Tax compliance: PAYE
In Nigeria today about 75% of potential taxpayers are not in the tax net, and about 65% of registered taxpayers are not fully compliant. This is a worrisome reality that needs to be critically addressed as the average level of tax compliance in Nigeria is put at about 10% based on our research findings.
A taxpayer must ensure that his/her taxes are paid and are also duly accounted for from time to time. This means taxes are paid as and when due and that relevant returns are submitted to the tax authorities in prescribed forms and formats. Going by the news emanating from many State Boards of Internal Revenue, the level of compliance with the requirements for filing of Personal Income Tax returns as prescribed by the Personal Income Tax Act (PITA) remains low across the country.
All taxable persons are required, to file a return of their income in the prescribed form and containing specific information in relation to their income and taxes with the tax authority of their State of residence. The return should contain income earned from every source in the year preceding the year of assessment computed in line with the provision of PITA. This return is expected to be filed by all individuals including those who are self-employed and submit their tax returns by way of direct assessments as well as those who are in paid employments under the Pay-As-You-Earn (PAYE) scheme.
Employers are also required to file annual returns of all emoluments paid to their employees and taxes deducted and remitted to the relevant tax authorities. The employer’s annual return is due not later than 31st January of every year and covers the income and taxes paid in the preceding year.
For some employees in paid employment, it appears the requirements for individual tax return is not yet being fully complied with. Many employees under the PAYE scheme believe that they are covered by employer’s annual return and that only self-employed individuals are required to file individual tax returns.
In a situation whereby there is no proper or effective sanction in case of default, there would be little or no enforcement at all. For instance, a penalty of N5,000 (five thousand Naira) is applicable when there is a failure to comply with any of the provisions of PITA or any rule or regulation made. Also, where the offence is failure to file return (as required by Section 41 of PITA), a further penalty of N100 (one hundred Naira) for every day during which the failure continues shall be imposed including terms of imprisonment for six months.
Nigeria is currently in a big battle with the reality of declining revenue from oil due to the decline in the global oil price, it is only appropriate that by now attention is fully focused on raising the level of tax compliance. There are countries, developed and developing, with no oil or any major natural resources, whose main source of sustenance are proceeds from tax revenues and tourism.
The Tax Authorities are intensifying efforts to tackle the issue of non-compliance on all levels. With information available from the National Bureau of Statistics and similar agencies, it should now be easier to bring more taxpayers into the tax net. Employers will begin to take the appropriate steps to address their tax compliance obligations and ensure that their employees do same to avoid potential penalty exposure.
Would you like to stay ahead of the PAYE RETURNS FILING PROCESS in 2021? Would you like to ensure that your computations are accurate, and you are not remitting more than or less than is required to the Tax Authorities. The great thing is; you really can.
Having a Tax-efficient 2021 is actually much easier than it looks.
For more information on the 2020 PAYE Returns Filling and other tax-related issues please do not hesitate to contact us at:
Tel: +234 700 TAXAIDE (070 829 2433), +234 1 631 0971
WhatsApp: +234 810 701 7274
Email: email@example.com, firstname.lastname@example.org