An Overview of the Assessment and Determination of Employee Tax in Nigeria

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ABSTRACT

An Overview of the Assessment and Determination of Employee Tax in Nigeria

Eti Best Herbert*

This paper focuses on the assessment and determination of tax payable by employees in Nigeria. Employees are expected to pay tax out of their earnings to the government. Before this is done, the tax payable has to be assessed and determined. Employers have a vital role to play in this regard as they are the ‘source’ from which the employees’ tax are extracted and remitted to the relevant tax authorities. Failure of the employer to deduct and remit bears civil and criminal liabilities. The primary statutes under consideration are the Personal Income Tax Act (including its 2011 amendment) and the Pay-As-You-Earn (PAYE) Regulation. The paper recommends that employers be made aware of their responsibilities in the assessment, determination and transmission of their employees’ tax to the relevant tax authorities. Also, the discrepancies inherent in the Personal Income Tax Act 2011 (as amended) should be reconciled by an amendment of the Act.

Keywords: Employees’ tax, Pay-As-You-Earn, Tax, Personal Income Tax Act, Tax authorities.

INTRODUCTION
‘The taxpayer’s only legitimate expectation is, prima facie that he will be taxed according to statute, not concession or on wrong view of law. The legitimate expectation therefore is that things will be done accordingly with the law not in accordance with contract regardless of who the parties to a contract are.’₁ No government can function effectively without dependence on sufficient revenue to enable the financing of state activities.₂ Hence, the main objective of taxation is revenue generation, apart from other objectives such as wealth redistribution and administration of the economy.₃ In as much as the government expects every tax payer to faithfully pay their tax when due, the taxpayer also expects that the tax he is to pay is assessed and computed as due. The Personal Income Tax Act₄ and other relevant tax regulations have provided standards and criteria for determination of tax payable by taxpayers concerned. If the standards are diligently followed by the tax authority, the proper figure would be arrived at; otherwise it could lead to dispute between parties with varying interest.

For the categories of taxpayers such as employees whose tax are removed at source, the issue is more compounded. This is because they may not be given the opportunity to know how their tax is determined. They only get to find out later how much has been deducted from their salary and emolument as tax. Since the money has already been deducted, they may lack the desire to insist on a review. Even if they do, there is no guarantee of a refund without their going through time and cost consuming measures

* LL.B (Uyo), BL. Legal Practitioner and Legal Research Consultant.

1. Per Bingham LJ in the case of R v Inland Revenue Commissioners Ex parte M.F.K. Underwriting Agents Ltd [1990] 1 WLR [1545], [1567] A-B; also cited in Waterways Authority v SPDC [2005] 8 CLRN 158.
2. OJ Onyemah, ‘An Examination of the Taxation of Multinational Corporations and its Legal Effects on Foreign Investments in Nigeria’ (LL.M Thesis, Ahmadu Bello University 2016) 15.
3. ibid.
4. No 104, 1993, now consolidated as Cap. P8, Laws of the Federation of Nigeria 2004.

THE GRAVITAS REVIEW OF BUSINESS & PROPERTY LAW VOL.10 NO.1