of the state is similar to that in other areas of consumer protection. The danger is that such regulation might serve instead to protect the economic interests of those permitted to act as tax advisors, or might strangle the free exercise of the profession by creating undue bureaucratic control.

In Nigeria, the regulation of the tax profession and practice has been a source of controversy between the Chartered Institute of Taxation of Nigeria and the Institute of Chartered Accountants of Nigeria.

The Chartered Institute of Taxation of Nigeria was specifically established under the Chartered Institute of Taxation of Nigeria Act (No76 of 1992)1 “to regulate members of the profession and provide for matters connected therewith”

Section 10 of the said Act provided thus:

10. Registration of members.

(1) Subject to section 11 of this Act and to rules made under section 8 of this Act, a person shall be entitled to be registered as a member of the Institute if-

(a) he passes the qualifying examination accepted by the Council under this Act and completes the practical training prescribed; or[1]

(b) he is by law entitled to practice for all purposes as a tax administrator or practitioner in the country in which the qualification was granted and, if the Council so requires, he satisfies the Council that he has sufficient experience as a tax administrator or practitioner; or

he satisfies the Council that immediately before the commencement of this Act he had not less than-

(i) one year's practical experience in accounting in the case of a registered member of the Institute of Chartered Accountants in Nigeria;

(ii) two years' practical experience in tax administration or practice in the case of a person who has passed the final of the Federal Board of Inland Revenue Training School examination or its equivalent;

(iii) three years' practical experience in taxation in the case of any other person possessing a degree certificate from any Nigerian or overseas recognized institution majoring in taxation.

(2) An applicant for registration shall, in addition to evidence of qualification, satisfy the Council that-

(a) he is of good character;

(b) he has attained the age of 21 years;

(c) he has not been convicted in Nigeria or elsewhere of any offence involving fraud or dishonesty; and

(d) he fulfils his financial obligations to the Institute.

(3) The Council may, in its sole discretion, provisionally accept a qualification produced in respect of an application for registration under this section, or direct that the application be renewed within such period as may be specified in the direction.

(4) Any entry directed to be made in the register under subsection (3) of this section, shall show that such registration is provisional and no entry so made shall be converted to full registration without the consent of the Council signified in writing in that behalf.

(5) The Council shall, from time to time, publish in the Gazette particulars of qualifications for the time being accepted as aforesaid.

The said Act also made relevant provisions enabling the Institute to set examinations to qualify for membership and also discipline members. Other important and notable sections of the Act are Sections 15-17 which provides thus:

15. Application of this Act to unregistered persons

Any person who is not a member of the Nigerian Institute of Taxation (in this Act referred to as "the former Institute") who, but for this Act, would have been qualified to apply for and obtain membership of the former Institute may, within the period of three months beginning from the commencement of this Act, apply for membership of the Institute in such manner as may be prescribed by rules made by the Council; and if approved, he shall be enrolled or, as the case may be, registered, according to his qualification.

16. When a person is deemed to practice as a member

(1) Subject to subsection (2) of this section, a person shall be deemed to practice as a member of the Institute if, in consideration of remuneration received or to be received and whether by himself or in partnership with any other person-

(a) he engages himself in the practice of taxation or holds himself out to the public as a member of the Institute; or

(b) he renders professional service or assistance in or about matters of principle or detail relating to taxation procedure; or

(c) he renders any other service which may by regulations made by the Council, with the approval of the Minister, be designed as service constituting tax practice.

(2) Nothing in this section shall be construed so as to apply to persons who, while in the employment of any Government, are required under the terms or in the course of such employment, to perform the duties or any of the duties of a tax administrator or practitioner.

17. Rules as to practice, etc.

(1) The Council may make rules-

(a) for the training of suitable persons in taxation administration, methods and practice; and

(b) for the supervision and regulation of the engagement, training and transfer of such persons.

(2)The Council may also make rules-

(a)prescribing the amount and due date for the payment of the annual subscription, and for such purposes different amounts may be prescribed by the rules according to whether the person is registered as a fellow, associate member, graduate member or student member;

(b) prescribing the form of licence to practise to be issued annually or, if the Council thinks fit, by endorsement on an existing licence; and

(c) restricting the right to practise in default of payment of the amount of the annual subscription where the default continues for longer than such period as may be prescribed by the rules.

(3) Rules when made under this section shall, if the chairman of the Council so directs, be published in the Gazette.

Section 19(2) of the Act created an offence thus:

If, on or after the relevant date, any person who is not a member of the Institute practices or holds himself out to practice as a tax administrator or practitioner for or in expectation of reward or takes or uses any name, title, addition or description implying that he is in tax practice, he shall be guilty of an offence; provided that, in the case of a person falling within section 15 of this Act

Importantly, the CITN Act specifically defined “profession” to mean the profession of taxation;

The Institute of Chartered Accountants of Nigeria, on the other hand, was established by the Institute of Chartered Accountants of Nigeria ACT(no 15 of 1965) to regulate the profession of accountancy and for matters connected there with.[2] The Act specifies the conditions for registration of accountants. The Act further states when a person can be deemed to practise as accountants. Section 14 provides thus

(1) Subject to subsection (2) of this section, a person shall be deemed to practise as an accountant if, in consideration of remuneration received or to be received, and whether by himself or in partnership with any other person-

(a) he engages himself in the practice of accountancy or holds himself out to the public as an accountant; or

(b) he offers to perform or performs any service involving the auditing or verification of financial transactions, books, accounts or records or the preparation, verification, or certification of financial, accounting and related statements; or

(c) he renders professional services or assistance in or about matters of principle or details relating to accounting procedure or certification of financial facts or
data; or

(d) he renders any other service which may by regulations made by the Council with the approval of the Minister be designated as service constituting practice as an accountant.

(2) Nothing in this section shall be construed so as to apply to persons who, while in the employment of any government or person, are required under the terms or in the course of such employment, to perform the duties of an accountant or any of them.

Note that the ICAN ACT did not specifically define the word “accountancy” or the profession. It only defines an "accountant" as including an auditor; It also states that "chartered accountant" means an accountant enrolled as a fellow or associate member of the Institute;

By the relevant originating process filed in 2005 before the Lagos High Court of the High Court of Lagos State, the Claimant in the above suit sought the following prayers from the court:

1. A DECLARATION that taxation is legally recognized in Nigeria as a profession separate and distinct from the accountancy profession.

2. A DECLARATION that the Claimant is vested with power to regulate and control the practice of taxation in all its ramifications to the exclusion of the Defendant and any other professional body or Institute in Nigeria.

3. A DECLARATION that it is illegal for any member of the Defendant who is not a member of the Claimant to practise, or hold him out as practising, as a tax administrator or tax practitioner for, or in expectation of, a reward in Nigeria.

4. A DECLARATION that it is unlawful for the Defendant to forestall or impede the Claimant’s efforts to regulate tax practice.

5. AN ORDER OF PERPETUAL INJUNCTION restraining members of the Defendant who are not members of the Claimant from practising, representing, or holding themselves out as tax administrators or practitioners in violation of the Chartered Institute of Taxation of Nigeria Act No. 76 of 1992, Cap. C10 of the Laws of the Federation of Nigeria, 2004.

The crux of the issue formulated by the Claimant for the court’s determination was whether by virtue of the Acts establishing ICAN and CITN, the then Claimant (CITN) is not the only body vested with power to regulate the taxation profession in Nigeria and whether members of ICAN who have not registered with CITN can practice taxation or hold themselves out as tax practitioners in Nigeria. The trial Judge(Per Justice Lateefat Okunnu) upon exhaustive consideration of the case on the merit, on 12th March,2007 found for the Claimant and granted the Claimant’s relief as prayed. The court in its judgment opined as follows

“The law makers in their wisdom, have created a new profession out of tax practice. It is not for the court of law to question them for so doing. Nor can the court attempt (by means of its pronouncements) to abrogate this law simply because a particular judge is not enamored of it. As we say in legal circles, sentiments have no place in law. All that the court will do is to interpret laws in such a way as to give them the proper meaning and effect that the law makers intended. This particular law - the CITN Act - I find, has come to create a new order that hitherto did not exist. It has created the taxation profession, and determined and defined the "space", as it were, within which that profession is to exist and be practised.”

Quite expectedly, ICAN filed an appeal against the aforesaid High Court judgment in Appeal No Appeal No. CA/L/673/07. The Court of Appeal delivered its judgment in 2013 and upheld the 1st , 2nd and 5th reliefs granted by the court below while setting aside the 3rd and 4th reliefs earlier granted.vis:

1st -A DECLARATION that taxation is legally recognized in Nigeria as a profession separate and distinct from the accountancy profession.

2nd -A DECLARATION that the Claimant is vested with power to regulate and control the practice of taxation in all its ramifications to the exclusion of the Defendant and any other professional body or Institute in Nigeria.

3rd -AN ORDER OF PERPETUAL INJUNCTION restraining members of the Defendant who are not members of the Claimant from practising, representing, or holding themselves out as tax administrators or practitioners in violation of the Chartered Institute of Taxation of Nigeria Act No. 76 of 1992, Cap. C10 of the Laws of the Federation of Nigeria, 2004.

The source of this controversy, in my view, may have arisen out the conceptual perceptions of the individual laws establishing both institutes. A literal consideration of both acts would reveal that the CITN Act was clear and unambiguous and specifically covered the field of the taxation profession and practice. The ICAN Act on the other hand was not specific as to entitle ICAN to foray into the arena of the taxation practice. Note that the CITN Act specifically defined taxation profession whereas the ICAN Act did not.

The above leads to the determination of a conceptual issue: what exactly is the scope of the accounting/accountancy profession?

It is hereby surmised that although it is conceded that taxation may be an aspect of the accountancy practice, the specific enactment of the CITN Act has created a new order, establishing taxation practise as a core of its own. To this extent, the decision of the High Court and the Appellate court hereinbefore reviewed has helped in a great deal in stating the categorical position as specifically elucidated in the CITN Act

As we have seen in this paper, aspects of accountancy practice foray into tax practice. It means that accountancy can really not do without taxation. In the face of the clear provisions of the CITN Act and the decided authorities which has upheld same, an understanding can be reached between both CITN and ICAN on regulation of accountants who foray into tax practise.