Effective tax administration for sustainable devp in Anambra
ANAMBRA State Government accords top priority to training and re-training of its work-force for the requisite capacity, optimum productivity, employment, wealth creation and poverty alleviation. The state governor, Dr. Willie Obiano, through the Head of Service has deemed it expedient to organize training and re-training of the work-force through in-service training programmes and workshops to upgrade their capacity for optimum service delivery.
Recently, workshop was organized for the staff of Internal Revenue Service (IRS] mainly Tax Inspectors in Awka. The capacity building workshop was a synergy between IRS and Anambra State and local governance Reform [SLOGOR] Project and JK Consulting Co. Limited. The programme focused on taxation: tax assessment, collection, accounting, administration, and implications of International Accounting Standards [IFRS and AIRS]
Correct tax payment is a desideratum for government to augment other sources of revenues with which to make annual budgets and implement the provisions to assuage the yearnings and aspirations of the governed in terms of infrastructural provisions that create the enabling environment for social and economic activities. Unfortunately, people are reluctant to fulfill the civic obligations like correct and prompt tax payment of taxes. In spite of government’s moral suasion on the necessity for tax obligation, there is high incidence of personal income tax evasion and even company tax even where the companies use government’s facilities and make substantial profits from their business ventures.
Tax evasion should be condemned from well-meaning citizens because it has impacted negatively on government’s good intention on the welfare of the governed. Tax revenues constitute a significant percentage of funding the annual budgets.
In advanced countries tax evasion is a very serious offence and defaulters are prosecuted to serve as deterrent to budding tax evaders and people who indulge in manipulations to underpay their taxes.
At times, people wonder aloud why tax should be paid while government has the unfettered access to explore and exploit all the natural resources in the country. On this score, they query the moral justification for government to subject people to various forms of taxation which imply what economists call “double taxation”.
Taxes are a desideratum because the proceed from the exploitation of mineral and natural resources are not always enough to carter for the myriads of public projects and programmes that justify the essence of government. Taxes are categorized to enable people understand the essence of them but unfortunately, many business organizations which are taxed proportional to their earnings demure and subtly shift the cost of their goods and services to regain the taxes. Financial experts refer to such things as “incidence of the taxation shifted to the beneficiaries of their goods and services”. In the business sector, taxes on profits lead to increase in the cost of their goods and services to cover what they pay in tax.
It is against this background that Anambra State Government deemed it expedient to organize a work-shop for the top officials of the Internal Revenue Services (IRS) to acquaint themselves with modern tools and requisite capacity to enable government realize meaningful revenues to transform the landscape of the state and upgrade the living standard of the citizens.
According to the organizers of the workshop, tax is a charge by the government on the income of an individual, corporation or trust, as well as the value of an estate or gift; a form of levy which is imposed on all taxable persons within tax jurisdiction.
WHAT IS TAXATION?
Taxation on the other hand is the method or process of determining the amount of tax payable by an individual, group of individuals or an organization on goods and properties and the methods of collecting this from the taxable person, good or property and accounting to the government for the amount so collected.
According to the resource persons, “there was no formal tax policy in Nigeria until the 1930s. Only traditional rulers had the authority to collect taxes and use them however they wanted. These rulers managed to create their own system of taxes. However, none of them managed to survive long enough to be printed in books of history.
Brief History and origin of Tax in Nigeria: “There was no formal tax policy in Nigeria until the 1930s. Only traditional rulers had the authority to collect taxes and use them however they wanted. These rulers managed to create their own system of taxes. However, none of them managed to survive long enough to be printed in books of history.
Before the colonization period in Nigeria, the tax system was traced to the Northern parts of the country. The Emirs created a system of taxes throughout the north. The basis for the taxation was the Islamic Religion.
“The Southern part of the country was not as organized as the North. Therefore, the South did not have the centralized system of taxation”.
According to the historical data, several forms of taxes that were collected included:
Zakat – it`s an obligatory tax presented by all representatives of the Islamic religion. It was gathered for educational, religious and spiritual purposes.
Kudin-Kasa – it was a tax for land utilization;
Shuka-Shuka – it was a tax for cattle rearers;
Isha-Kole – this tax was to be paid to community leaders or chiefs;
Owo-Ori – this tax was paid to the country for services provided by individuals;
Community tax – this tax was obligatory for all adult members of the community.
Osusu-Nkwu – Community tax paid in the East .
Lord Lugard, who was the British colonial administrator in Nigeria, tried to harmonize and centralize the tax system in Nigeria. He implemented the Stamp Duties Proclamation in 1903. This proclamation was followed by the Native Revenue Proclamation in 1906. The Native Revenue Proclamation was created to harmonize the taxes.
This procedure simplified and clarified the taxation policy in Nigeria. These two proclamations became the first in the sequence of the taxation policies in Nigeria.
The present form of Nigeria taxation can be traced back to 1914. During that year, the Northern and Southern Protectorates implemented the basics of taxation in Nigeria. In addition, it helped to start the sequence of tax ordinances in Nigeria. The recommendations from the commission were later accepted and adopted by the National Government.
These recommendations became the part of the Nigeria`s Constitution. The constitution gave birth to the Income Management Act and Companies Income Tax Act in 1961.
The following complexities in tax reforms created the sequence of tax laws. The latest representations of these tax laws are the Personal Income Tax Act 2004 and the Companies Income Tax Act 2004.
Taxation in Nigeria has come a long way to the point where we now have the present form of tax policies. However, this form is still under development. New forms of taxation will be developed, and they will be able to change the face of Nigeria. Still, they will stand on the shoulders of the previous taxation policies.
The essence of taxation is very important because it is one of the major sources of revenue of the Nigerian government.
The taxes collected come back to the taxpayers in the form of social amenities provided by the government.
The National Tax Policy is a document which sets broad parameters for taxation and ancillary matters connected with taxation. It is a clear statement on the principles governing tax administration and revenue collection.
According to the resource persons, the objectives
of tax policy is to promote fiscal responsibility and accountability, to pursue fairness and equity, to provide economic stabilization, and to correct market failures.
Legislation on tax: Laws refer to a whole body of enacted acts of legislation. In the context of taxation, it is a codified system of order that describes the legal implications of taxation, i.e. government levies on economic transactions. The objective is to enshrine best practices in terms of ethical and professional conduct. Tax laws provide a well-defined legal backing to the administration of each tax type and states in clear terms the applicable rate.
Examples of Tax Laws: Federal Inland Revenue Service, Companies Income Tax, Personal Income Tax, and Petroleum Profits Tax
Direct taxes and Indirect taxes may be imposed on individuals’ incomes, corporate entities’ incomes, assets and transactions. Personal Income Tax is imposed on the income of all Nigerian citizens or residents who derive income in Nigeria and outside Nigeria. Development Levy is a flat charge imposed on every taxable person typically within a state.
Petroleum Profit Tax is subject to any resident company or person in charge of a non-resident company who are exploring for petroleum or producing it. This also includes any liquidator, receiver, or agent of liquidator or receiver of any company carrying on petroleum operations in Nigeria.
Value Added Tax (VAT) is paid by any person or individual, corporate or sole organization who consume or buy any taxable product or service. Withholding Tax has no distinction of its own; it is only a mechanism to collect other taxes.
Direct taxes are defined as taxes levied directly on the income of individuals after allowances have been deducted or on the profit of corporate bodies after deducting expenses. Tax is imposed on the person or on the property of the person paying the tax or the income of the entity if it is a corporate body.
Government places much emphasis on direct tax because the revenue is predictable, the amount is certain and it involves low cost of collection and used as wealth re-distribution. Indirect tax comprises VAT, Excise duties, goods and services, customs (import and export) duties, Stamp duties and road taxes called “toll gate.
Since the Nigerian economy is still in doldrums, government should dump the suggestion of the presidential technical committee to suggest sources of revenues to enable the federal government to sustain payment of the just signed new national minimum wage. Indirect taxes which is known to reduce profits of business organizations and equitable should be scaled down to enable the suffering masses have a breathing space. For instance, increased VAT will cut across all strata of the society and inflict more hardship on the poor and low income earners even when the new minimum wage is not sure to be implemented by the 36 governors going by their insistent that the national revenue allocation should be reviewed to make more money available to them to implement the new wage and across board to all the salary grade levels.
Government should intensify the creation of conducive business environment for Direct Foreign Investment (DFI). Insecurity and poor electricity supply have become the greatest challenges facing industrialization in the country now. It is said that one of the characteristics of a good tax laws is to provide various incentives to companies carrying on business in Nigeria.