Methodology
The data for this study would be obtained
from primary and secondary sources. The primary sources include experience and
observation. The personal observation techniques involves watching people.
Events especially toward tax payment in order to obtained first hand
information for the purpose of this research. The secondary source includes the
use of textbooks, journals, magazines, report, unpublished thesis periodical
etc. the method of analysis to be adopted in his work shall be by the use of
simple statistic. Relevant information that depicts the tax structure and
characteristics of Nigeria
shall be elected from different publication of the federal office of
statistics, federal Inland Revenue Service (FIRS) State Board of internal
Revenue and shall be presented using percentage, ratios and table in order to
have a better picture of taxation in Nigeria. this will make the
analysis of the data, clearer and concise.
For taxation to be
effective and efficient, and for taxpayer to respect the system, there must be
proper administration of tax. Tax administration involves the care and
management of the phenomenon of taxation. Under the current law in Nigeria,
taxation is enforced by three tiers of government i.e Federal, State, and Local
Government with each having its sphere clearly spelt out. Section 1 (1) of the
taxes and levies (Approved) list for collection Act1
provides that;
Notwithstanding anything contained…in any other enactment of law, the
federal government, state government and local government shall be responsible
for collecting the taxes and levies listed in part i, part ii, part iii, of the
schedule to this Act respectively.
The companies Income
Tax Act, 1990 established the Federal Board of Inland Revenue together with its
operational arm called Federal Income Revenue Services (FIRS). It has
responsibility to administer companies Incomes Tax Act, petroleum profit Tax
Act, and Value added Tax. In addition, FIRS also administers the personal
Income Tax Act in respect of residents of the federal capital territory,
members of Nigeria
police force, members of Armed Forces of
Nigeria
as well as staff of Ministry of Foreign Affairs and non-residents. Furthermore,
FIRS has responsibility for the capital Gains Tax Act and Stamp duty at in
respect of the resident of the Federal capital territory, corporate bodies and
non-residents.
At the state level,
the personal Income Tax Act, 1993 established the State Board of Internal
Revenue (SBIR) which responsibility is for personal income taxes of individual
and non corporate bodies except resident of the Federal capital territory,
members of Armed forces of Nigeria
as well as staff of Ministry of foreign affairs and non-residents. In
additional it has responsibilities for capital Gains Tax Act and stamp duty Act
except those aspects relating to residents of the federal capital Territory,
corporate bodies and non-residents.
The foregoing had been
the situation until towards the end of the last regime when the country
embarked on a world bank inspired economic reform agenda. This led to the Federal Inland
Revenue Services (establishment) Act 2007 thereinafter referred as the Act)2 on tax administration at the state
level in Nigeria.
The Act was signed into law on 16th April, 2007. The Act created the
Federal inland Revenue services (FIRS) and, by virtue of its sections 2, 25 and
68, effectively put under it’s administration, the personal Income Tax Act No.
104, 11993 (PITA) and other tax laws. The said Sections 2, 25 and 68 are to the
effect that the FIRS has henceforth taken over the control and administration
of taxes and laws specified in seven legislations listed in the first schedule
to the Act among others. The legislation are:
1. Companies
Income Tax Act 1990
2. Petroleum
profit Tax Act 1990
3. Personal
Income Tax Act 1993
4. Capital
Gains Tax Act 1990
5. Value
added Tax Act 1993
6. Stamp
duty Act 1990 and
7. Taxes
and levies (approved list for collection) Act 1998
A
study of the above list leaves no one in doubt as to the intention of the Act,
which is nothing but a notification of Tax administration in Nigeria albeit though the backdoor. The Act3 has completely wiped out the division
of tax administrative responsibilities that hitherto existed between the FIRS
and the SBIR. Unlike the previous tax legislations that clearly specified
responsibilities of the FIRS or the SBIR as the case maybe, the new Act does
not even recognize the existence of the SBIR as a revenue collection agency let
alone of identifying where they belong in tax administration under the new dispensation.4
The Act only recognizes the SBIR in section 8(q) as if they are clerical
outfits only created to assist the FIRS in issuing taxpayer identification
number to every taxable person in Nigeria. In fact section 8 of the federal
Income revenue Service (establishment) Act, 2007, list among its functions of
the SBIR as provided in the PITA as if the SBIR are already extinct. Given the
fact that the SBIR were created by the PITA, the enactment of the Act seriously
calls into question the continuous relevance of the SBIR if not their
legitimacy.
A
quick glance at the Act will effortlessly reveal that its main objectives are
to pave way for the FIRS to take over the functions of the SBIR. It sought to
do this by introducing
a centralized tax
administration as being canvassed in the dying days
of the fifth republic. That could have been the only reasons why an act meant
to create a federal tax agency would contain many provisions that are meant to
take over the basic functions of state revenue agencies and make them
redundant. For example, sections 26, 27 and 28 o the Act practically plagiarize
section 46,47 and 48 of the PITA by empowering the FIRS to call for returns,
books, documents and information from taxable individuals preparatory to
assessing them for income tax.
In
addition to the forgoing duplication of function of the SBIR by the FIRS, section 28 (1) of the Act5
went further by compelling Banks to deliver return to the FIRS in respect of
taxable individuals under section 48 of PITA are not as wide as those given to
FIRS by the Act. In order to further rub it from the SBIR that there is no
place for them in the current dispensation, section 59 of the Act empowers the
Minister of Finance to establish a Tax appeal Tribunal. The Act specifically
extends the tribunal’s jurisdiction under section 1191) of the fifth schedule
to cover disputes and controversies arising form the personal Income Tax Act,
1993 and other tax laws. This is an effective way of transforming the Federal
Minister of Finance.
The
inclusion of the taxes and levies (approved list for collection) Act, 1998 in
the list of legislations to be controlled by FIRS has as its main objectives of
this particular legislation to eliminate multiple taxations by specifying the
relevant tax authority that can collect specified types of taxes and levies.
This is not a tax law per se; rather, it is a law that only identifies tax
collection responsibilities among different revenue collecting agencies taking
into consideration the federal nature of the country.
It
is pertinent at this stage, to note that Section 4 of the 1999 Constitution as
amended (items 58 and 59 of the part 1 of the 2nd schedule) makes
impositions of stamp duties and taxations of incomes, profits and capital gains
exclusively preserved for the Federal Government. However, item 7 of part 2 of
the 2nd schedule to section 4 of 1999 constitution as amended (concurrent
legislative list) states that:
“In the exercise of its power to impose any tax or duty on:
1.
Capital Gains, incomes or profits of persons
other than
companies; and
2.
Documents
or transactions by way of stamp duties, the
National Assembly may subject to such conditions
as it may prescribe, provides that the collection
of any such tax or duty or the administration
of the law imposing it, shall be carried
out by government of the state or other authorities
of a state.”
Having enacted the PITA, and
having provided in its section 85 for the establishment of the SBIR with the
responsibility of administering the taxes and duties mentioned, in the above
quoted item 7 of part ii of the second schedule to section 4 of the Nigerian Constitution.
The National Assemble has ceded its assessment and collection responsibilities
in respect of the Personal Incomes taxes to the state. Effectively, therefore,
collection of taxes mentioned in the concurrent list now is residual to the
state unless the PITA is amended or repealed to reflect otherwise.
Furthermore on the
assessment and collection, once an assessment has been done on a taxpayer, the
taxpayer is liable to pay statutorily, the Board or other relevant tax
authority does not initially carry out assessment. According to section 41 (1)
of the PITA, for each year of assessment, a taxable person shall without notice
or demand therefore, file a return of income in the prescribed form and
containing the prescribed information with the tax authority of the state in
which the taxable person is deemed to be residential. A similar provision is
contained in section 41 (1) of the CITA thus: Every company including a company
granted exemption from incorporation shall, at least once a year without notice
or demand therefore, file a return with the Board.
The
above provision show clearly that the Act require the individual or company to
make self-assessment of its source of income and profits. The return must include
a statement or declaration that the statement is to the best of the taxpayer’s
knowledge, accurate and complete. In the case of a company, the tax authority
may accept it and proceed to determine the amount of assessable and process to
determine the amount of assessable profits which it proposed to include in the computation
of the total profits of the company.
However,
where a company or individual fails
to comply with the prescribe form, then the tax authority is empowered to
refuse to accept the return and make its own assessment of the individual or company
to its best of judgment6.
Furthermore, if the bound discovers or is of the opinion that any company liable
to tax has not been assessed or has at an amount less than it ought to have
been change, the board may within the year of assessment or within six month
thereafter, assess such company at such amount or additional amount as ought to
has been charged.
Conclusively,
the registration of a taxpayer is one essential procedure that needs to be done
by FIRS office given the necessary details that must be provided by the
taxpayer on demand. It is required that during registration with any FIRS
office, the taxpayer must provide the following documents; a certificate of
incorporation issued by C.A.C and bearing an Rc No; necessary document showing
the correct business address. Individuals and enterprises are registered under
individuals enterprises are registration.
1 Taxes And
Levies (Approved List For Collection Act. Cap T2L.E 2004
2 Federal
Inland Revenue Service (Establishment) Act (No. 13 of 2007).
3 Ibid
4 Ibid
5 Ibid
6
Section 53(2) of personal income tax act, cap p8
LFN 2004, and section 47(20(b) of
companies income tax act cap 21 LFN 2004