Recently, Ifueko Omoigui-Okauru,chairman, Joint Tax Board said the new Personal Income Tax (PIT) Amendment Act, 2011 will become operational in April, bringing to an end incessant evasion by individuals and corporate organisations in Nigeria. This is so, according to Omoigui-Okauru because the new act has various penalties ranging from fines to outright imprisonment of defaulters. JTB is the umbrella body of federal and state tax authorities in Nigeria.
She said at the media briefing on the Personal Income Tax (PIT) Amendment Act, 2011 in Lagos that the new Act has simplified process of compliance, stressing that defaulters would face the stipulated penalties.
For instance, under the old Act, the penalty for individual or corporate body that made false statements and returns was expected to pay N5, 000 or face five years imprisonment but under the amended Act, the sanction is N10, 000 and N50, 000 for individuals and corporate bodies and imprisonment for six months, adding that “with the new Act, government has demonstrated that it has a listening ear and reduced the overall burden on low and middle income earners, while recouping it from high net worth individuals who would be expected to bear a higher burden given their level of earning.
According to her, “The law was conceived to bridge the gaps identified in the old Act, especially with respect to its impact on the take-home earnings of low and middle income earners, which is the band within which most of us all fall.”
But, Omoigui-Okauru, who is also the chairman, Federal Inland Revenue Service (FIRS) failed to convince the public on how to tame the scourge of the multiple taxation, which most Nigerians are suffering. She only described it as ‘hydra-headed monster’ that must be addressed by all the tax authorities, stressing that the issue was thoroughly discussed at the last Economic Management Team (EMT).
She pointed out that the board was working towards having a uniform revenue code in the country. The implication is that until that is done; Nigerians would have to live with multiple and all manner of intra and inter-states levies, all in the name of raising revenue for the government.
Another issue that attracted the attention of Journalists was that of accountability and transparency. Again, she said part of the accountability is for the board to ensure that all taxable adults perform their civic responsibility.
“The amendment is focused on Personal Income Tax and not necessarily on checking multiple taxation. The overall reform agenda is concerned with that. They are exploring national dialogue with president, governors and stakeholders, even as Lagos state has provided code to check multiple taxation, but not all states yet, but work in progress (WIP).
Babatunde Fowler, chairman, Lagos State Board of Internal Revenue, who justified the huge tax in Lagos told his audience that they are enough evidence on the use of the funds. He decried the level of poor compliance with tax payment, stating that the state tax authorities had been able to enlist over 12, 000 people into the tax fold.
“In Lagos, most of the people caught for traffic offences by LASTMA and are found not to be taxpayers. What we do is to adopt on-the-spot assessment of such individuals. This is one way we have been able to get people to become taxpayers,” he stated.
However, Omoigui-Okauru, said that following the signing into law the Personal Income Tax (Amendment) Act 2011 by President Goodluck Jonathan, the president, vice-president, governors as well as their deputies are to pay tax on all their official and non-official earnings effective April 1, 2012.
She said some of the major changes in the new tax reforms were expected to bring out “a more reflective and efficient personal income tax administration at the state and federal levels”.
In the new income tax rates formulation, a first earning of N300, 000 would attract 7 per cent tax, while subsequent income in same amount would be taxed at 11 per cent.
Those who earn N500, 000 would be made to pay 15 per cent of it as tax in the first instance, while 19 per cent would be charged in the next earning of same amount.
In addition, earnings of N1, 600,000 would attract 21 per cent tax, while income above N3, 200,000 attracts 24 per cent in tax.
But under the old rates, an initial income of N30, 000 attracted 5 percent in tax and 10 percent of same amount subsequently. Also, 15 percent was deducted as tax from earnings of N50, 000 at first and 20 percent in same amount the next time.
A tax payer, who earned N160, 000 had to part with 25 percent of that amount in tax under the former rates.
Under the new tax administration, there is the provision for a consolidated relief allowance of N200, 000 plus 20 percent gross income as deductible allowance from income before computing tax on the balance, a method of calculation which replaces the outdated and cumbersome process of computing allowances under the old Act.
Omoigui-Okauru said one of the objectives of the amendment was to ensure that the incidence of taxation was not borne by an individual more than once.
She described the reform as unprecedented in the history of tax administration in the country where there is an effort by government to give back to the low income earners, adding that those who had been honest in declaring their real income would realise a drastic reduction in tax payment.
The JTB boss, however, handed down warning to those in the habit of circumventing tax to turn a new leaf or face the wrath of tax administrators, who she said have been further empowered to search, seize and embark on risk-based audit of any organisation.
She said, “As we commence the implementation of the Personal Income Tax (Amendment) Act 2011, let me invite everyone to partner the Joint Tax Board, State Boards of Inland Revenue, Federal Inland Revenue Service and government at all levels to ensure the successful implementation of the law.
“Without a doubt, this is a milestone in the area of personal income tax in Nigeria and we believe it is a step in the right direction for Nigerian tax system and one which gives us a platform to work toward ensuring that taxation becomes the pivot of national development in Nigeria.”
While Nigerians welcome the new personal income tax administration, the issue should not be inclusion of some political office holders but the need to eliminate the multiplicity of taxes and the need for accountability and transparency in the administration of the funds. It is not enough to read or watch them, but that Nigerians deserve to feel it, with the attendant improvement in their standard of living.