AN EVALUATION OF THE LEGAL REGIME FOR THE IMPOSITION OF PERSONAL INCOME TAX IN NIGERIA

Abstract

Tax is one of the very sources of revenue to the government. It is a legitimate compulsory contribution by the citizens to the government in exchange for the provision of social amenities for the citizens. One of the features of British colonial administration in Nigeria was the introduction of monetary system, the use of British currency which replaced trade by barter system. This eventually led to the levying of tax by the British Government. However, upon independence, the newly formed Nigerian State retained this tax system, though with variations. Accordingly, various types of taxes were then introduced, one of which was personal income tax, which was levied on salary or properties of the individuals. Notably, there have been many changes in the policies and law regulating the administration of taxation in Nigeria. This work therefore had evaluated the current legal regime for the imposition of Personal Income Tax in Nigeria. However, some of the lingered problems of tax administration in Nigeria are non-compliance by the taxpayers as well as the tax authorities to the tax policies and law, and tax evasion. The researcher adopted the doctrinal research approach, wherein the laws regulating Personal Income Tax were reviewed. In the same manner, opinions of writers on the subject were also referred to in the course of this research. The research finding showed, among other things, that the new 2011 Personal Income Tax Act offers a higher relief to taxpayers than the old Act. This is because a minimum fixed component of N200, 000 is claimable under 2011 Act while N5, 000 could maximally be claimed under the old Act. Again, the variable component of the old law is 20% of earned income while the 2011 Act allows claims for 20% of gross income. Logically, since Gross Income will normally be higher than Earned Income, the 2011 Act apparently offers a higher amount of relief for taxpayers than the 2004 Act. On the other hand, the research found that the malignant problems of non-compliance to tax laws, tax evasion and multiplicity of taxation were not properly addressed either by the Personal Income Tax Act, 2004 or Personal Income Tax (amendment) Act, 2011. In the light of the above, the work recommended among other things that the government should live up to their fiscal and social responsibilities since they are dependent variables for tax compliance in Nigeria, and also ensure proper compliance by the tax authorities to the tax laws and regulations.