The Effect Of Personal Income Tax And Pay-as-you-earn Scheme On Nigerian Workers

ABSTRACT

The law regulating Personal Income Tax in Nigeria is the Personal Income Tax (Amendment) Act 2011. The Personal Income Tax Act Subsidiary Legislation further provides for the regulations to be used in the operation of the Pay As You Earn scheme. Personal Income Tax in Nigeria is a long standing concept which is and would still be operational for a very long time. The Pay As You Earn scheme has also been the established mode of collection of income tax in Nigeria.

This work would look into the strains paying of income tax puts on Nigerians. We would determine whether it is justified to impose tax on individual’s income and what benefits are derived by individuals from this imposition.

We should also ask ourselves if Pay As You Earn scheme is the best and most effective process through which income tax could be collected because if not there would be need for improvement in the mode of collection.

In conclusion, this work would look at the problems stated above and proffer solutions to them. 

TITLE PAGE

TABLE OF CONTENTS

………………………………………………………………………………i

ATTESTATION ii

CERTIFICATION iii

ABSTRACT iv

DEDICATION vii

ACKNOWLEDGEMENT viii

TABLE OF CASES x

TABLE OF STATUTES xi

LIST OF ABBREVIATIONS xii

CHAPTER ONE 1

GENERAL INTRODUCTION 1

1.0.0: INTRODUCTION 1

1.1.0: BACKGROUND TO THE STUDY 5

1.2.0: OBJECTIVES OF THE STUDY 6

1.3.0: FOCUS OF THE STUDY 6

1.4.0: SCOPE OF THE STUDY 6

1.5.0: METHODOLOGY 7

1.6.0: LITERATURE REVIEW 7

1.7.0: DEFINITIONS OF TERMS 11

1.8.0: CONCLUSION 12

CHAPTER TWO 13

PERSONAL INCOME TAX IN NIGERIA 13

2.0.0: INTRODUCTION 13

2.1.0: MEANING OF TAX 14

2.2.0: DEFINITION OF PERSONAL INCOME TAX 18

2.3.0: APPLICABILITY OF PERSONAL INCOME TAX 20

2.4.0: PROBLEMS ASSOCIATED WITH PERSONAL INCOME TAX 23

2.5.0: SOLUTIONS TO PROBLEMS ASSOCIATED WITH PERSONAL INCOME TAX 30

2.6.0: CONCLUSION 33

CHAPTER THREE 35

PAY AS YOU EARN SCHEME IN NIGERIAN SETTING 35

3.0.0: INTRODUCTION 35

3.1.0: DEFINITION AND CONCEPT OF PAY AS YOU EARN (P.A.Y.E) SCHEME 36

3.2.0: EFFECTS OF PAY AS YOU EARN SCHEME ON SALARY EARNERS 42

3.3.0: EFFECT OF PAY AS YOU EARN SCHEME ON NON-SALARY EARNERS 44

3.4.0: ADVANTAGES OF PAY AS YOU EARN SCHEME 49

3.5.0: DISADVANTAGES OF PAY AS YOU EARN SCHEME 51

3.6.0: CONCLUSION 55

CHAPTER FOUR 58

THE EFFECTS OF PERSONAL INCOME TAX AND PAY AS YOU EARN SCHEME IN NIGERIAN SETTING 58

4.0.0: INTRODUCTION 58

4.0.1: EFFECTS OF PERSONAL INCOME TAX ON NIGERIAN WORKERS 59

4.2.0: CHALLENGES OF PAY AS YOU EARN SCHEME AS A MODE OF PERSONAL INCOME TAX COLLECTION 72

4.3.0: CONCLUSION 75

CHAPTER FIVE 79

GENERAL CONCLUSION 79

5.0.0: CONCLUSION 79

5.1.0: RECOMMENDATIONS 81

BIBLIOGRAPHY 84

TABLE OF CASES

     UNITED KINGDOM

• London County Council v Attorney-General (1901) A.C 26 at 35

• Lord Howard de Walden v IRC (1942) 1 K.B 389

 UNITED STATES OF AMERICA

• Michigan Employment Sec Commission v Patt 224 14 N.W 2nd 663

• United States v Butler 2229 US 1 (1935) at p.61

TABLE OF STATUTES

      NIGERIA

• Personal Income Tax Act, Cap P.8 LFN 2004 (As Amended By Act No. 20 2011)

LIST OF ABBREVIATIONS

• A.C: Appeal Cases

• Cap: Chapter

• FIRS: Federal Inland Revenue Service

• IRC: Inland Revenue Commissioners

• ITMA: Income Tax Management Act

• JTB: Joint Tax Board

• K.B: King’s Bench

• LFN: Laws of Federation Nigeria

• N.W: Northwest

• PAYE: Pay-As-You-Earn

• PITA: Personal Income Tax Act

• SBIR: State Board of Internal Revenue

• SIRS: State Internal Revenue Service

• TCC: Tax Clearance Certificate

• TDC: Tax Deduction Card

• T.I.N.: Tax payer Identification Number

• UK: United Kingdom

• US: United States

• VIP: Very Important Person