AN ANALYSIS OF THE LEGAL FRAMEWORK FOR THE ADMINISTRATION OF PERSONAL INCOME TAX IN NIGERIA

Abstract

Tax has become globally acknowledged as the most constant and most reliable source through which government generates revenue. Personal income tax is the oldest form of taxation and predates the modern Nigeria state having evolved from the pre-colonial era through the colonial era and still evolving in this post-colonial era. It is a tax on the personal income of the taxable individual for the year of assessment. In line with the Personal Income Tax Act, the administration of this tax is vested on the state revenue authority of each state and collectable from the residents of the state. The issue of residence has been a burning issue in the collection of this tax and certain rules have been developed to ascertain whether one is resident in a particular state thereby making him liable to pay to the revenue authority of the particular state. This paper explores the nature of personal income tax in Nigeria, its legal framework and administration. Attempt is made to concisely analyze personal income tax, the issues and challenges surrounding assessment and collection of personal income tax. The paper found out that the collection of illegal taxes, mismanagement of funds collected, large informal sector amongst other challenges have affected negatively the output of personal income tax. It recommends that the various states should adhere strictly to the rules of residence as provided for in the Personal Income Tax Act and also for the government to judiciously put into use the revenue generated through tax as this will encourage voluntary compliance from the taxpayers.