Administration of Personal Income Tax in Nigeria: An Appraisal.
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Date
2017
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College of Law, Kwara State University.
Abstract
The Black’s Law Dictionary defines tax as “a charge usually monetary, imposed by the government on persons, entities, transactions or property to yield public revenue. In broad term, the term embraces all government impositions on persons, properties, privileges, occupations, and enjoyment of the people and includes duties and excises. Although a tax is often thought of as being pecuniary in nature, it is not necessarily payable in money”. Tax is, therefore, a compulsory levy by government through its agencies on the income, consumption and capital of its subjects. These levies are made on personal income such as salaries, business profit, interest, dividend, discount or royalties and it is also levied against company profit, petroleum profit, capital gains and capital transfer. Taxation is primarily aimed at generating revenue for government in order to cater for its expenditure. The importance of taxation in the activities of any government cannot be overemphasized. The world over, tax is a major source of government revenue, however, not every national government has been able to effectively exploit this great opportunity for revenue. This can be attributed to a number of reasons including the system of taxation; tax legislation; tax administration and policy issues; over-reliance on other sources of revenue (such as foreign aid, grants, oil revenue); corrupt practices in the system especially as it relates to the system of tax collection and behaviour of citizens towards tax payment; and ease of tax payment.
The unwillingness to pay tax, which may depend on the aforementioned issues in tax-revenue generation, remains a key taxation-challenge in Nigeria. On the ease of tax payment, evidence from the World Bank Doing Business Report 2011 and 2012, show that Nigeria ranked 109 and 138, respectively, out of 183 countries; in Sub-Saharan Africa (SSA), it ranked 27 out of 46 countries. This result is not impressive, despite some improvements the government has made to the tax system in the recent past.
In most developing countries, the imposition of various forms of taxes has been without some forms of feedback on compliance, effectiveness and efficiency of such taxes. This article provides an overview of Personal Income Tax in Nigeria, taking the recent amendment of the Personal Income Tax Act into consideration, and examines the factors underlying individual taxpayers’ compliance behaviour in Nigeria and the causes of non-compliance with Personal Income Tax Act. This article further examine the challenges confronting the implementation of Personal Income Tax Act, as well as the various methods adopted by taxpayers to avoid compliance with the Income Tax Act. The article makes recommendations on how to ensure voluntary compliance with the Act. The significance of this paper is that it will enable the government officials, researchers and economic analysts to appreciate the level of compliance/non-compliance with Personal Income Tax Act in Nigeria.
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Citation
Changing Perspectives in Law and Practice of Taxation in Nigeria: Essays in Honour of Professor M. T. Abdulrazaq Oyesola Animashaun, O. Y. Abdul-Hamid, Bimbo Atilola (eds) 345-368