President Jonathan Signs Personal Income Tax Act Into Law
---Taxpayers Get More Reliefs
SAN FRANCISCO, December 16, (THEWILL) - President Goodluck Jonathan has signed the Personal Income Tax Act (PITA) into law. It is the first major amendment to the income tax law since 1979.
The bill sent to the National Assembly in 2004, was sent to the President for assent after passing through both chambers of the 6th National Assembly, according to a release from the Federal Inland Revenue Service (FIRS).
No fewer than 41 clauses, including amendments to Cap.P8 LFN, 2004, 36 sections, First Schedule, Third Schedule, Sixth Schedule and Short Title of the old PITA law were reviewed.
The new act would provide more disposable income to the lower income earners following the amendment of the income tax table and adjustments in the applicable income tax incremental bands, which brings it in line with current income levels.
The Act also simplified the compliance processes by consolidating the reliefs and allowances stipulated in the Act and lowering the burden on low income earners as well as widening the tax base by bringing in a huge number of potential taxpayers, especially in the informal sector, into the tax net
The act also removes obsolete, unrealistic and outdated reliefs and allowances associated with the former Act, replacing the previous reliefs and allowances with enhanced consolidated reliefs and allowances
Principally, section (5), sub-section (1) of the Act states, “There shall be allowed a consolidated relief allowance of N200, 000 subject to a minimum of 1 percent of Gross Income or whichever is higher plus 20 percent of the Gross Income and the balance shall be taxable in accordance with the Income table in the Sixth Schedule to this Act.’
The Schedule provided tax exemption on National Housing Fund (NHF) contributions, National Health Insurance Scheme, Life Assurance Premium, National Pension Scheme and Gratuities.
Sub-section (3) of the Schedule provided a graduated tax rate of Gross Income or whichever is higher on First N300, 000 at seven percent, Next N300, 000 at 11 percent, the next 500, 000 at 15 percent, next 500, 000 at 19 percent, Next N1.600, 000 at 21 percent and above N3.200, 000 at24 percent.
The new Act supports the use of taxation as a tool for income redistribution and wealth creation by imposing lower tax burden on low income earners and higher tax burden on the higher income earners.
The Act also supports government’s intention to implement a shift in focus from direct to indirect taxation, by lowering the overall income tax burden so that there is more disposable income in the economy, leading to higher value added tax collection and higher economic activity amongst others.
Under the new Act, it is now obligatory for government agencies, professional bodies, and trade associations to provide information to tax authority that would assist them in the performance of their duties.
The Act also provides greater leverage to the Minister of Finance, Tax Authorities and the Accountant General of the Federation in administering the law, including the power to deduct at source from its budgetary allocation, unremitted taxes due from Ministry, Departments and Agencies (MDAs) and transfer such deduction to the relevant State upon request by state.
In a way, the act professionalized the appointment of Chairmen for the State Internal Revenue Service. This is because such appointments are now subject to the confirmation by the State Houses of Assembly and three members representing a Senatorial District in the state as contained in section (30) (a) of the Act.
Tax authorities are empowered to enforce payment of taxes due from taxable persons that has been properly served with an assessment notice as specified by the law.
In particular, Section 104, sub-section 1 (a) and (b) states that: ``the relevant tax authority may in the prescribed form, for the purpose of enforcing payment of due, distrain the taxpayer by his goods, other chattels, bond or other securities.
“Distrain upon any land, premises or places in respect of which the taxpayer is the owner and subject to the provisions of this section, recover the amount of tax due by sale of anything so distrained.’’
At the International Tax Conference, by the Joint Tax Board, a few months ago, FIRS Chairman, Ifueko Omoigui Okauru noted that the administration of Personal Income Tax (Amendment) Bill 2011, will introduce and make the expected impact on tax revenue collection at the state and federal levels and also impact positively on the wages of our workers.
Omoigui said the launch of the National Tax Policy and signing into law of the PIT - approved by the Federal Executive Council and ratified by the National Economic Council, will enable Government at all tiers to enhance the ability of tax authorities to effectively play their roles of raising revenue for Government and in turn enable Government to properly utilize these revenues for developmental purposes.
“The Personal Income Tax (Amendment) Bill, 2011 will unlock the hidden potentials of personal income tax as a source of revenue and which if properly implemented, will not only resolve many of the issues which affect tax administration in the States, but enable states to focus energy and resources on areas, which will bring in a higher yield of tax revenue and bring in a large number of taxpayers, who have previously operated outside the tax system or have been ignored or neglected by the tax authorities.
“PITA will also introduce a more equitable system of personal income tax administration, whereby the tax burden is typically lesser at lower income levels and heavier at higher income levels and improve and simplify tax compliance for all taxpayers.
Ecstatic on Tuesday at the signing of the bill, Omoigui noted that its relieving that the journey which started seven years ago, had coursed through three Presidents, 4th, 5th, 6th and the 7th National Assembly and four ministers had eventuated in the signing of the law.
She saluted President Jonathan for signing the PITA bill into law, the National Assembly for their commitment in reviewing the bill over and over again and for passing it into law, the Joint Tax Board, the National Economic Management Council, all professional bodies, all government agencies and individuals for their contributions to the passage of the bill.
Economic Management Council, all professional bodies, all government agencies and individuals for their contributions to the passage of the bill.