THE LEGALITY OR OTHERWISE OF DISTRAINING EMPLOYERS FOR FAILURE TO PAY TAX UNDER THE PAY-AS-YOU-EARN (PAYE) SCHEME IN NIGERIA

Abstract

Income tax is paid under the Pay as You Earn (PAYE) Scheme by a person who is engaged by another under a contract of employment. It is the responsibility of every employer to deduct income tax from the pay of the employee for onwards remittance to the relevant tax authority. Anytime a taxable person fails and/or refuses to make the necessary tax payments or returns, sanctions are prescribed in the relevant tax laws, which include but are not limited to the power to distrain the property of the employer. This impunity is continuing notwithstanding that the issue of assessment and payment of personal income tax payable by a taxable person is ordinarily a matter between the Taxable person and the Tax Authority where the person resides. It is a practice that under the Pay-As-You-Earn (PAYE) Scheme, it is the employer that is visited with all sorts of embarrassment and punishment for failure to pay tax to the tax authority as and when due by the employee. The employer is sometimes but most painfully distrained, kicked out business and exposed to all manner of hardship based on the Best of Judgment Assessment by an inefficient staff of the tax authority. This paper examines the propriety or otherwise of the practice in Nigeria of distraining or distressing of an employer over an unpaid PAYE tax. Doctrinal method of data collection was used and analytical approach adopted in examining the research materials like taxing statutes, judicial decisions, textbooks, journal articles and internet sources. The paper discovered that it is a wrong procedure adopted by the tax authorities to distrain an employer while enforcing payment of tax under the PAYE Scheme. The employer is not allowed under the law to object to any step taking by the tax authority whereas every action is targeted at the employer. Moreover, assessment of tax payable is always determined at the beginning hence the duty of the employer is that of an agent. The paper calls for the review of this wholesome practice in the tax jurisprudence.