OBLIGATIONS AND RIGHTS OF A TAXPAYER
An obligation is a legal or moral duty to do or not to do something. The obligation of the taxpayer is both legal and moral.The Constitution of the Federal Republic of Nigeria, 1999, sections 24 (d) and (f) imposes the duty on every citizen to;
“make positive and useful contribution to the advancement, progress and well being of the community where he resides” and ;
“declare his income honestly to appropriate and lawful agencies and pay his tax promptly”
The Taxes and Levies (Approved List for Collection Act) 1998 Vol. 14 Laws of Federation of Nigeria 2004 enumerated the various taxes payable by taxpayers to the Federal, State and Local governments. The schedule to the Act was amended in 2015. In view of the powers vested in the State to legislate on residual matters, the items listed as collectible by the States may not be exhaustive. The under-listed are clearly identifiable as obligations of a taxpayer.
- This requires each taxpayer to have Tax Identification Number (TIN) which is issued free to every applicant and is a unique identifier for all tax purposes.
- Under the operation of Pay As You earn (PAYE) Regulations, an employer must register with the relevant tax authority for the purpose of deducting income tax from his employees with or without formal notification from the tax authority. Deductions from employee emoluments and remittance must be made within six months of commencing business.
2. Filing Returns and Entries
- Every Taxpayer is obligated to file correct tax returns. It is an offence to file incorrect or false returns. A taxable individual shall file with the relevant tax authority the returns as stipulated within 90 days from commencement of the assessment year (S.90 (3) P.I.T.A.) to the relevant tax authority. That is not later than March 31 of every year. Failure to file returns is an offence and is punishable with a fine of N5,000 on conviction with an additional payment of N100 for every additional day of default. Default to pay the fine attracts imprisonment of six months.
- Every employer shall file returns of all emoluments paid to its employees by January 31 of every year. Late filing attracts a fine upon conviction of N500,000 for corporate bodies and N50,000 for individuals.
3. Tax payment.
- Tax should be paid at the right time and to the relevant tax authority as required by the relevant laws. The place where an individual pays his tax is determined by his place of residence. Non payment of taxes is criminal and carries a jail term on conviction.
4. Cooperation with the Tax Authority.
- Every taxpayer must extend necessary courtesies and cooperation to the authorized personnel of the tax authority in the discharge of the duties imposed on them. It is an offence to hinder a tax officer from carrying out his lawful duties.
- All government institutions and commercial banks must demand for tax clearance certificates of persons with whom they have dealings in respect of transactions listed under s. 85 (4) of PITA.
5. Keeping Proper Accounts
- A taxpayer must keep books of accounts which in the opinion of the tax authority are adequate for the purposes of the tax. The tax authority has powers to direct the taxpayer to keep such records, books and accounts as the relevant tax authority considers adequate. S. 52 P.I.T.A.
- Under S.49 of P.I.T.A, banks have a duty to prepare a return at the end of each month specifying the names and addresses of new customers not later than the seventh day of the month next following and deliver same to the tax authority of the area where the bank operates or where such customer is a company, to the Federal Board of Inland Revenue.
- The taxpayer must at all times render full disclosure concerning his income to the relevant tax authority. The tax authority is empowered, when it reasonably suspects an offence involving partial non disclosure of information, to enter and search a premises or request for information from any person found within the premises. (S.53 and 103 P.I.T.A.). See also S. 24 (f) CFRN 1999 which requires a citizen to declare his income honestly.
- Banks must ensure that existing business accounts have tax identification numbers (TIN) and can only open new business accounts where there is evidence of TIN number.
7. Employers obligation to deduct and remit tax.
- 82 of P.I.T.A. imposes on every employer of labour an obligation to deduct appropriate tax from the emolument of the employee and remit same to the tax authority not later than the tenth day of the month immediately after the month of deduction.
8. Agent of collection.
- When under S.50 (P.I.T.A.) a taxpayer is notified by the tax authority that he has been appointed as an agent of collection, such person must ensure that any sum in his possession or that may later come into his possession is paid to the tax authority. The law makes any person who violates this provision to be primarily liable for the entire sum in respect of which he is appointed as agent.
9. Obligation of payer to withhold taxes.
a. On Rent
A company (corporate or unincorporated) including government ministries, departments, parastatals, statutory bodies, institutions and other established organizations approved for the operation of Pay As You Earn System must withhold taxes of 10% of the value of rent paid by them and remit same to the relevant tax authority which under Section 2 of P.I.T.A. is that of the place of residence.
b. On Interest
Where a payment such as interest or royalty becomes due or payable to a person, the payer at the date of payment shall withhold tax of 10% of the gross interest or 5% of gross royalty and remit same to the relevant tax authority as determined under Section 2 of P.I.T.A, which as discussed earlier in the case of an individual, is that of the place of residence except in the case of savings interest where the relevant tax authority shall be where the branch of the bank paying interest is located.
(c) On Dividend
Where such a dividend or such other distribution is due or payable from a Nigerian company to a person, a deduction of 10% of the value, shall be withheld and remitted to the relevant tax authority as determined by Section 2 of P.I.T.A.
(d) On Director’s Fees
Where any payment of Director’s fees is due or payable to a person, the payer at the date when the payment is made or credited, whichever first occurs shall deduct 10% of the value and remit to the tax authority as determined under section 2, P.I.T.A. The definition of the payer is same as under Rent.
(e) Everybody corporate or incorporate, a government ministry, department and agency, a local government, a statutory body, a public authority and any other institution, organization, establishment and enterprise which operates a Pay As You Earn scheme shall withhold taxes in the following cases as follows:
1.All aspects of building, construction and related activities – 5%
2. All types of contracts and agency arrangements, other than sales in the ordinary course of business. – 5%
3. Consultancy and professional service. – 5%
4. Management Services. – 5%
5. Technical Services – 5%
6. Commissions – 5%
Please see the column on offences and penalties for breach of tax obligations.
A right is a recognized and protected interest the violation of which is a wrong. It is a legally enforceable claim. The under-listed are rights, which are easily deducible, of the taxpayer.
1.Right to object to an excessive assessment that is either unreasonable or is not in accordance with the law. Allied to these are the following:
a. Objections of taxpayers shall be attended to promptly in accordance with the relevant laws and procedures.
b. Each taxpayer has the right to appeal to an independent tax tribunal to revise an assessment where such exists.
c. Right to seek redress at the Courts of law where he or she does not agree with the decision of the Revenue authority or other body up to the Supreme Court.
2. Right to Confidentiality.
- The secrecy of every taxpayer’s affairs shall be ensured and the use of tax information can only be as allowed by law.
3. Right to prior Notices.
- Taxpayer is entitled to be notified of his tax liability by raising and serving on him a Notice of tax assessment. The taxpayer must equally be notified of the intention and date the tax authority purposes to audit its books.
4. Right to proper Account.
- The tax authority must ensure that each Taxpayer’s tax payments are receipted and accounted for accurately at all times, and tax records are maintained up to date. Where there are tax credits such should be processed promptly and properly accounted for.
5. Tax Refund.
- Where a taxpayer is entitled to a refund it should be within the prescribed time limit under the law. In practice, what is given is a tax credit against the next assessment year.
6. Right not to be subjected to double taxation.
- The taxpayer must not be made to bear the burden of multiplicity of taxes.
7. Right to Tax Clearance Certificates (T.C.C)
A person who has fully discharged his tax obligation or from whom no tax is due shall within two weeks of demanding for same be entitled to a tax clearance certificate covering the three years immediately preceding the current year of assessment. The taxpayer is entitled to notification within the same period of any reason(s) for the denial of his application.