State Governments have the exclusive authority to collect personal income tax from itinerant workers

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Read History Go to My Account Log Out Enhanced by Google Legal Business State Governments have the exclusive authority to collect personal income tax from itinerant workers FEDERAL INLAND REVENUE SERVICE (FIRS) v. ATTORNEY GENERAL OF BAYELSA STATE & ANOR SUPREME COURT OF NIGERIA (SAULAWA; ABUBAKAR; AGIM; OGBUINYA;

Listen to this article Share FEDERAL INLAND REVENUE SERVICE (FIRS) v. ATTORNEY GENERAL OF BAYELSA STATE & ANOR

SUPREME COURT OF NIGERIA (SAULAWA; ABUBAKAR; AGIM; OGBUINYA; ABIRU, JJ.SC)

The Federal Inland Revenue Service (“the Appellant”) is the federal tax authority. The Attorney General of Bayelsa State and the Bayelsa State Board of Internal Revenue (“the Respondents”) are, respectively, the chief law officer and the tax authority of Bayelsa State. The dispute arose from payments made to the Appellant by Pacific Inter Drilling West Africa Limited (“PIDWAL”) and the Nigeria Content Development and Monitoring Board (“NCDMB”) between July 2011 and May 2017 as Pay As You Earn (PAYE) tax for their employees working at the Agbami Oilfield. On discovering the alleged erroneous payments, the Respondents, through their tax advisers, KPMG, sought the intervention of the Joint Tax Board.

By a letter dated 23 February 2018, the Joint Tax Board affirmed that the 2nd Respondent was the appropriate tax authority for the collection of personal income tax from employees working at the Agbami Oilfield. Subsequently, the Appellant conducted a statutory refund audit and acknowledged its refund obligation to the Bayelsa State Government in respect of the PAYE taxes collected. The Appellant, however, deducted the sums representing alleged outstanding Value Added Tax (VAT) and Withholding Tax (WHT) liabilities of the Bayelsa State Government, leaving a balance proposed for refund to the State Government.

The 2nd Respondent by a letter dated 18 September 2018, accepted the proposed deduction and supplied its account details for the refund. However, by a subsequent letter dated 3 October 2018, the Appellant reversed its position, contending that the Agbami Oilfield was situated within Nigeria’s Exclusive Economic Zone and that the Federal Government was therefore entitled to collect the personal income tax of employees working there. Efforts by the Respondents to resolve the dispute amicably proved unsuccessful, prompting them to institute an action against the Appellant. The Respondents sought, among other reliefs, a declaration that the 2nd Respondent was the appropriate tax authority over the Agbami Oilfield and an order directing the Appellant to refund the balance of the PAYE taxes after the proposed deduction.

On 4 March 2020, the trial court delivered judgment in favour of the Respondents. Dissatisfied with the decision, the Appellant appealed to the Court of Appeal. The Court of Appeal allowed the appeal in part but affirmed that the 2nd Respondent was the appropriate tax authority for the collection of the personal income tax in question. Still dissatisfied with the decision of the Court of Appeal, the Appellant further appealed to the Supreme Court. One of the issues raised for determination was: Whether, on the facts of this case, the Court of Appeal was correct in affirming the trial High Court’s decision that the Second Respondent was the appropriate taxing authority in respect of the personal income tax payable by the employees of Pacific Inter Drilling West Africa Limited and Nigeria Content Development and Monitoring Board and thus entitled to the repatriation of the balance of the PAYE taxes held by the Appellant.

Learned Silk arguing on behalf of the Appellant contended that the Appellant was the appropriate taxing authority entitled to collect the personal income tax (PAYE) payable by employees of PIDWAL and NCDMB working at the Agbami Oilfield. Counsel argued that the Agbami Oilfield, particularly OML 127, was situated approximately 70 kilometres offshore the Niger Delta coast and beyond the territorial boundaries of Bayelsa State. He maintained that the oilfield was within Nigeria’s Exclusive Economic Zone and was therefore subject to the sovereign rights and jurisdiction of the Federal Government. Learned Silk further argued that the employees concerned were expatriates who worked and resided on the oilfield and did not fall within the category of persons resident in Bayelsa State for personal income tax purposes. He submitted that the Federal Government, acting through the Appellant, was consequently the appropriate authority to collect the taxes in question.

In response, Learned Silk for the Respondents contended that the 2nd Respondent was the appropriate authority to collect personal income tax from employees of PIDWAL and NCDMB working at the Agbami Oilfield. He argued that the PAYE taxes had been erroneously remitted to the Appellant, although the employees were subject to Bayelsa State’s taxing authority. He submitted that the relevant State tax authority was empowered to collect tax from itinerant workers and individuals deemed resident in that State. Learned Silk further submitted that, where an individual had two or more places of residence, the relevant tax law recognised the company’s operational site as the principal place of residence for an employee working there. He finally argued that the inclusion of oil terminals, oil platforms and flow stations within the definition of an operational site brought the employees within the provisions governing itinerant workers, thereby making their personal income tax payable to the Bayelsa State Board of Internal Revenue.

In resolving the issue, the Supreme Court held that:

The State taxing authority, and not the Federal taxing authority, is vested with the power to collect Personal Income Tax from itinerant workers. The Supreme Court explained that the preambles of laws relied on by the Appellant do not concern the administration of personal income tax payable by persons working or residing within Nigeria’s exclusive economic zone or territorial waters and that the provision is clear and unambiguous and by its own force, confers on the 2nd Respondent the statutory authority to collect tax from the itinerant employees.

In the instant case, the Supreme Court found that the employees of PIDWAL and NCDMB, whose taxation was in dispute, qualified as itinerant workers. Accordingly, the Court affirmed that the Bayelsa State Board of Internal Revenue, rather than the Appellant, was the relevant taxing authority statutorily empowered to collect their personal income tax.

Issue resolved in favour of the Respondents.

Prince Lateef Fagbemi, SAN, with J. U. K. Igwe, SAN, T. A. Gazali, SAN, Omosanya Popoola, SAN, Hajara Bolanle Oniyangi, Moses Ideho, O. A. Oloruntogbe and E. D. Gbetsere, for the Appellant.

Preye Agedah, SAN, with Somina Johnbull and Karina Awo, for the Respondents.

This summary is fully reported at (2026) 11 CLRN