THE CURRENT TAX SYSTEM IN NIGERIA.

The Nigerian tax system has undergone several reforms geared at enhancing tax collection and administration with minimal enforcement cost. The recent reforms include the introduction of TIN, (unique Taxpayer’s Identification Number  which became effective  since February 2008), automated tax system that facilities tracking of tax positions and issues by individual taxpayers, e-payment system which promotes smooth payment procedure and reduces  the incidence of tax touts, enforcement scheme (Special Purpose Tax officers), these are special tax officers  in collaboration with other security agencies to ensure strict compliance in payment of taxes. The tax authority now has autonomy to assess, collect and record tax. This enabling environment which came into being on the basis of (Section 8(q) of FIRS Establishment Act 2007) has led to an improvement in tax administration in the country. The Nigerian tax system has undergone significant changes in recent times. The tax laws are consistently being reviewed with the aim of repealing obsolete provisions and simplifying the main ones. Under current Nigerian law, taxation is enforced by the 3 tiers of government, i.e. federal, state, and local governments, with each having its sphere clearly spelt out in the Taxes and Levies (approved list for Collection) Decree, 1998. Despite this improvement, there are still a number of contentious issues that require urgent attention and among them is the issue of the appropriate tax authority to administer several taxes. The crisis between Lagos State and the federal government on the tax jurisdiction of VAT in the state is still a contentious issue that has been taken to the courts. Other states like Ogun, Oyo and Benue have joined Lagos state, while states like Abia, have gone against this. Also, there is the issue of multiple taxes administered by all the three tiers of government which sometimes imposes welfare cost.  Furthermore, the issue of the paucity of a data base, which contributes to tax avoidance in the country. The issue of corruption is still a perennial issue in the country; this reduces the confidence and trust of the taxpayers in discharging their civic duty. The issue of infrastructural development is also a crucial issue, in Nigeria, the level of infrastructural facilities  is in a deplorable state, most of the facilities are often privately sourced, thus a number of people wonder what  the taxes collected are  used for,  hence the tendency to evade tax payment. Furthermore, the problem of the tax language that is legally codified makes it difficult for an average Nigerian to understand. Policy Recommendations *Disclosure  and sharing of information There is a need for mutual cooperation among different government agencies and parastatals, this collaboration should enhance exchange of information, and reduce the incidence of tax evasion as well as fraudulent tax practices. *Beneficial /welfare schemes. To elicit voluntary compliance, the government should be more responsive to the welfare needs of the citizens. The Nigerian tax system can effectively generate more revenue when the citizens have trust and confidence in the authority. Lagos state in recent times is generating huge revenue due to the fact that many corporate bodies and individuals feel that they can visibly feel the development impact of their contributions *Patriotism  and positive tax culture There is a need to enhance a positive tax culture; this can be done through the re-branding efforts of the ministry of information.  In most developed countries, tax payment is considered a moral and civic responsibility, thus tax avoidance is frowned upon. This implies that our leaders should demonstrate patriotism through leadership that is worthy of emulation by timely payment of their taxes and discharging other civic duties. *Religious  education /responsibility: In Nigeria, most of the citizens are religious and faithful people. Thus, with religious provisions that explicitly support fulfilling religious obligations, tax payment could be enhanced. Therefore, tax education can be encouraged to be part of religious education among the adherents.  Evoking religious injunctions could elicit more voluntary compliance and reduce tax evasion and avoidance. For instance, the Biblical saying of “Give unto Caesar, what is for Caesar and to God what is for God” is apt and relevant to the Christians while the Qur’an calls on the Muslims thus: “O you who believe, fulfil all obligations” (Q5:1). *Civic education Civic education was part of the educational curriculum in the early 1960s and 1970s; however, this was stopped in the mid-1980s and 90s. A re-introduction of this into the school curriculum would not only improve civic responsibility but also infuse a sense of patriotism and commitment to national ideals and interests. There should be vigorous enlightenment and public awareness about tax payment and its importance in the economy. *Hot lines There can be dedicated lines or emails, where issues, observations and queries can conveniently reach the authority; this will contribute to the reduction of tax fraud and avoidance. *Harmonization of taxes to reduce double/ multiple taxation on a single taxpayer There is a need to harmonize the different taxes that are being levied by the different tiers of government so as to reduce the negative impact on the taxpayer. A situation where an individual pays rates and licenses to local government, pays sales tax and personal income to the state government and at the same time pays VAT is not one that will encourage voluntary compliance. *Improving  our record or database, to be able to track all potential taxpayers In Nigeria, an improvement in our tax revenue can be enhanced through a regularly updated, comprehensive database. This would enable the country to be able to track all potential taxpayers as well as to reduce incidences of tax avoidance. *Elongated tax operation (Twilight Shift) In order to maximize the revenue accruing from tax collection and especially to fulfil the principles of convenience and economy on the part of taxpayers, collectors of tax should be made to operate on shift throughout the day. *Tax laws should be codified in simple, non-technical language, if possible in the three major languages: Hausa, Ibo and Yoruba *Need for  an effective judicial process to adjudicate on tax issue List of approved taxes and levies for the three tiers of government A list of approved taxes and levies for collection by the three tiers of government: (A) Taxes collectible by the Federal Government (1) Companies income tax; (2) Withholding tax on companies; (3) Petroleum Profit Tax; (4) Value-added tax (VAT); (5) Education tax; (6) Capital gains tax – Abuja residents and corporate bodies; (7) Stamp duties involving a corporate entity; (8)    Personal income tax in respect of: –    Armed forces personnel; –    Police personnel; –    Residents of Abuja FCT; –    External Affairs officers; and –    Non-residents. (B) Taxes/Levies Collectible by State Governments (1) Personal income tax: – Pay-As-You-Earn (PAYE); – Direct (self and government) assessment; – Withholding tax (individuals only); (2) Capital gains tax; (3) Stamp duties (instruments executed by individuals); (4) Pools betting, lotteries, gaming and casino taxes; (5) Road taxes; (6) Business premises registration and renewal levy; – urban areas (as defined by each state): *maximum of N 10,000 for registration and N5 ,000 for the renewal per annum – rural areas – registration N2,000 per annum – renewal N 1,000 per annum (7) Development levy (individuals only) not more than N100 per annum on all taxable individuals; (8) Naming of street registration fee in state capitals (9) Right of occupancy fees in state capitals; (10) Rates in markets where state finances are involved. (C) Taxes/Levies Collectible by Local Governments (1) Shops and kiosks rates; (2) Tenement rates; (3) On and off liquor licence; (4) Slaughter slab fees; (5) Marriage, birth and death registration fees; (6) Naming of street registration fee (excluding state capitals): (7) Right of occupancy fees (excluding state capitals); (8) Market/motor park fees (excluding market where state finance  are involved); (9) Domestic animal licence; (10) Bicycle, truck, canoe, wheelbarrow and cart fees; (11) Cattle tax; (12) Merriment and road closure fees; (13) Radio/television (other than radio/tv transmitter) licences and vehicle radio licence (to be imposed by the local government in which the car is registered); (14) Wrong parking charges; (15) Public convenience, sewage and refuse disposal fees; (16) Customary, burial ground and religious places permits; and (17) Signboard/advertisement permit. 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