Tax Administration in Nigeria.

 

Tax Administration

 

FISCAL FEDERALISM AND THE NIGERIAN TAX ADMINISTRATION SYSTEM

The system of fiscal federalism explains the system of revenue generation and revenue distribution within a federal system. It bothers on financial and functions and responsibilities of components units within a federal structure.

 

STRUCTURE AND TAXING RIGHT OF DIFFERENT LEVELS OF GOVERNMENT

The provisions of Nigerian constitutions, for the purpose of taxation divided Nigeria into three constituents – the federal, state and local government.

The federal government is responsible for the assessment and collection of taxes due from all taxable corporate bodies, residents of FCT, personnel of Nigerian armed forces and employees in Nigerian foreign missions.

Each State governments is responsible for the assessment and collection of the taxes due from all taxable person’s residents in the states with the exception of the personnel of the Nigerian armed forces, employees of the Nigerian foreign missions and individual residents of in FCT.

 

THE CONTENTS RELATING TO EACH TIER OF GOVERNMENT

These are as follows:

Federal government collects the following taxes:

1.    Company income tax

2.    Withholding tax on companies, residents of FCT, and non residents’ individuals.

3.    Petroleum profit tax.

4.    Value added tax.

5.    Capital gain tax on companies, residents of FCT.

6.    Stamp duties of corporate bodies and residents of FCT.

 

Taxes to be collected by the state government:

1.    Pay as you earn

2.    Withholding tax on individuals

3.    Capital gain tax on individuals

4.    Stamp duties on investments executed by individuals

5.    Road taxes

6.    Development levy

7.    Market taxes and levies where state finances is involved

8.    Naming of street registration fees in the state capital

 

Taxes and levies to be collected by the local government:

1.    Shops and kiosk rates.

2.    Tenement rates.

3.    Marriage, birth and death registration fees.

4.    Slaughter slap fees.

5.    On and off liquor license fees. 

6.    Motor park fees.

7.    Domestic animal license fees.

8.    Bicycle, truck, canoe, wheel barrow etc.

9.    Road closure fees etc.

 

TAXING POWER:

Under the 1999 constitution of the federal republic of Nigeria, only the federal government has the exclusive power to legislate and impose stamp duties and taxes on incomes, profits and capital gains, both for individuals and corporate bodies, by way of Acts. It exercises the power through the joint tax revenue service.

Prior to 1993, various states impose one form of tax or the other by way of Edicts. The promulgation of the personal income tax Act 104 of 1993 repealed all such Edicts and replaced them with a uniform structure throughout the federation.

Whilst, the power to impose taxes on individuals and corporate bodies is under the exclusive list of the constitution, that is, exclusive to the federal government, the collection of the taxes is under the concurrent list, which means that the power to collect the various taxes has been split between the three tiers of government – Act 21 of 1993.

 

LIMITATIONS OF TAX ADMINISTRATION

The following are constraints to the effective tax administration in Nigeria.

1.    Poor public enlightenment.

2.    Inadequate funding of tax authorities.

3.    Dearth of qualified personnel.

4.    Tax evasion.

5.    Improper use of tax consultants.

6.    Poor governance.

7.    Loopholes in the law.

 

ROLE OF THE THREE ARMS OF GOVERNMENT

Functions of the Various Tax Organs

The various tax organs of government are:

1.    Federal Inland Revenue Service Board (FIRSB)

2.    Joint Tax Board (JTB)

3.    State Board Internal Revenue ( SBIR)

4.    Joint State Revenue Committee (JSRC)

5.    The Local Government Tax Authority (LGTA)

 

1.    Federal Inland Revenue Service Board (FIRSB)

Administration of taxation of incorporated companies is vested in FIRS whose management board is FIRSB.

COMPOSITION

1.      Chairman appointed by the president

2.      Six members from the 6 geopolitical zones

3.      Representative of the attorney general

4.      Governor of CBN or representative

5.      Representative of the minister of finance

6.      Chairman of RMAFC

7.      Group MD of NNPC

8.      Comptroller general of the Nigerian custom

9.      Registrar general of CAC

10.  CEO of National Planning Commission

FUNCTION of FIRSB

1.    Provide guidelines for the function of FIRS

2.    Review and approve plans of FIRS

3.    Employ and determine terms and conditions of FIRS

4.    Do such other things expedient for the running of FIRS

 

 

2.    Joint Tax Board (JTB)

COMPOSITION

1.    Chairman of the FIRSB

2.    One tax experienced person from each state

3.    Secretary appointed by FCSC

4.    Legal adviser to FIRS

FUNCTION of JTB

1.    Exercise power confers on it by PITA

2.    Advise federal government on double taxation agreement with other country.

3.    Advise the federal government on rates of capital allowance

4.    Promotes uniformity of tax administration

3.     State Board Internal Revenue (SBIR)

COMPOSITION

1.    Executive chairman of the state service

2.    Directors and heads of department within state service

3.    Directors from state MOF

4.    Three person nominated by the commissioner of finance in the state on their personal merit

5.    Legal adviser to the state service

6.    Secretary to the state service

FUNCTIONS of SBIR

1.    Assessment and collection of PAYE

2.    Effectiveness and optimum collection of all taxes and penalties due.

3.    Doing all things necessary

4.    Making recommendations where appropriate to the JTB

5.    Appointing, demoting and condition of service of workers of state service.

 

 

4.    Joint State Revenue Committee (JSRC)

Each state of the federation must have a JSRC

COMPOSITION

1.    Chairman who is the chairman of SBIR

2.    Chairman of LGRC

3.    A representative of bureau of local government affairs.

4.    A representative of Revenue Mobilization Allocation and Fiscal Commission as observers

5.    State sector commander of FRSC as observer

6.    Legal adviser

7.    Secretary

FUNCTIONS of JSRC

1.    Advise Joint Tax revenue service, the state and local government on revenue matters.

2.    Harmonize tax administration in the state

3.    Enlighten the public generally on state and local government revenue matters

 

The Local Government Tax Authority

COMPOSITION

1.    The supervisor for finance as chairman

2.    Three local government councilors as members

3.    Two other persons experienced in tax matters nominated by the chairman of local government

FUNCTION of LGTA

1.    Shall be responsible for the assessment and collection of all taxes under its jurisdiction

2.    Shall be autonomous of the local government treasury department and be responsible for the day to day administration of the department.