Tax Administration In Nigeria
WHAT IS TAX?
Tax is a compulsory Levy imposed on individuals and business organization by the government of a country. The proceeds from tax are used to provide social amenities for the citizens and residents of that country. Some of the social amenities include: good roads, quality education, quality health system, payment of salaries, portable water and constant electricity, etc.
Various tax authorities are vested with the job of tax administration depending on the type of tax under consideration.
In Nigeria, the two tax authorities are;
(a) Federal Board of Inland Revenue
(b) State Inland Revenue Board. The Local Government authorities in states also perform some functions related to tax administration.
There are various Act in respect of each type of tax under consideration which are;
i) Companies Income Tax Act,Cap. C21, LFN 2004: The company income tax imposes tax on the incomes of companies other than corporation soles and companies engaged in petroleum operations (upstream sector).
ii) Education Tax Act, Cap. E4, LFN 2004 which levies education tax on the assessable profits of companies registered in Nigeria.
iii) capital Gains Tax, Cap. C1, LFN 2004: this is a tax on capital gains arising from disposal of chargeable assets.
iv) Petroleum Profit Tax Act, Cap. P13, LFN 2004 levies tax on the profits of companies engaged in oil exploration.
v) Personal Income Tax Act, Cap. P8, LFN 2004: it imposes tax on the incomes of productive individuals and corporation soles.
vi) Value Added Tax Act, Cap. V1, LFN 2004 imposes tax on the supply of goods and services made by incorporated companies and other business organisations.
vii) Stamp Duties Act, Cap. S8, LFN 2004 charges duties on specified instruments listed in the Acts.
ORGANS OF TAX ADMINISTRATION IN NIGERIA
1. JOINT TAX BOARD (JTB)
Section 86 of the Personal Income Tax Act establishes the Joint Tax Board.
COMPOSITION OF THE JOINT TAX BOARD (JTB)
a) Executive Chairman of the Federal Inland Revenue Service who is also the Chairman of the board.
b) A representative from each 36 states of the federation who are experienced in tax.
c) The secretary, who shall be ex-officio appointed by the Federal civil service Commission;
d) The Legal Adviser of FIRS acts as the legal Adviser to the the JTB.
FUNCTIONS OF JOINT TAX BOARD
The Joint Tax Board (JTB) is saddled with the responsibilities of:
i. promoting uniformity both in application of personal income Act and in the incidence of tax.
ii. imposing its decision on matters of procedures and interpretation of Personal Income Tax on any State for the purpose of conforming with agreed procedures or interpretation.
iii. advicing Federal Government in respect of double taxation arrangement.
iv. exercising the powers or duties conferred on it by the PITA and other Acts.
v. advising Government on request, in respect of double taxation arrangement with other countries.
2. FEDERAL BOARD OF INLAND REVENUE (FBIR)
Section 1 (1) of CITA vested the administration of the taxation of profit of incorporated companies to FIRS which is the operational arm of FBIR. The Federal Board Of Inland Revenue is responsible for administration and collection of taxes on behalf of the federal government of Nigeria.
COMPOSITION OF FEDERAL BOARD OF INLAND REVENUE
The Board of inland revenue comprises of;
a) the Executive Chairman experience in tax administration and appointed by the president of the federal republic of Nigeria.
b) the directors and Head of departments of Federal Inland Revenue Service.
c) Director of planning, research and statistics in the Federal Ministry of Finance.
d) an officer from NNPC not below the rank of an Executive Director.
e) a member of the Board of the National Revenue Mobilization Allocation and Fiscal Commission.
f) a Director from the Nigeria Customs Services.
g) a Director from the National Planning Commission.
h) Register-General of Corporate Affairs Commission.
i) the Legal Adviser to the FIRS.
A secretary shall be nominated by the Board from within the FIRS
FUNCTIONS OF FEDERAL BOARD OF INLAND REVENUE
The core functions of the federal board of inland revenue are:
i. To administer the Companies Income Tax Act and other Tax Acts and other taxes that are vested on them.
ii. To assess and collect companies income tax.
iii. To issue directives or guidelines on the interpretation of the provisions of the CITA and other Tax Laws.
iv. To advice the Federal Government of Nigeria through the Minster of Finance on tax matters including amendment to tax laws.
v. To account for the amount collected in a manner prescribed by the Minister of Finance.
3. STATE BOARD OF INTERNAL REVENUE (SBIR)
The State Board of Internal Revenue was created by Section 87 of Personal Income Tax Act. The operational arm of the SBIR is State Internal Revenue Service (SIRS).
COMPOSITION OF STATE BOARD OF INTERNAL REVENUE
The Inland Revenue Board of each state comprises of:
a) the chairman, who is the executive head of the SIRS appointed by the governor of the state.
b) the Directors and Head of department within the SIRS
c) a Director from Ministry of Finance
d) the Legal Advicer
e) three other persons nominated by the state commissioner for finance on their personal merit
f) the Secretary
FUNCTIONS OF STATE BOARD OF INTERNAL REVENUE
The functions of state board of internal revenue are:
i. To ensures effective and optimum collection of all taxes and penalties due to the government under relevant laws.
ii. They account for all amount collected in a manner prescribed by the state commissioner of finance.
iii. Making recommendation on tax policy, tax reform, tax registration, tax treaties and exemptions to JTB as may be required from time to time.
iv. Appointing, promoting, transfering and discipline of employees of the SIRS.
4. LOCAL GOVERNMENT REVENUE COMMITTEE
Section 90 creates Local Government Revenue Committee (LGRC) for each Local Government Area of a state in Nigeria. In Nigeria, the Local Government is the last tier of government. It is the government that is closer to the people.
COMPOSITION OF LOCAL GOVERNMENT REVENUE COMMITTEE
Its comprises of:
a) the supervisor for finance who is also the Chairman
b) three Local Government Councillors
c) two other persons experience in revenue matters to be nominated by the chairman of the Local Governments.
FUNCTIONS OF LOCAL GOVERNMENT REVENUE COMMITTEE
The committee is saddled with the responsibilities of assessing and collecting all taxes, fines and rates under its jurisdiction.
REGISTRATION OF TAXPAYERS
All incorporated companies in Nigeria shall register with Federal Board Of Inland Revenue (FBIR) while unincorporated entities, individuals and body of individuals shall register with State Board Of Internal Revenue (SBIR) in the various states of operation.
1. Companies that are Incorporated are expected to register within eighteen months of incorporation or six month after the end of its first accounting period.
2. Unincorporated companies and body of individuals are expected to register with the relevant tax authority within 3 months of the year.