TAX

ADMINISTRATION
(FOR NEW EMPLOYEES)

ORGANISED BY

Lagos State Internal Revenue Service

October, 2015.

TABLE OF CONTENTS
Page
Introduction
 Socio-economic nature of Lagos State
1
1.0 Understanding Taxation
1.1 What is Tax?
1.2 Tax Distinguished From Other Charges
1.3 Justification For Taxation
1.4 Government & Tax
1.5 Classification of Tax
 Incidence of Tax
 Direct Tax
 Indirect Tax
1.6 Elements of a Tax
1.7 Systems of Taxation
1.8 Essentials of a Good Tax
1.9 History of Nigerian Tax System

2.0 Administration of Tax in Nigeria

2.1 Interrelationship of Tax Laws, Tax Policies and Tax administration
2.2 Federal Inland Revenue Service Board
2.3 Joint Tax Board
2.4 State Board of Internal Revenue
2.5 Local Government Revenue Committee
2.6 Joint State Revenue Committee
2.7 Major Revenue Generating Agencies of Lagos State Government

3.0 Residence
3.1 Relevant Tax Authority
3.2 Determination of Residence
3.3 Multiple Applications
3.4 Dispute Relating to Determination of Residence

4.0 Income
4.1 Chargeable Income
4.2 Forms of Incomes
4.3 Income Exempted From Tax
4.4 Chargeability to Tax
4.5 Chargeable or Taxable Persons
4.6 Income Tax Return
4.7 When Does A Person Become Liable To Personal Income Tax?

5.0 Assessment
5.1 Definition
5.2 Basis Period of Assessment
5.3 Classes of Assessments
5.4 PAYE Tax Operations
5.5 Self Employed Assessment Procedures
5.6 Self Assessment
2
 5.7 Due Date for Payment of Tax
5.8 Final & Conclusive Assessment
5.9 Error or Mistake Claim
5.10 Currency of Payment Of Tax
5.11 Withholding Tax
5.12 Tax Rates
5.13 Minimum Tax
5.14 Assessment Compliance Issues
5.15 Tax Clearance Certificate

6.0 Objection, Appeal, Offenses, Penalties & Distrain

6.1 Objection
6.2 Appeal
6.3 Offences, Penalties & Sanctions
6.4 Distrain Process

7.0 Computation of Tax Liabilities

Individuals
7.1 Computation Format
7.2 Charges, Reliefs and Allowance
7.3 Practice Questions
Taxation of Income/Profit of Sole Proprietor
7.4 Non Taxable Incomes
7.5 Disallowable Deductions
7.6 Adjusted Profits/Loss
7.7 Elements of a Tax Computation
7.8 Computation Format
7.9 Practice Questions

8.0 Major Provisions of the Personal Income Tax (Amendment) Act, 2011

9.0 Organizational Structure

9.1 Office of the Executive Chairman
9.2 Administration and Human Resource Department
9.3 Personal Income Tax Department
9.4 Tax Audit Department
9.5 Legal Department
9.6 Finance and Accounts Department
9.7 New Growth Areas

10.0 Concept of Tax System Management

10.1 Tax Compliance
10.2 Tax Evasion
10.3 Tax Avoidance

3
 10.4 Differences & Similarities between Tax Evasion & Avoidance
10.5 Tax Corruption
10.6 Good-Practice Reform Measures
10.7 Collection & Payment Enforcement Practices

11.0 Relationship Management

11.1 Who Is A Customer?
11.2 Customer Care/Service
11.3 Taxpayer Relations/Communication
11.4 Method of Communication with Taxpayers
11.5 Rights & Obligations of a Taxpayer
11.6 Taxpayer Behaviour & Concern
11.7 Taxpayer Complaints & Handling
11.8 Dishonesty within the Organisation

12.0 Introduction to Staff Policy

12.1 Understanding the Agency
12.2 Vision Statement
12.3 Mission Statement
12.4 Expectations of LIRS employees
12.5 Conditions of employment
12.6 Staff Privileges
12.7 Rules of office Practice
12.8 Disciplinary Procedures
12.9 Composition of Disciplinary committee members
12.10 Performance of Duties
12.11 Personal Conduct and Private Interest
12.12 Offences that attracts summary Dismissal

INTRODUCTION
This Induction Training is designed to equip new employees of the Lagos State
Internal Revenue Service with the relevant skill and knowledge required for sound,
effective and efficient tax administration to generate optimum tax revenue for the
4
state. In view of this, emphasis shall be laid on Personal Income Tax and other related
tax revenue in which the state has statutory legislative authority and administration
accordingly.

This training will lead the participants to the administrative organogram and policies
of the Lagos State Internal Revenue Service, insight on the socio-economic nature of
Lagos State, some of the major revenue generating agencies/parastatals in the state
and some of the staff policy/ethics of the service.

Socio-Economic Nature of Lagos State

Lagos State is located in the south–western part of Nigeria on the narrow coastal flood
plain of the Atlantic Ocean. Bounded in the north and east by Ogun state of Nigeria,
in the west by the Republic of Benin and in the south by the Atlantic Ocean, Lagos
State is made up of 20 Local Governments and 37 Local Council Development Areas.
Territorially, it encompasses an area of 358,862 hectares or 3,577sq.km.

Lagos State by various international assessments is a mega city with over 75% of its
current population living in Metropolitan Lagos. With a population estimate in the
region of 21 million, Lagos is the largest urban agglomeration in Africa and the black
world (1999 UNCHS). In spite of the relocation of the Federal Capital, Lagos State
remains Nigeria’s and indeed ECOWAS and sub-saharan Africa’s economic and
commercial hub. It contributes over 35% of the National GDP and accounts for over
65% of the country’s commerce.

The state government’s role in providing efficient social services for its residents calls
for an efficient and effective tax administrative machinery to generate the required tax
revenue hence the creation of Lagos State Internal Revenue Service (LIRS) as an
operational arm of the Lagos State Board of Internal Revenue (LSBIR) through the
passage of a Bill which was presented to the Lagos State House of Assembly and
assented to by the then Governor of Lagos State, His Excellency, Asiwaju Bola Ahmed
Tinubu on the 13th of March, 2006.

The Lagos State Revenue Law established the LSBIR as a body corporate with
perpetual succession and the Lagos State Internal Revenue Service (LIRS) as its
operational arm. It also makes provision for the Administration and Collection of
Revenue due to the State Government and Local Government Councils.

UNDERSTANDING TAXATION
What is Tax?

5
A tax can be defined as a compulsory, yet non-penal payment made by individuals,
business firms or government institutions to the government at intervals for which
no direct benefit is received. It is an imposition by the government on persons,
properties, income, commodities, transactions, etc to provide for general public goods
and services.

Tax is distinguished from a fee, charge, fine, penalty, donation, confiscation, rate,
rent, license or permit.
A Fee is a payment for service.
A Charge is a synonym for a fee.
A Fine is a payment in lieu of imprisonment.
A Penalty is a synonym for a fine.
A Donation is given freely or voluntarily.
To Confiscate means to seize goods.
A Rate is a synonym of a fee or a charge.
A Rent is a payment for using a fixed or moveable asset.
A License is a payment for a permit, certification or accreditation.
A Permit is a synonym of a license.

Justification for Taxation

It is obvious that Public Services such as maintenance of national security, provision
of good roads, health care system, electricity, housing, etc are necessary for the social
and economic wellbeing of the people of a given society. It is also obvious that the
discharge of these responsibilities will require a great deal of funding; otherwise their
provision cannot be sustained in the long term.

How then does the Government source fund for Public Expenditure? It could be
through:
(1) Borrowing (Local & Foreign)
(2) Print more money (only applicable to the Federal Government)
(3) Charge for services
(4) Taxation
(5) Grants/Aids (Local $ Foreign)
(6) Endowment/Donation
(7) Proceeds from sale of goods/products/properties etc.

None of the above, save taxation, is suitable as a permanent and most reliable means
of financing government projects; yet the governed who desire to enjoy basic amenities
have to pay for them in certain ways. Thus taxation was devised as a means of
providing government with regular, reliable, dependable and continuous source
of revenue.

Taxation therefore, is more or less the price of the social contract between the
government and the governed for the provision of basic amenities. Thus every nation,

6
no matter how richly endowed, usually requires some forms of taxation from its
citizens or residents.

Government & Tax

Objects of Public Expenditure
Some of the purposes for which Government impose taxes to raise revenue for public
expenditure are:
1. Maintenance of Armed Forces and Colleges of War.
2. Administration of Justice
3. Maintenance of the President, Vice President and diplomatic representatives
abroad.
4. Maintenance of Civil Government including ministers and Commissioners,
Legislators and Civil servants.
5. Expenditure to foster industry and commerce - postal services, communication
facilities, transport facilities, etc.
6. Public debt charges including interests, repayments of principal and cost of
management.
7. Social expenditure on health, education, water supply, electricity and other
social services.

In addition, modern taxation involves many other things apart from generating
revenue as indicated below:

Objects of Modern Taxation

Appraisals of some of the uses of Tax revenue by Government are:
1. Tool for Satisfying Collective Wants:
- protection against external aggression;
- internal maintenance of law and order;
- Provision of electricity, transport and communication services, water
ports, broadcasting services, etc.

2. Tool for Economic Policy – Redistribution of income, safeguarding Balance of

Payments, Checking consumption and importation (thereby encouraging local
manufacturers) to influence the level of business activity, protection of infant
industries, to combat inflation.

3. Tool for Social Policy – Child welfare, free education, free medical services,
security, military and public services, etc.

Classification/Forms Of Tax

7
Incidence of Tax -This indicates how the burden of Tax payment is shared between
the initial taxpayer and the subsequent or final Taxpayer or consumer of the product
or service on which this Tax was originally imposed.

There are two main forms of taxes – Direct tax and Indirect Tax.

DIRECT TAX
This is a form of tax that is assessable directly on the taxpayer who is required to pay
tax on personal income, property, company’s profit, capital gains, petroleum profit,
etc. The burden or effect of direct tax is borne directly by the person upon whom it is
charged. The burden cannot be shifted to another person Examples are:
 Personal Income Tax
 Companies Income Tax
 Capital Gains Tax
 Education Tax
 Petroleum Profit Tax

INDIRECT TAX
An Indirect tax is that tax that is imposed on goods, purchases, sales and services.
The burden or effect of indirect tax is not expected to fall upon the person who
actually pays it but usually the final consumer. Indirect taxes are imposed on
commodities before getting to the consumer who eventually pays for them, not as
taxes, but as part of the selling price of the commodity. This means that the burden
(incident) of Tax is shifted/transferred to another person. Indirect tax can affect the
cost of living, as they constitute taxation on expenditure. They are also known as
consumption taxes. Examples are as follows:
 Value Added Tax
 Stamp Duties
 Excise Duties
 Customs Duties
 Sales tax
 Entertainment tax
 Pools betting and Casino tax
 Consumption tax
 Toll Tax

The major distinction between Direct tax and Indirect tax, is that direct tax is
imposed on the income or property of the person paying the tax; whereas in the
indirect tax, the payer is different from the person who bears the burden of the
tax. Indirect taxes on goods and services are usually passed to the ultimate
consumer of such goods and services in form of higher prices.

Elements of a Tax/By Base and Rate

8
In order to carry out taxation; government develops a set of laws that constitute its tax
policies to legalize taxation. These laws or policies define areas to be taxed (tax base)
and how to tax it (system/tax rate). Therefore, each tax has two (2) elements – the
tax base and the tax rate.

A - Tax Base is the object being taxed. It could be stratified as follows:

o Income tax base (Personal income or Company income)
o Property/Wealth tax base (Stamp duty, Capital transfer/Registration fee)
o Expenditure tax base (VAT, Consumption tax, import/export duties)

It is the value of an asset or set of assets, investments or income streams that is

subject to taxation. Examples are Personal Income, Company Profit, Value of
Property, Goods for Sale, Exports, and Imports.

B - Tax Rate is the proportion of tax base which has to be paid in tax and which may
be either a flat rate or percentage. It is a flat rate if the tax is levied on the quantity
of a commodity or service, i.e. an absolute amount is imposed as tax per unit (i.e.
quantity) of the commodity or service, e.g. Specific duty on imports is a flat rate.
Other examples of flat rates of tax include Toll duty, Poll Tax, Pools Betting and
Casino Tax, Entertainment Tax. It is a percentage if the tax is expressed as a
proportion of the price (i.e. value) of a commodity or service, e.g. Ad-Valorem Duty on
imports is a percentage. Other examples include Personal Income Tax, Company
Income Tax, Petroleum Profit tax, Value Added Tax, Capital Gains Tax, Stamp Duty,
and Education Tax.

Systems of Taxation/By Method- Method or procedure of Assessment

The different ways taxation can be administered are:

a. Proportional Tax: - This is the system of taxation where the marginal rate of
tax remains constant as income increases or decreases. It takes the same
percentage of taxpayers’ income any level of income. Examples include
Petroleum Profit Tax (85%), Capital Gains Tax (10%), etc

b. Progressive Tax: - This is the system of taxation where the marginal rate of
tax increases as income increases. It takes a larger percentage of taxpayers’
income as income increases. Example includes Personal Income Tax.

c. Regressive Tax: - This the system of taxation where the marginal rate of tax
decreases as income increases. It takes a smaller percentage of taxpayers’
income as income increases. Example includes Consumption/Expenditure
Taxes like Value Added Tax (VAT), Poll Tax which is levied at a fixed rate per
person regardless of income, and Toll Duty.

Essentials of a Good Tax

9
Since taxation is the principal source of government revenue, the prosperity of the
State and its citizens depends greatly on the nature of taxes and the manner in
which they are imposed as well as the efficiency of collection. Hence, the
principles underlying taxation should be founded on equity and justice. Adam Smith,
father of political economics laid down the following four principles which he called
canons of taxation:

a. Equity (Ability to Pay):- that the amount of tax to be paid should as nearly as
possible be related to the taxpayers’ respective income (i.e. abilities). The
proportional tax on Companies and the progressive tax on personal income
satisfy this principle. It could be horizontal or vertical. Horizontal equity is
when same incomes are charged equally and vertical when different incomes
are taxed differently.

b. Certainty:- that the income, property, transaction or activity included to be

taxed, the occasion for tax payment, the rate of tax, the modalities for
assessment and the general administration of the tax should be clearly spelt
out. This will enable taxpayers to be able to determine what, how much,
when, where and on what to pay tax.

c. Convenience:- this requires that the taxpayer should be made to pay at a time
and in a manner that is most convenient for him/her. This principle
emphasizes the occasion of payment, which is usually the time at which the
income to be taxed accrues to the tax payer. Examples include the Pay As You
Earn system of Personal Income Tax, the Capital Gains Tax payable upon the
disposal of an asset, the preceding year basis of taxing business profits, etc.

d. Economy: - this requires that the cost of collecting the tax should be relatively
low as to ensure that a substantial portion of the realizable revenue is
available to government. It also requires that the payment of tax should be
relatively low in relation to the tax payer’s income since a good system of
taxation should not discourage savings, investment and hard work on the part
of the taxpayer.

Owing to the dynamic nature of the economy, we may add two more principles of
taxation. These, however, are not laid down by Adam Smith. They are:

e. Elasticity (or Flexibility): - this requires that the system of taxation should be
flexible as to provide for an increase of revenue whenever the need arises, and
to align tax policies with adjustments in the economy e.g. the need to change
the rates of taxes, introduce new tax laws or abrogate existing tax laws when
the need arises;

f. Sufficiency (or Productivity): - this requires that taxes should be of various

kinds and must yield an amount of revenue sufficient to meet the expenditure
of the government.

History of Nigeria Tax System

10
The history of taxation in Nigeria dates back to the pre-colonial era. During this
period, different systems of taxation existed in forms of compulsory services,
contribution of goods, money, labour, etc. traditional monarchs.

Modern form of taxation in Nigeria could be traced to the British Colony established in
Lagos 1861 and subsequent amalgamation of Southern and Northern Protectorates of
Nigeria in 1914. The colonial era witnessed promulgation of various laws by the
colonial authority which imposed different types of taxes on Nigerians which they were
compelled with.

The first legislation was introduced in 1904-the Community Tax Ordinance in

Northern Nigeria. This tax was later implemented through Native Ordinances in the
Western Region in 1918 and in the Eastern Region in 1928.

These three ordinances were consolidated into Direct Ordinance of 1940. In 1952,
Nigeria became a Federation. Subsequent legislations include the Income Tax
Management Act (ITMA) of 1961 and the Income Tax (Uniform Taxation Provisions) Act
of 1975.

These legislations became the Personal Income Tax Decree of 1993 (being Military
dispensation). It became an Act in 2004 known as Personal Income Tax Act 2004
(LFN); and with the recent amendment, it is now known as the Personal Income Tax
(Amendment) Act of 2011.

We also now have statutes guiding the following taxation activities in Nigeria:
I. Companies Income Tax Act (CITA)
II. Personal Income Tax Act (PITA)
III. Value Added Tax (VAT)
IV. Capital Gains Tax (CGT)
V. Petroleum Profits Tax (PPT)
VI. Stamp Duties Ordinance

Sources of Nigeria Tax Laws:

1. The Constitution
2. The Statutes
3. Case Laws
4. Budget Speech
5. Delegated or subsidiary legislation
6. International Law

ADMINISTRATION OF TAXES IN NIGERIA

11
Interrelationship of Tax Laws, Tax Policies and Tax administration:
Tax administration is the implementation of the measures put in place including tax
laws and tax policies by a statutorily organized institution or system for the
imposition of tax for the purpose of generating revenue for the government.

Tax Policy – Fundamental principles that guide the efficient operation of the tax
laws. The policy thrust of Taxation is to regulate the economy as a major fiscal policy
instrument. Thus, every tax imposed must be backed by legislation- The Tax Law.
The Tax Laws is the statutory rules and regulations put in place for the
administration of Tax. The Tax Law and the organ of tax administration in Nigeria
conform to the system of political administration in the country – Local, State and
Federal governments.

Pursuant to the provisions in Decree No. 21, of 1998 - Taxes and Levies (Approved List
for Collection), The Nigerian tax system comprises of at least 39 taxes, levies and fees,
including 8 tax base for Federal Government, 11 tax base for State Government and
20 tax base for Local Government. In addition, the evolution of information technology
in the country heralds another tax base to the Federal Government termed IT Levy as
provided in Section 16 of the National Information Technology Development Agency
Act 2007. However, the following organs are charged with the responsibility of
administering taxes in Nigeria:

1. Federal Inland Revenue Service Board (FIRSB)

The Federal Inland Revenue Service Board (FIRSB), with operating arm as Federal
Inland Revenue Service (FIRS) as established by the Federal Inland Revenue Service
Establishment Act, No 57 of April 16 2007, is the taxing arm for the Federal
Government. Though section 8 of this Act listed 20 functions of FIRS, however, going
by the provisions of Taxes and Levies (Approved list for Collection) Act:-

FIRS is responsible for the collection and accounting for taxes to be collected
by the Federal Government, which are:
1. Companies Income Tax
2. Withholding Tax on companies, residents of the Federal Capital Territory and
non-resident individuals
3. Petroleum Profit Tax
4. Value Added Tax
5. Education Tax
6. Capital Gains Tax on the residence of the Federal Capital Territory, body-
corporate and non-resident individuals.
7. Stamp Duties on bodies corporate and residents of the Federal Capital Territory
8. Personal Income Tax in Respect of:
a. members of the Armed Forces of the Federation;

12
 b. members of the Nigerian Police Force;
c. residents of The Federal Capital Territory; and
d. staff of the Ministry of Foreign Affairs and non-resident individuals
9. Information Technology (IT) Levy of 1% of profit before tax where annual
turnover is over N100m.
a. Global Satellite for Mobile (GSM) service provider and companies;
b. Cyber companies and Internet provider;
c. Pension Managers and pension related companies;
d. Banks and other financial institutions; and
e. Insurance companies.

Composition of Federal Inland Revenue Service Board (FIRSB)-S. 3 of FIRS Act.

Composition of the Board is as stated below:
 The Executive Chairman- who shall be experienced in taxation, to be appointed
by the President subject to the confirmation of the Senate.
 Six (6) members with relevant qualifications and expertise to be appointed by
the President to represent each of the six geo-political zones.
 A representative of the Attorney-General of the Federation.
 The Governor of the CBN or his representative.
 A representative of the Minister of Finance not below the rank of a Director.
 The Chairman of the Revenue Mobilization Allocation and Fiscal Commission or
his representative who shall be any of the Commissioners representing the 36
states of the Federation.
 The Group Managing Director of the Nigerian National Petroleum Corporation or
his representative who shall not be below the rank of a Group Executive
Director of the Corporation or its equivalent.
 The Controller-General of the Nigerian Customs Service or his representative
not below the rank of Deputy Controller-General.
 The Registrar-General of the Corporate Affairs Commission or his representative
not below the rank of a Director.
 The Chief Executive Officer of the National Planning Commission or his
representative not below the rank of a Director.

The members of the Board, other than the Executive Chairman and Secretary,
shall be part-time members.

The Chairman and other members of the Board, other than ex-officio members, shall
each hold office for a term of four (4) years, renewable only once on terms and
conditions specified in the letter of appointment.

Board Secretary shall be appointed by the Board within the FIRS. Secretary issues
notices of meetings, keep records of the proceedings and carries out duties assigned by
the Chairman.

Functions of FBIR - S. 7 of FIRS Act.

13
1. Provide the general policy guidelines relating to the functions of the service
(FIRS).
2. Manage and superintend the policies of the service on matters relating to
administration of revenue assessment, collection and accounting system underv
the Act or any enactment or law.
3. Review and approve the strategic plans of FIRS.
4. Employ and determine terms and conditions of the service including discipline,
promotion and transfer of employees of the service.
5. Stipulate remuneration, allowances, benefits and pensions of staff and
employees in consultation with the National salaries, income and wages
commission.
6. Do such other things which in its opinion are necessary to ensure the efficient
performance of the functions of the service under the act.

Technical Committee of FIRSB (Composition)- S. 9 of FIRS Act.

 The Executive Chairman of the Board as Chairman
 All the Directors and Head of Departments of FIRS
 The Legal Adviser in the FIRS
 The Secretary to the Board
 May co-opt from the State Service (IRS) staff deemed necessary for effective
performance of its functions

Functions of the Technical Committee of FIRSB - S. 10 of FIRS Act.

 To consider all Tax matters that require professional and technical expertise
and make recommendations to the Board;
 To advise the Board on all powers and duties specifically listed in section 3 and
in the First Schedule of the Company Income Tax Act (CITA);
 To attend to such other matters as may from time to time be referred to the
Board.

Joint Tax Board- S. 86

Composition:
The JTB is made up of the following:
 The Executive Chairman of the Federal Inland Revenue Service Board
(FIRSB) as the Chairman.
 A representative from each State of the Federation.
 The Joint Tax Board is empowered to appoint an officer experienced in
income tax matters to act as the secretary to the board. He is an ex-officio.
 The Legal Adviser to the Federal Inland Revenue Service Board (FIRSB) is
always in attendance of the meetings of the board in the capacity as an
adviser to the Board.

14
Functions of the JTB
 To arbitrate on tax dispute(s) between the state tax authority and another and
even between any state tax authority and The Federal board of Inland Revenue.
 To advise the government of the Federation in respect of double taxation
agreement, tax reforms and other tax matters.
 To consider and approve pension scheme.
 To promote uniformity in the application of the provision of tax laws and the
incidence of tax on individuals throughout Nigeria.

2. State Board of Internal Revenue (SBIR) S. 87 of PITA.

Section 87 of PITA establishes the State Board of Internal Revenue whose operational
arm is known as The State Internal Revenue Service (SIRS). Some States has however,
relying on Section 4(7) of the constitution, enacted the State Revenue Administration
Law which makes provisions for the Administration and Collection of Revenue due to
the state Government.
Composition of the State Board of Internal Revenue (SBIR)
With reference to The Personal Income Tax (Amendment) Act of 2011, the following are
the members of the board:

 The Chairman – He shall be a person experienced in taxation and a member

of a relevant recognized professional body, appointed by the State Governor,
subject to confirmation by the State House of Assembly.
 The Directors from within or outside the State Service
 A Director from the State Ministry of Finance
 The Legal Adviser to the State Service
 Three other persons appointed by the State Governor on their personal merit,
one each representing a senatorial district in the State.
 The Secretary to the Board from Internal Revenue Service, who shall be an
ex-officio member.

Note: The Secretary of the State Service shall be appointed by the Board from
within the State Service

Functions of SBIR - S. 88 of PITA.

1. Ensure the effectiveness and optimum collection of all taxes and penalties due
to the Government under relevant laws
2. Doing all such things as may be deemed necessary and expedient for the
assessment and collection of tax and shall account for all amount so collected
in a manner to be prescribed by the Commissioner
3. Making recommendations, where appropriate, to the JTB on tax policy, tax
reform, tax registration, tax treaties and exemptions as may be required, from
time to time

15
4. Generally controlling the management of the State Service on matters of policy ,
subject to the provisions of the law setting up the State Internal Revenue
Service
5. Doing all such things as may be deemed necessary and expedient for
assessment and collection of tax and shall account for all amounts so collected
in a manner to be prescribed by the Commissioner; also 5% of the revenue
collected shall be retained by the Board to defray cost of collection and
administration.

Technical Committee of The SBIR- S. 89 of PITA.

For effective and efficient discharge of its statutory duties, the law provides that the
SBIR is to be assisted by a committee to be called the “THE TECHNICAL COMMITTEE
OF THE BOARD”

Composition of the Technical Committee

 The Chairman of the Board
 The Directors within the State Service
 The Legal Adviser to the State Service
 The Secretary of the State Service

Functions of the Technical Committee

Technical Committee shall:
 Have powers to co-opt additional staff from within the State Service in the
discharge of the duties;
 Consider all matters that require professional and technical expertise and make
recommendation to the State Board;
 Advise the state Board on all its powers and duties
 Attend to such other matters as may, from time to time, be referred to it by the
Board.

Taxes and Levies to be collected by the State Government

1. Personal Income Tax in respect of individuals resident in the State
2. Withholding Tax (Individuals only)
3. Capital Gains Tax (Individuals only)
4. Stamp Duties on instrument executed by individuals
5. Pools betting, lotteries gaming and casino taxes.
6. Road Taxes
7. Business premises registration fee in respect of –
(a) urban areas as defined by each state maximum of :
(i) N10,000 for registration,
(ii) N5,000 per annum for renewal of registration and
(b) Rural areas-
a. N2,000 for registration, and
16
 b. N1,000 per annum for the renewal of registration
8. Development Levy (individuals only) not more than N100 per annum on all
taxable individuals
9. Naming of street registration fees in the State Capital
10. Right of Occupancy fees on lands owned by the State Government in urban
areas of the State
11. Market Taxes and Levies where State finance is involved.

3. Local Government Revenue Committee (LGRC) – S. 90 of PITA

Section 90 of PITA establishes Local Government Revenue Committee (LGRC) for each
Local Government Area of a State
Composition: The Revenue Committee shall comprise of the followings:
 Supervisor For Finance as Chairman
 Three Local Government Councilors as members; and
 Two other persons experienced in revenue matter to be nominated by the
Chairman of the Local Government on their personal merits.

However, Section 57 of the Lagos State Public Finance Management Law (LSPFML) of
August, 2011 provides for the establishment of Local Government Revenue Committee
with its Composition as follows:
o Chairman
o Council Manager
o Director of Accounts/Treasury
o Legal Office
o A member of the public not being a member of the Local Government who
is experienced in revenue matters to be nominated by the Chairman.

Functions of LGRC –S. 91 of PITAM and S. 58 of the LSPFM Law.

 The Revenue Committee shall be responsible for the assessment and collection
of all taxes, fines and rates under its jurisdiction and shall account for all
amounts so collected in a manner to be prescribed by the Chairman of the Local
Government;
 The Revenue Committee shall be autonomous of the Local Government Treasury
and shall be responsible for the day-to-day administration of the Department
which forms its operational arm.

Taxes and Levies to be collected by Local Government

1. Shops and Kiosks rates
2. Tenement rates
3. On and Off Liquor License fees
4. Slaughter slab fees
5. Marriage, birth and death registration fees
6. Naming of street registration fees, excluding any street in the State Capital
7. Right of Occupancy fees on lands in the rural areas, excluding those collectible
17
 by the Federal and State Governments.
8. Markets taxes and levies excluding any market where State finance is involved
9. Motor park levies
10. Domestic animal license fees
11. Bicycle, truck canoe wheelbarrow and cart fees, other than a mechanically
propelled truck
12. Cattle tax payable by cattle farmers only
13. Merriment and road closure
14. Radio and television license fees(other than radio and television transmitter)
15. Vehicle radio license
16. Wrong parking charges
17. Public convenience, sewage and refuse disposal fees.
18. Customary burial grounds permit fees
19. Religious places establishment permit fees.
20. Signboard and Advertisement permit fees

Joint State Revenue Committee (JSRC) – S. 92

Composition -
 The Chairman of the State Internal Revenue Service as the Chairman.
 The Chairman of the Local Government Revenue Committee.
 A representative of the Bureau on Local Government Affairs, not lower than the
rank of a Director.
 A representative of the Revenue Mobilization Allocation and Fiscal Commission,
as an Observer
 The legal Adviser of the State Internal Revenue Service.
 The State Sector Commander of the Federal Road Safety Commission, as an
observer
 The Secretary of the Committee, who shall be a staff of the State Internal
Revenue Service.

Functions of JSRC-S 93
The Joint State Revenue Committee:
 Implement decisions of the Joint Tax Board
 Advises the JTB, the states and Local Governments on revenue matters
 Harmonies tax administration in the State.
 Enlightens members of the public generally on the State and Local Government.
revenues matters
 Carry out such other functions as may be assigned to it by the Joint Tax Board

Major Revenue Generating Agencies of Lagos State Government

S/N Name of Agency Type of Revenue Collected
18
 1 Lagos State Internal Revenue Service Personal Income Taxes
2 Motor Vehicle Administration Agency Road Taxes; Registration of
Vehicles
3 Ministry of Physical Planning Charges for building plan approval
4 New Town Development Authority Charges on government scheme
5 Land Bureau Survey Plans and Approvals;
Stamp duties, consent and
perfection of titles
6 Ministry of Finance Government Investments and
land use charge
7 Ministry of Housing Sale of Government Houses
8 State Treasury Office (STO) Income from LASG Tenders
9 Lagos State Advertisement Agency Income from open advertisement,
mobile and billboards.

Some enhancement initiatives that accelerate Internally Generated Revenue

(IGR) in Lagos State.
In 1999, the LASG generated 600m as IGR, in 2005 this figure rose to 3.5b monthly
and in 2011 the figure has risen to 16 b monthly. What has brought about this
change? This is an example of timely policies, Law and Administration working in
sync with one another can achieve. Examples of changes include
1. No more collection of Cash
2. IT system that helps track payments. This is called Electronic Banking
System powered by Alpha Beta Consulting.
3. Autonomy of the LSBIR away from the Civil Service Structure
4. Inter-agency Relationships with the MVAA, Lands, LASTMA etc
5. Aggressive Enforcement Drive
6. Promulgation of New Laws
7. Opening up of the Informal Sector
8. Creation of Tax Education and Enlightenment Team
9. Autonomy of the Distrain Unit
10. Simplification of Tax Forms
11. Expansion of the Self-Assessment Unit

RESIDENCE

19
Relevant Tax Authority
A Relevant Tax Authority (RTA) is a government agency recognized by a tax statute
and charged with the responsibility for the assessment, collection and administration
of tax. In Nigeria there are 37 RTAs: Federal Inland Revenue Service and the Internal
Revenue Service of each of the 36 states of the federation. The relevance of a tax
authority therefore is determined by the type of tax and the jurisdiction over which it
is empowered to assess, collect and administer a particular tax.

The following table summarizes the Relevant Tax Authorities for the administration of
the Personal Income Tax in Nigeria

S/N TAXABLE PERSONS RELEVANT TAX

AUTHORITY
1 Resident Individuals other than The SIRS of the state of
Military/Police/FCT Residents residence
2 Residents of FCT FIRS
3 Members of the Armed Forces, The FIRS
Police and other Civilians in the Forces
4 Staff of the Foreign Affairs Ministry The SIRS of the state of
Resident in Nigeria residence
5 Staff of the Foreign Affairs Ministry FIRS
Working Abroad
6 Foreign Diplomats working in Nigeria Tax Authority of Home
Country
Foreigners without diplomatic status The SIRS of the state of
working in Nigeria residence
7 Nigerians working in Embassies and The SIRS of the state of
UN/AU/ECOWAS offices in Nigeria residence
8 Non-Resident Individuals FIRS

Determination of Residence (Schedule 1)

As outlined above, the relevant tax authority for an individual is determined mainly by
the place he/she is resident. The place of residence of a person is recognized by law as
a place available for his domestic use in Nigeria on a relevant day, and does
not include any hotel, rest house or other place at which he is temporarily
lodging unless no more permanent place is available for his use on that day.

There are however situations where the above general position may not be easily
determinable. Therefore, the First Schedule of PITA has set out details to guide the
determination of residence of the taxpayer for the purpose of assessing his income to
tax in Nigeria under the Act.

The following concepts are therefore relevant under the Residence principle:
i. Place of Residence- “place of residence” in relation to an individual, means
a place available for his domestic use in Nigeria on a relevant day, and does
not include any hotel, rest-house or other place at which he is temporarily
lodging unless no permanent place is available for his use on that day; i.e. a

20
 relevant date. The relevant date for tax purpose is 1st of January of every
year and the place of residence on this date determines the Tax Authority to
which the taxpayer is accountable.

ii. Principal Place of Residence – “principal place of residence” in relation to

an
Individual with two or more places of residence on a relevant day, not being
both within any one territory means -
(a) in the case of an individual with no source of income other than a
pension in Nigeria, that place of those places in which he usually
resides;

(b) in the case of an individual who has a source of earned income other
than a pension in Nigeria, that place of those places which on a relevant
day is nearest to his usual place of work;

(c) in the case of an individual who has a source or sources of unearned

income in Nigeria, that place of those places in which he usually
resides.

(d) In the case of an individual who works in the branch office or operational
site of a company or other body corporate, place of residence is the place
at which the branch office or operational site is situated; provided that the
operational site shall include oil terminals, oil platforms, flow stations,
factories, quarries, construction sites with a minimum of fifty (50) workers,
etc

ii. Domicility – In the case of a Partnership, the place where the Partnership is
domiciled or situated (i.e. the registered office of the Partnership, principal office
or place of business) on the first day of that year of assessment determines the
tax authority to which the Partners are accountable.

FOREIGN EMPLOYMENT: A foreign employment is the employment in which the

duties of the employment are fully performed outside Nigeria, other than when the
employee is in Nigeria on a temporary visit. Temporary visit means a stay in Nigeria
that does not amount to 183 days in any 12 calendar year. The number of leave days
and days of temporary absence from work are now also to count in determining 183
days.

The state of residence for a person with a foreign employment would be the
territory in which the principal place of business of the employer is situated on
the first day of January in a year of assessment or on the day he first enters
the employment.

This is however subjected to the condition that the person first becomes liable to
Nigerian tax by virtue of entering into the employment in that year. However, if the

21
person has been resident outside Nigeria, but has only derived income from Nigeria,
his RTA would be FIRS as stated in Section 2 (1) (b) of the Act.

The income from a foreign employment is also liable to tax in Nigeria if such income
constitute an expense in the records of a Nigerian company.

NIGERIAN EMPLOYMENT: the RTA would be the tax authority of the territory in
which he has a place or principal place of residence in Nigeria on the first day of
January of that year of assessment. Where however, the individual is on leave outside
Nigeria on the first day of January in the year of assessment, then his RTA would be
that of the territory in which he resided before his leave.

OTHER EMPLOYMENTS: an employee whose remuneration is subject to income tax in

Nigeria for a year of assessment, but who is not deemed to be resident (non-resident)
in a territory for that year under the rules relating to Nigerian employment, shall be
deemed to hold a foreign employment, and if he has no territory of residence for that
year shall be deemed to be resident in the FCT.

EXPATRIATES:
An Expatriate will be liable to personal income tax in Nigeria if:
 His employment costs are charged to a Nigerian company or borne by a ‘fixed
base” in Nigeria
 He is in Nigeria for an aggregate of 183 days in any 12 months period (including
leave and temporary absence)
 He is not liable to tax in another country which has Double Taxation Agreement
(DTA) with Nigeria.

PENSIONERS:
a. Where the only source of earned income in Nigeria as at 1st January is Pension
and the person has a place or principal place of residence on that day: Place of
residence would be the territory of the place or principal place of residence.

b. Where the only source of earned income in Nigeria as at 1st January is Pension,
but the person had no place or principal place of residence on that day: If the
pension is a Nigerian pension wholly payable by government of one territory,
then he is resident in that territory in which the pension fund or the person
authorizing the payment of the pension is situated.

c. Where the only source of earned income arising from Nigeria is a Nigerian
pension and the individual has no place or principal place of residence, the
pension is payable by more than one government or if there are two or more
pensions arising from different territories: such persons would be deemed to be
resident in the FCT.

22
UNEARNED INCOME: Where all the income of an individual for a year is comprised of
unearned income and he has a place or principal place of residence in that year, he
shall be deemed to be resident in the territory where he has a place or principal place
of residence on 1st January of the year. Where however he has no place of residence
on that day, he shall be deemed to be resident in the territory from which income is
derived.

Multiple Applications:
In the event that a person’s residence can be determined under more than one of the
basis above, the first basis in the order of arrangement would apply:
a. Paragraph 2 - Foreign Employment
b. Paragraph 3 - Nigerian Employment
c. Paragraph 4 – Other Employment
d. Paragraph 5 - Pension Income
e. Paragraph 6 – Other Earned Income
f. Paragraph 7 - Unearned Income

Disputes Relating To Determination of Residence: Where the determination of the

principal place of residence leads to a dispute between two or more tax authorities or
between an individual and a tax authority, the Joint Tax Board determines the tax
jurisdiction.

23
 INCOME
Chargeable Income S3
For any income (or profit) to be liable to tax in Nigeria, such income (or profit) must be
“accruing in”, “brought into”, “derived from”, or “received in”, Nigeria. The
following explain clearly the meaning accorded with the above terms describing
chargeable income:
 Accruing in refers to income or profit made in Nigeria.
 Derived from refers to the income or profit made on jobs done in Nigeria.
 Brought into refers to profits or income remitted into Nigeria from other
countries, and
 Received in refers to income or profit received in Nigeria from whatever source
it is derived.

Provided that the above conditions to transactions are met, then such shall be
subjected to tax in Nigeria.

SOURCES OF CHARGEABLE INCOMES

The various sources of incomes on which tax is payable in the above section of the Act
are as follows:
A. Gain or profit from any trade, business, profession, or vocation carried on or
exercised for whatever period of time in a given year of assessment.

B. Any salary, wage, fee, allowance or other gain or profit from employment
including compensation, bonuses, premiums, benefits or other prerequisites
allowed given or granted by any person or employee other than so much of any
sums as may be admitted by the relevant tax authority to represent
reimbursement to the employee or expenses incurred by him in the performance
of his duties, and from which is not intended that the employee should make
any profit or gain
The implication of the amendment in practical terms is that all emolument of
employees are taxable without exception i.e. no more non-taxable housing,
transport, meal, utilities, entertainment etc.

C. Gains or profit including any premium arising from a right granted to any other
person for the use or occupation of any property. (Rents and Royalties)

D. Dividend, interest or discount.

E. Any pension, charge or annuity.

F. Any profit, gain, or other payment not falling within paragraphs A-E above.

24
 OTHER FORMS OF INCOMES

1. Assessable Income – S. 23
This is the income from each source defined as “the income of the taxable person
from each of his sources of income in the year immediately preceding the year of
assessment” with the exception of employment income which is “the income of the year of
assessment” from that employment.

2. Total Assessable Income-S.36

The Total Assessable income for any year of assessment is the addition of all
assessable income of an individual for the year of assessment

3. Total Income
The total income of an individual for any year of assessment is: his taxable income
plus balancing charge (if any) less balancing allowance (if any) less capital
allowance (if any) less loss relief (if any) for the year of assessment.

4. Chargeable Income
The chargeable income of an individual for any year of assessment is: his Gross
Income less his Statutory Allowances and Deductions

5. Disposable Income
The disposable income of an individual is the difference between his total income
and tax paid, (i.e. Total Income less Tax). It is that part of his total income available
for use as he pleases.

6. Earned Income
Earned Income is that income which is derived from paid employment whether as a
self-employed or as an employee. It is considered as earned income because the
individual income earner is directly or actively involved in the generation of the
income. This is an income derived by an individual vide the use of her/his mental
or physical efforts i.e, physical, intellectual or artistic exertion as opposed to those
earned passively through investment. The PITA 1993, as amended defined earned
income, in relation to an individual to mean income derived from a Trade,
Business, Profession, Vocation or Employment carried on or exercised by her/him
and any Pension derived by him/her in respect of any previous employment.

7. Unearned Income
This is the income derived from ordinary investment (i.e. investment income). The
generation of the income does not involve the direct activities of the individual
income earner. These are incomes not associated with physical or mental labour.
They are basically derived from investment incomes or employment of assets.
Mainly investment incomes are rental incomes, dividends, royalties, gifts,
inheritance, planned bequeaths, income from pool betting and earning from
trademarks, patents, etc. They are usually subjected to withholding tax at source.

25
 Where the net value of an unearned income has been given, it should be grossed
up before it inclusion into the category of unearned income. For the purpose of
assessment, this class of income is assessed to tax on preceding year basis (PYB).

8. “Franked Investment Income” (“F.I.I.”)

This is the income from which tax has already been deducted at source. This
income is distinguished as “Franked Investment Income” as soon as it has suffered
taxation once. This is done in order to avoid double taxation, as such an income is
exempted from further tax. Under Personal Income Tax, dividend and interest are
regarded as “Franked Investment Income”, withholding taxes on them being
regarded as final tax in the hands of the recipients.

Income Exempted From Tax - Third Schedule

The Personal Income Tax Act exempts certain incomes from taxation. Such incomes
include
1. The emoluments payable from United Kingdom Funds to members of visiting
or other Forces and to persons in the permanent services of the United
Kingdom Government in Nigeria and the emoluments payable to a civilian
components, and the income of any authorized service organizations,
accompanying the visiting forces.

2. All consular fees received on behalf of a foreign State, or by a Consular

Officer or employee of the state of his own account.

3. The income of a Local Government or Government Institution.

4. The interest accruing to foreign currencies, domiciliary accounts of any

person who is not resident in Nigeria.

5. The income of any ecclesiastical, charitable or educational institution of a

public character in so far as such income is not derived from a trade or
business carried on by such institution.

6. Pension granted to any person as a result of legislation.

7. Wound and disability pension granted to a member of the Armed Forces of

any recognized national defense organization or to persons injured as a
result of enemy action.

8. Pension granted to a person under the provisions of the Pension Reform Act
2004 relating to widows and orphans.

9. The income of a trade union registered under the Trade Union Act, in so far
as the income is not derived from a trade or business carried on by that
trade union.

26
 10. Gratuities payable to public officers or private sector employee.

11. The income of a statutory or registered friendly society in so far as such

income is not derived from a trade or business carried on by such society.

12. The income of a co-operative society registered under the co-operative

Societies Act 1993, not being income from any trade or business carried on
by the society.

13. Income earned from:

a. bonds issued by Federal, State and Local Governments and their
agencies,
b. bonds issued by corporate bodies including supra nationals and
c. Interest earned by holders of the bonds and short term securities listed (a)
and (b).

14. Interest on any loan granted by a bank on or after 1st of January 1997 to a
person engaged in
a. Agricultural trade or business; and
b. The fabrication of any local plant and machinery
c. Cottage Industry established under the Family Economic Advancement
Programme (provided that the moratorium is not less than 18 months and
the rate of interest is not more than the base lending rate at the time the
loan was granted)

Chargeability To Tax – Section 2

The following persons are exempted from paying tax to the SIRS are:
i. Persons employed in the Nigerian Army, the Nigerian Navy, the Nigerian
Air Force , the Nigerian Police other than in a civilian capacity;
ii. Officers of the Nigerian foreign service;
iii. Every resident of the Federal Capital Territory Abuja; and
iv. A person who resides outside Nigeria, but derives income, gain, or profits
from Nigeria.

Income tax shall be payable for each year of assessment on the total income of every
individual (other than the ones listed above)or corporation sole or body of individuals,
deemed to be resident for that year in the relevant state under the provisions of this
Act.

Chargeable or Taxable Persons – Sections 2 & 40

A Taxable or Chargeable ‘Person’ is that person (i.e. an individual or body of
individuals) who has an income that is chargeable to tax in a particular year of
assessment.

27
A Taxable person shall be chargeable to tax:
A. In his/her own name, or
B. In the name of:
I. A receiver, trustee, guardian, or committee having the direction,
control or management of property or concern on his behalf, or

II. A person treated as his agent in accordance with the applicable

provisions of PITA, in like manner and to the like amount as the
taxable person would be chargeable.

Taxable Persons include:

a. an ‘individual’ resident or deemed to be resident in Nigeria;
b. a trustee of a trust or settlement. A trustee is a person who holds
property to take care of it and apply it for the benefit of those entitled to
it, e.g. marriage settlement, debt settlement).
c. an Executor (or Administrator) of the estate of deceased person
where that person was or would have been liable to tax;
d. an itinerant worker i.e. an individual who customarily earns his living in
more than one place in Nigeria. Note that he is such individual
irrespective of his status who work at any time in any state during a year
of assessment for wages, salaries or livelihood by working in more than
one state and worked for a minimum of 20 days in at least three months
of every assessment year.
e. a Corporation Sole or anybody of individuals deemed to be resident for a
year of assessment in the territory in which its Principal office in Nigeria
is situated on the first day of January in that year or if no office in Nigeria
on that day, territory in which part or whole of its income liable to tax in
Nigeria arises for that year;
f. an indigenous family;
g. a partnership.
h. an indigenous community.

Where two or more persons act in the capacity of trustees, they may be charged jointly
and severally with the tax to which they are chargeable in that capacity, and shall be
jointly and severally liable for the payment of the tax as stated in section 40 (3), PITA
(1993), as amended.

Sole trader assessment would essentially be based on the audited account of the sole
trader. This involves identifying accounting expenses that are not allowed for tax
purposes and accounting incomes which are non-taxable, and also in the same vein,
identifying allowable expenses and taxable incomes, so as to accurately and
adequately bring the taxpayer into the tax bracket, without necessarily over-
burdening the taxpayer.

Partnership firms are not chargeable to tax on their own. It is the individuals making
up the partnership that would separately be subjected to tax, and also where the
28
partnership has capital allowance to be claimed against income, it should be treated
as allowance in the partners agreed profit sharing ratio as stated in the partner’s
deed.

While Estate, Trusts, and Settlement assessment may appear not to be too common in
Nigeria. Ordinarily, estate, trusts and settlement set by families, individuals etc
should be assessed to taxation. Under the provision of PITA, it is either the direct
beneficiaries or the trust manager or the person setting up such trust that is
subjected to tax. The implication of this is that trust estate or settlement is in itself
not subjected to be charged to tax but the income derived in the hands of the
beneficiary, which are subjected to tax. If the beneficiaries are infants, then the
administrators of such trust or settlement are to be subjected to tax on behalf of the
infants, as stated above.

Note: The provisions of S36(6) where the income of the tax payer cannot be
ascertained, then such taxpayer shall be assessed on such terms and conditions as
would be prescribed by the Finance Minister by way of regulations in a gazette.

Income Tax Return – Section 41

At the beginning of each fiscal year, every taxable person is required by Section 41 of
the PITA to file without notice or demand thereof, to prepare and deliver to the state in
which the taxable person is deemed to be resident, a true and correct statement in a
specified form, his total income from all sources together with the particulars
applicable to him for the purposes of granting him reliefs, allowances etc.

This statement is what is referred to as “Income Tax Return.” The return contains a
declaration which should be duly signed by the taxpayer to the effect that a true and
correct statement of his affairs has been rendered. Every taxable person shall file the
return within 90 days from the commencement of the fiscal year of assessment,
according to section 41, of PITA (1993), as amended.

When Does A Person Become Liable To Personal Income Tax?

A person is liable to Personal Income tax every year. Such year is referred to as the
year of assessment. The year of assessment for income tax purpose is the
Government Accounting Year which is a period of twelve (12) months commencing
from the first day of January and subsequent period of twelve (12) months i.e. 1 st
January to 31st December of the same year. For example, 2013 year of assessment is a
period of 12 months from 1st January to 31st December 2013.

29
 TAX ASSESSMENT
Definition
Tax Assessment is the whole process of measurement of a taxable person’s tax
obligation and putting him/her on notice in respect thereof. Therefore, the calculation
of the amount of tax payable by individuals on the basis of the tax law is called Tax
Assessment. The modus-operandi for achieving this depends on the provisions of the
tax laws of the tax base concerned, which involves the below:
1. Ascertaining the base or the assessable profit.
2. Granting reliefs and allowances as allowed by tax laws.
3. Applying the relevant tax rates.
Depending on the provisions of the relevant laws, it may involve the issuance or not,
of the Notice of Assessment and serving same on the Taxpayer.

S. 54 provide that where an income tax return has been filled and submitted by the
taxpayer, Relevant Tax Authority (SIRS) may:
1. Accept the tax return and make an assessment accordingly, or
2. In the absence of a satisfactory return of Form A or written statements; or
where the taxpayer refused to submit his completed Form A or written
statement within the specified period of 90 days; the RTA may raise an
assessment on the Taxpayer based on his (RTA) Best of Judgment (B.O.J)- i.e.
estimated assessment.

Basis Period of Assessment - S. 23(1)

Assessable income of an individual is determined by reference to the basis period of
assessment (i.e. the period of income on which the assessment is based). The basis
period is a definite period with defined dates which serves as a link between a period
of account of a business enterprise or period of income of an employee or individual as
the case may be, and a tax year or year of assessment. It is therefore the period of
income/profit with which the tax year of assessment is linked for the purpose of
determining the tax liability.

Whatever profit or income that falls within the basis period is to be assessed to tax in
the relevant year (i.e. year of assessment). Thus failure to ascertain the basis period of
a tax year, profit/income assessable to tax cannot be determined.

S. 30 on “Apportionment of Income” states that in the case of a trade, business,

profession or vocation, it is necessary in order to arrive at the income of any
year of assessment or other period to allocate or apportion to specific periods
the income or loss of any period for which accounts have been made up.

However, in the case of employment income the basis period is the year in which that
income is earned (actual year or current year). This means that for an employee who

30
is chargeable to tax in the year 2014, his income for assessment is that actual earned
income between 1st January and 31st December 2014.

Special rules however, apply in the case of a new business (commencement), a

business that has ceased operation (cessation), and a business whose accounting
date has changed (change in accounting date).

Classes of Assessments
There are two broad classifications of assessment:
A. Official Assessment (Revenue or Government or Administrative Assessment)
B. Self-Assessment

OFFICIAL ASSESSMENT
1. Official Assessment is also known as Revenue Assessment or Government
Assessment or Administrative Assessment. Two methods or procedures are
applied under Official Assessment, depending on whether the taxpayer is an
employee under the Pay As You Earn (P.A.Y.E) or a Self-employed under Direct
Assessment.

(a) THE PAY AS YOU EARN (P.A.Y.E) – S. 81

The term Pay As You Earn is used to describe the system whereby an employee pays
an income tax on his or her current earnings when they become payable, in the form
of deduction made by his or her employer. Tax is therefore deducted by the employer
from the remuneration paid its employees.

The tax so deducted by the employer from its employees is paid over to the Tax
Authority at monthly intervals. Each employee is obliged, as a matter of civic
responsibility, to complete a tax form stating his income from employment and
other sources including his claims for allowances and reliefs and send this Form
through his employer to the tax office (relevant tax authority) nearest to his place of
employment in his state of residence at the beginning of the year. This form is called
the Income Tax Form for the Return of Income and Claims for Allowances and
Reliefs (i.e. Tax Form ‘A’).

Registration Requirements of Employers of Labour under P.A.Y.E.

1. Letter of Intent on the Employer’s Letter-Headed paper;
2. Tax Clearance Certificate of at least two (2) Directors;
3. Certificate of Incorporation;
4. Memorandum and Articles of Association;
5. Spread-Sheet containing the names, job titles and remunerations of the
staff.

31
 6. Evidence of Payment of Business Premises registration – Urban -
N10,000.00 & Rural Area-N2,000.00.
7. Evidence of Payment of Staff Development Levy (N100.00)

Procedures For PAYE Administration

Section 81 (1) of PITA provides that Income tax chargeable on an employee by an
assessment whether or not the assessment has been made, shall, if the relevant tax
authority so directs, be recoverable from any emolument paid, or from any payment
made on account of the emolument, by the employer to the employee.

The procedure for PAYE administration is as given below:

1. Collection of Tax Form A* ( *Income tax Form for return of income and claims
for allowances and reliefs) by employer.
2. Completion and return of all dully completed Forms collected by the employer
(for the employee) to the relevant tax authority.
a. Before submission of all Forms collected, the employers should as a matter
of duty, certify as to the correctness of salaries, and allowances declared in
the Forms by their employee, to ensure that correct reliefs are granted to
their employees. (Note that all claims must be accompanied with
evidence/proof before any could be granted).
b. Employees whose Forms are not carefully and fully completed and signed as
well as duly certified by their employers may experience delay in granting
and collection of their Tax Deduction Card (TDC**).
3. The RTA after review of each Tax Form A submitted will compute total reliefs
and allowances each employee is entitled to in line with applicable PITA
provisions and this will be communicated to the employer through each
employees’ Tax Deduction Cards (TDC**). The TDC** shows the cumulative
monthly income, tax reliefs, taxable income and tax payable and column for
refund of excess tax paid, if any.
4. Employers are required to file with RTA not later than 31 st January of every of
every fiscal, Employers End of the Year Returns consisting of:
a. Employers Annual Declaration Form ‘Tax Form H1’. The Form has
columns for names of employees, gross income, tax deducted and
remitted, NSITF and tax in the preceding year.
b. All TDC used in the operation of PAYE scheme in the year.
c. Receipts evidencing PAYE remitted in the preceding year
d. Failure to file the employers’ return by January 31 as prescribed,
defaulting employer of Labour will be liable to a fine of N500,000 (Body
Corporate) and N50,000.00 (Individual).
5. Remittance of PAYE deduction.
Remittances must be done within 10 days of the end of each month to any of
the designated banks, in order to prevent payment of interest and penalty for
late payment. Receipt must be collected by the employer for any remittance
made.
* As a result of modern technological advancement some State Revenue Boards
require employers to submit in lieu of each staff Tax Form A, information
32
relating to all staff (names, designation, income, allowances received and claims)
in a prescribed format in both hard and soft copies which form the basis of
advising the employer on how much to deduct from each employee’s
remuneration.

** Due to the manual nature of computation and completion of TDC of each

employee and considering the large number of staff in most firms/companies in
Lagos state, the LIRS current policy uses signed Spreadsheet in lieu of TDC.

Conversely, an employer commits an offence:

 When she/he fails to register with the relevant tax authority within six months
of commencement of a business for the purpose of deducting income tax from
his employees with or without formal notification or direction by the relevant tax
authority.
 For making incorrect and false statement and returns or failure to comply with
the requirements of a notice served on an employer.

(b) THE SELF-EMPLOYED (DIRECT ASSESSMENT)

Section 41 of PITA provides thus:
1. For each year of assessment, a taxable person shall, without notice or demand
therefor, file a return of income in the prescribed form and containing the prescribed
information with the tax authority of the State in which the taxable person is deemed
to be a resident together with a true and correct statement in writing containing:

a. Amount of income from every source in the preceding year of assessment.

b. Such particulars of the income as to allowances, reliefs, deduction or otherwise
as may be material for that purpose.

2. The Form of return shall contain a declaration which shall be by or on behalf of the
taxable person that the return contains a true and correct statement in accordance
with the law.

3. The return shall be filed within 90 days from the commencement of every year of
assessment.

Official Assessment of the self-employed is the Tax obligation established by the

relevant tax authority and communicated to the taxpayer in a Notice of assessment.
The computation of the tax payable may be based on the taxpayers returns filled or on
best of judgments.

NOTICE OF ASSESSMENT- S. 57
A NOTICE OF ASSESSMENT is a notice of tax computation sent by the tax
authority to a taxpayer (self-employed) informing him of, among others:
a. his incomes from each stated source (i.e. assessable incomes);
b. aggregate income from all sources (i.e. total assessable income);

33
 c. deductions for capital allowance, loss reliefs and balancing
charge/allowance (if any);
d. amount of total income;
e. personal reliefs;
f. amount of chargeable income;
g. rates of tax payable;
h. amount of tax payable;
i. right of objection; e.t.c.
j. number of months within which payment becomes due after the date of
service of the Notice of Assessment.
k. number of installments in which tax is payable.
l. the State Tax Authority / Internal Revenue Office.
m. the year of Assessment.
n. name and address of Taxpayer (including Trading Name if any).
o. the enabling Tax Law.
p. taxpayer’s right of objection.
q. date of preparation of assessment.
r. signature and date of assessing the officer.
s. double Taxation relief.
t. tax paid in advance (i.e. prepayment).
u. tax overpaid (to be refunded).
Note that the Notice of Assessment may be served on the taxpayer by registered
post, courier service and or electronic mail.

As soon as the notice is received, the taxpayer should check the amount of the
assessment with the return, and any agreed computation based on accounts, and the
allowances, reliefs verified. The taxpayer has a right to object if, in his/her opinion,
the assessment is incorrect.

Even after, an assessment has been made and accepted as correct by the taxpayer, a
further assessment may be raised to make good any lost tax if the relevant tax
authority discovers that income which should have been assessed has not been
assessed, or that too little has been assessed.

However, the liability under such a further assessment might have been reduced or
eliminated by claims and/or elections that the taxpayer could have made, had the
relevant tax authority raised the assessment at the normal time, but which are now
‘out of time’.

Where an assessment is excessive due to some ERRORS OR MISTAKES in the

taxpayer’s returns or other statement supplied by him/her, the taxpayer can claim
reliefs within a given, stated time limit at the end of the relevant tax year. The Acts
covers errors of omission or mistakes arising from a failure to understand the law and
arithmetical errors. It does not cover failure on the part of the taxpayer to appeal
against an assessment of changes in the accepted view of the law after the return was
made.

34
Defects In Assessment Notice/Validity of Assessment
No assessment warrant or other proceeding purporting to be made in accordance with
the provision of the Act shall be quashed or deemed to be void or voidable for want of
form or be affected by reason of a mistake, defect, or omission therein. Section 59 of
the Personal Income Tax Act authorizes the validity of an assessment in spite of want
of form, mistake, defect, or omission provided that the assessment is made in
conformity with or according to the intent and meaning of the Act.

An assessment is not impeached or affected;

1. By reasons of a mistake therein as to
a. The name of a taxpayer or of a person whose name a taxable person is
chargeable.
b. The description of the income.
c. The amount of any income tax charged or shown to be payable.
2. By reason of any variance between the assessment and the notice thereon.

Assessment List
It is statutorily mandatory for the Relevant Tax Authority to keep a list of all taxpayers
assessed to tax in each year of assessment. This is known as an Assessment List.

Assessment Register
Assessment register which is only permissive, is merely an office record brought into
use for the purpose of ensuring a proper and orderly issue of assessment Notices.

Types of Direct Assessments (under Self-Employed Assessment)

1. Original Assessment,
2. Best of Judgment assessment,
3. Amended Assessment,
4. Refusal to Amend Assessment,
5. Revised Assessment,
6. Additional Assessment,
7. Back Duty Assessment,
8. Jeopardy/Protective Assessment, and
9. Turnover Assessment.

Original Assessment
Also known as normal assessment, this is the assessment of either the income of the
current/ actual year (for employment income), or an assessment of the income of the
year immediately preceding the year of assessment (for other incomes). For example,
an assessment of 2013 for 2013 year of assessment on employment income, or an
assessment of any income from trade, business, profession or vocation of 2012 for
2013 year of assessment, is a normal assessment.

35
Best of Judgment (BOJ) Assessment
The individual self-employed who does not complete his income return form (Tax Form
“A”) or who fails to provide any other information required of him will be assessed in a
sum estimated to be his income. The assessment will be made to the best of judgment
(BOJ)of the Relevant Tax Authority and it will be based on EVIDENCE HELD AND
LOCAL KNOWLEDGE regarding the taxpayer.

Amended Assessment
An assessment is amended if it is REVIEWED DOWNWARDS and a NOTICE OF
AMENDED ASSESSMENT is served on the taxpayer.

Refusal to Amend Assessment

A taxpayer has the right to object the tax liability on a notice of assessment served
him and request for a downward review. If the tax authority is of the opinion that the
assessment should not be amended, a NOTICE OF REFUSAL TO AMEND
ASSESSMENT would be served on the taxpayer, thus upholding the original
assessment.

Revised Assessment
An assessment is revised if it is reviewed upwards. This occurs when in the opinion of
the Tax Authority, the tax assessed is increased, following the taxpayer’s service of
notice of objection. The taxpayer will be notified of the development and he will be
served both Refusal to Amend Assessment and the Revised Assessment.

Additional Assessment
When A Tax Authority suddenly discovers more or new information about a taxpayer
after assessment has been raised on him, or the tax authority is of the opinion that a
person liable to tax has not been assessed or has been under-assessed, an
ASSESSMENT or ADDITIONAL Assessment may be raised. This can be done any time
within the assessment year or within six (6) years from the end of the assessment
year. The time limit of six years will not apply where the omission or error is as a
result of any form of fraud, Willful default or Neglect by the taxpayer

Back Duty Assessment

A back-duty assessment is a form of additional assessment on any income before the
year of assessment (for employment income), or an assessment of any income before
the year immediately preceding the year of assessment (for other income). Examples of
Back-duty Assessment is an assessment of employment income of 2013 for 2013 year
of assessment, or an assessment of any income from trade, business, profession or
Vocation of 2012 and below in 2013 year of assessment.

Jeopardy/Protective Assessment
This assessment is issued in the circumstance that the taxpayer may leave the
country before the end of the tax year. In such case, a departure from the normal
rules may be applied by issuing the assessment on actual year basis.
36
Turnover Assessment
This assessment is raised where it is difficult to ascertain the profit/gain or where the
taxpayer could not provide the cost of raising the income. The assessment is therefore
based on the turnover of the business. e.g. Legal Fee.

Self
Assessment
Self-assessment scheme which was introduced in Nigeria in 1991 permits a taxpayer
to assess himself by completing specific columns of a standardized form (Tax Form
A1) designed by the Tax Authority. Hence the taxpayer is allowed to determine his
income, make claims for allowances/reliefs and work out his tax due subject to the
amount payable as may be prescribed by the Minister by order of gazette.

Under Self-assessment system, a taxpayer is entrusted with the responsibility of

assessing himself to tax and paying the assessed tax as stipulated by law setting up
the system of tax assessment. However, the RTA reviews the assessment and raise
additional assessment as the situation warrants.

Peculiarities of Self-Assessment
1. Individuals filing self-assessment must do that within six months from the end
of the accounting year.
2. There should be statement of account – indicating incomes and expenditures.
Incomes statement may include both earned and unearned. There may be
schedule of assets, depreciation and also balance sheet statement.
3. The individual may calculate the tax due, capital allowances and state precisely
the basis of his or her calculations in form of notes.
4. A tax official handling such accounting case should have ability to interpret
account and re-compute the assessable profit to enable him or her arrive at the
actual tax payable.
5. The tax due can be paid on six (6) installmental basis as provided for in the
relevant laws and tax policy statement.
6. There is provision for 1% rebate as an incentive to self-assessment filer.

Due Date For Payment of Tax

A. Where income tax has not been the subject of objection or appeal, it shall be
payable within two months from the date of service of the notice of assessment.
Where such period of two months expires before the 14 th day of December,
within the year of assessment for which the tax has been charged, any balance
of such tax shall be payable not later than that day.
B. Where there has been valid objection or appeal pending, payment of such
income tax shall remain in abeyance until such objection or appeal is
determined though the relevant tax authority may enforce payment of the
portion, if any, of tax which is not in dispute.
37
 C. Where upon the determination of an objection or appeal, the relevant tax
authority shall serve notice upon the taxpayer of the tax chargeable as so
determined and that tax shall be payable within one month of the date of
service of the notice. Where this period of one month ends before the 14 th day of
December, within the year of assessment for which tax has been charged, any
balance of such tax shall be payable not later than that day. The relevant tax
authority can vary these payment dates as they consider reasonable and
expedient.

Final & Conclusive Assessment

An assessment is considered to be final and conclusive where:
A. No valid objection or appeal has been lodged within the statutory time limit
allowed.
B. No further notice has been given of a further appeal against a decision of the
Tax Appeal Tribunal or a Judge.
C. The amount of total income or profit has been determined on objection or on
appeal the assessment as made, agreed to, revised, or determined on appeal.

Error or Mistake Claim

If any taxpayer who has paid for any year of assessment can prove that an
assessment made on him was excessive by reason of some error or mistake in any
return or statement made by him, he may at any time not later than six years after
the end of the year in which the assessment was made, make an application in writing
for relief. The relief to be in form of repayment of tax as the Board (SIRS or FIRS) may
consider just and reasonable.

Currency of Payment of Tax

Income tax charged on a taxpayer shall be paid in the currency of the transaction or
income- that is, the currency in which the income that gave rise to the tax was
derived, and paid to the taxpayer. If the taxpayer’s transaction was in foreign
currency, the tax to be paid shall also be paid in the same currency in which the
income was derived, that is, in foreign currency.

Withholding Tax
Withholding tax in Nigeria refers to the deduction of tax at source from payments
(income) due to a benefiting party and withheld as advance payment by taxpayers
which can be applied as set-off against or tax credit to settle the total tax liability of an
individual of the year to which the income that suffers deduction by the amount
withheld relates. Withholding tax is not a separate form of tax but a collection
mechanism adopted by the Tax Authorities to reduce the incidence of tax evasion and
encourage voluntary compliance since a certain percentage of the taxable income
accruing to the taxpayer has been deducted at source. It is an advance payment of a
taxable entity’s normal income tax, since it is available for set-off against the
ultimately assessed tax.

38
Objectives of Withholding Tax:
The withholding tax system is aimed at achieving a number of objectives both for
government and the tax payer. The chief objective however, is to reduce the incidence
of tax evasion by companies and individuals, thereby increasing the revenue earning
potentials of government from income tax. Withholding tax apart from ensuring that
tax evasion is minimised, also guarantees the all-year round flow of revenue to
government instead of waiting for the financial or fiscal year-end when tax
assessments and collection are carried out. Similarly, the effect of large tax payment
on the cash flow of business is also reduced by the instalment payment of tax via the
withholding tax system.

Withholding Tax Rates

TRANSACTIONS COMPANIES (%) INDIVIDUALS (%)
Royalties 10 5
Contract of Supplies 5 5
Contract of Construction 10 5
Dividend 10 10
Technical Service 10 5
Professional Service 10 5
Consultancy 10 5
Management Service 10 5
Commission 10 5
Rent 10 10
Interest 10 10
Hire, Charter, Lease 10 10
Directors fees 10 10

Withholding tax on Dividend and interest are treated as final taxes in the hands of the
recipients. That is, incomes from Dividends and Interest are excluded in determining a
Taxpayer’s Chargeable Income for tax purposes. S.73 (4) of PITA states that excess
remittances should be refunded within 90 days of such remittances or be set off
against future tax repayment.

The agents of WHT are:

I. Corporate bodies (companies)
II. Individuals, firms and sole traders.
III. A statutory body, a public authority and other institutions or
organizations.
IV. Government Ministry, Department or Agency and Local Government.

Transactions that are exempted from WHT are:

I. Direct purchase across the counter,
II. Direct purchase of raw materials from supplier as distinct from contract
of supplies
39
 III. Sale in the ordinary course of business.
IV. All imported goods.
V. Inter- bank interest.
VI. Income exempted from income tax
VII. Claims in insurance business
VIII. Interest on Bonds
IX. Dividends redistributed by Holding Companies

Rates of Tax – Sections - 19, 37, 74 and the Sixth Schedule

To arrive at the tax payable, the chargeable income of an individual will be assessed to
tax at graduated rates as shown below:
Progressive/ Graduated/ Top-Sliced Rates of Tax

Chargeable Rate of Tax Tax Due (N) Cumulative Cumulative Tax

Income (N) (%) Income (N) (N)

300,000 7 21,000 300,000 21,000

3O0,000 11 33,000 600,000 54,000

500,000 15 75,000 1,110,000 129,000

500,000 19 95,000 1,600,000 224,000

1,600,000 21 336,000 3,200,000 560,000

Above 24 ? ? ?
3,200,000
*? - to be computed depending on the residual income in the quadrant.

Minimum Tax - S. 37
This is the least possible amount of tax that is payable by a taxable person in a given
year of assessment. The conditions attaching to the payment of minimum tax are
stated below:

a. When the total Personal reliefs of a taxpayer is equal to or more than his gross
income to the end of the year, such that no tax will be paid by him, 1.0% of the
gross income to December 31st would be payable by him as tax.
b. But where the total reliefs claimed, if granted result in a taxpayer having to pay
less tax than at 1.0% of total annual income, the total reliefs issued will be
ignored and tax deducted at 1.0% of total annual income.
c. Annual income of N300,000 and below is exempted from tax. However, the 1.0%
minimum tax will be payable on such income.

40
Assessment Compliance Issues:
The followings are compliance issues as relevant to the issues of assessment, and
collections:
1. A taxable person, who is required by the Board to complete and deliver any
return to it or attend personally before an officer of the Board or produce or
cause to the produced for examination at any place and time, any books,
documents, accounts and return or give orally or in writing another specified
information must do so, not later than twenty-one days after receiving the
notice.
2. Income tax charged by an assessment which has not been a subject of objection
or appeal should be paid within two months of the receipt of the notice of
assessment.
3. No person should give incorrect information in relation to any tax matter with
the aim of obtaining a tax clearance certificate nor should any person obtain tax
clearance certificate through misrepresentation, forgery or falsification.
4. No person shall fail to comply with any requirement of a notice served on him
or, without sufficient cause, failure to attend to a notice or summons served on
him/her or having attended fails to answer any question lawfully put to
him/her.
5. No person shall without a reasonable excuse, make an incorrect return through
omission or understatement of income chargeable to tax or give incorrect
information in relation to any tax liability.
6. No person shall make a false statement for the purpose of obtaining a
deduction, relief, set-off, in respect of tax to himself nor should any one aid,
abet, assist, counsel, incite or induce other persons to make or deliver a false
return or statement, keep or prepare a false account or particulars concerning
income chargeable to tax unlawfully refuse or neglect to pay tax.
7. 1. No revenue official or any person appointed for the due administration of tax
or employed in connection with the assessment and collection of tax shall:
a. Demand for tax that is more than the actual amount due.
b. Withhold for his/her own use either part of the whole of the tax collected
by him/her.
c. Defraud any person or embezzle any money.
2. No person, who is unauthorized shall collect or attempt to collect tax. It also
includes understating any income liable to tax, preparing false accounts,
unlawfully refusing or neglecting to pay tax.

Tax Clearance Certificate-S. 85

S. 85(2) states that all bodies that need tax clearance certificate as a prerequisite in
their dealings with the public should refer the same to the Tax Authority for
verification of genuity.

41
S. 85(3) states that a tax clearance certificate shall disclose the following: chargeable
income, tax payable, tax paid, outstanding tax and a tax payer identification number
(TIN).

S. 85(4) states that Tax Clearance certificate should be required for a number of
transactions which include and are not limited to the following:
- Change of ownership of vehicle by vendor
- Application for plot of land
- Any other transactions as may be determined from time to time.

S. 85(7) states that Fine for obtaining tax clearance through misrepresentation,
forgery and falsification is N50,000 plus twice the tax payable by him or 3 years
imprisonment or both.

S. 85(9) states that corporate bodies or government institutions that fail to comply
with the requirements of tax clearance is to pay a fine of N5 million or imprisonment
for 3 years or both fine and imprisonment.

42
 OBJECTION, APPEAL, OFFENCES, PENALTIES & DISTRAIN
OBJECTION
Where a taxpayer receives a notice of assessment, she/he either agrees or disagrees
with it. Where she/he agrees with the assessment, the position of the law is that the
tax must be remitted within the statutory time limit of sixty days from the date of
receipt of the assessment.

Where the taxpayer disagrees with the notice of assessment, she/he must give notice
of objection in writing to the relevant tax authority, within the time limit of thirty days
from the date of service of the assessment on the taxpayer.

On receipt of a valid notice of objection, the Board may require the person giving that
notice to furnish such particulars and to produce such books or other documents as
the board may deem necessary, and may summon any person who may be able to give
information which is of material to the determination of the objection to attend for
examination. Furthermore, the relevant tax authority would examine the grounds of
objection to determine their validity. Where the grounds are found to be valid, the tax
computation would be reviewed and a revised or amended assessment raised.
Payment would be made based on the revised/amended assessment by the taxpayer.

Where the relevant tax authority believes that there is no merit in the notice of
objection, then a notice of refusal to amend would be sent to the taxpayer. If the
taxpayer is still aggrieved by the notice of refusal to amend of the tax authority,
he/she should file a notice of appeal to the Tax Appeal Tribunal, within thirty days
from the receipt of the notice of refusal to amend.

Conditions For A Valid Notice Of Objection:

Where the taxpayer is aggrieved, a notice of objection must be valid for it to have an
effect. For a notice of objection to be valid, the notice must contain the following:
1. It must be made in writing (addressed to the Chairman of the Board).
2. It must have been made within the statutory time limit of thirty days of the
receipts of the notice of assessment.
3. It must contain the precise grounds of objection.

APPEAL
When a notice of a refusal to amend has been received by the taxpayer, the taxpayer
may either accept and make remittance or if she/he so wishes, can appeal against the
refusal to amend within thirty days from the date of service of such notice of refusal to
amend. All appeals shall, in the first instance tabled before the Tax Appeal Tribunal
(TAT), which is directly supervised by the Federal Inland Revenue Service Board
(FIRSB). Any of the parties that is aggrieved can appeal against that decision to Court
of Appeal and thereafter to the Supreme Court.

OFFENCES & PENALTIES/SANCTIONS

An attempt to willfully cover, conceal or evade taxes is a criminal act, and therefore,
offences are as prescribed under the criminal code of Nigeria. In addition, there are
43
specific offences as stated in the tax laws, and stiff penalties prescribed, where an
employer or employee commits such an offence.
S/N OFFENCES
1 Failure to deduct and remit
tax to RTA within 30 days
2 Failure to pay due taxes,
levies & rates
3 Obstruction of any kind
4 Making incorrect returns
(untrue declarations)
5 Counterfeiting of
documents
6 when a tax offender is
armed
7 When tax offender is armed
& causes injury to an
officer of the IRS
8 Connivance to contravene
any of the provisions of
this Law
9 Impersonating a Revenue
Collector
10 Failure by self employed to
keep books of account
11 Failure by employer to file
return of income of
employees
12 Failure to pay an
assessment charged after
two months
13 Failure to comply with S.
41 (file return of income
within 90 days)
14 Offences by authorised &
unauthorised persons –
staff or anyone collects or
attempts to :
1. Demand tax
assessment in excess
2. Renders false return
orally or verbally
3. Defrauds a person,
embezzles money or
otherwise uses his
PENALTIES
Tax remitted shall be paid plus penalty of
10% and interest at M.P.R of CBN
1% of total amount revenue due and
payable for each day of default &
imprisonment for 12 months
N200,000 or imprisonment for 3yrs or both
10% of the correct tax and double the
amount undercharged
N500,000 or imprisonment for 3 years or
both
5 years Imprisonment
Imprisonment for 10 years
Any person or group of person conniving for
the purpose of contravening the law by
making a false statement or representation,
N50,000 for individuals, N500,000 for
corporate bodies & imprisonment for 6
months
N250,000 or imprisonment for 3 years or
both
N50,000 for individuals & N500,000 for
corporate bodies
N500,000 or imprisonment for 3 years or
both
10% of tax per annum shall be added to
income charge assessment
Income tax chargeable on him for preceding
year of assessment, provided a written notice
of penalty shall be served on the person
A fine of N100,000 or imprisonment for 3
years or both.
44
 position to deal
wrongly with tax
authority
15 Misrepresentation or N50,000 plus twice the amount of tax
falsification of tax payable or 5 years imprisonment or both.
clearance
16 Failure to render N50,00 for individuals & N500,000 for
information about new corporate bodies.
customers
17 Failure to render same as above
information about
accounts
18 Failure to comply with S. N50,00 for individual employer & N500,000
81 (file employer for corporate bodies.
declaration & certificate
return by January 31st of
the year) Form H1.

DISTRAIN PROCESS
S104 (1-8) PITAM provides that the Relevant Tax Authority can enforce collection of
tax from a recalcitrant taxpayer through the Distrain.

The process is as follows:

Distrain Process In Practice

1. Officers of the Distrain Unit, visit the premises of the taxpayer

45
 2. Verify taxpayer had earlier received demand note and letter of intent to levy
warrant of distrain through proof of delivery
3. Once verified, taxpayer could decide to make payment there, thus distrain is
cut short
4. Otherwise, taxpayer would be asked to exit premises with staff.
5. All electrical and other appliances are shut down
6. All exits are sealed and the seal of non compliance is placed at conspicuous
entry and exits points
7. Head of Distrain proceeds to warn on the dangers of breaking Government
Seal, noting it is a punishable offence under the Law.
8. Note that once the Relevant Tax Authority has written to the taxpayer, time
begins to run against him.
9. PITAM envisages a situation where goods are moved to offset tax liability, but
LIRS merely seals the premises till payment is made and this has also led to
various situations.
10. LASG’s deliberate prosecution of tax evaders with more emphasis on criminal
prosecution.

COMPUTATION OF TAX LIABILITIES

INDIVIDUALS
46
 COMPUTATION FORMAT
MR. MOGAJI GOGO
COMPUTATION OF TAX LIABILITY FOR 2014 YEAR OF ASSESSMENT

Earned Income N N
Gross Employment Income (Gross Emoluments) (AYB) Xx
Others Xx
Xxx
Unearned Income
Rent (Gross Amount) (PYB) Xx
Dividends (Gross Amount) (PYB) Xx
Interest (Gross Amount) (PYB) Xx
Royalty (Gross Amount) (PYB) Xx
Directors’ Fees (Gross Amount) (PYB) Xx
Others xx Xx
Statutory Total Income Xxx
Less: Non-Taxable Income:
Pension Income (xx)
* Gratuities (AYB) (xx)
Less:
Dividend (**F.I.I.) (xx)
Interest (**F.I.I.) (xx) xx(xx)
Gross Income Xxx
Less: Statutory AllowanceS & Deductions:
Consolidated Relief Allowance (CRA):
20% of Gross Income +(N200,000 or 1% of Gross (xx)
Income, whichever is higher)
Statutory Deductions:
National Housing Funds (HNF) (AYB) (xx)
National Health Insurance Scheme (NHIS) (AYB) (xx)
Life Assurance Premium (LAP) (PYB) (xx)
National Pension Scheme (Contributory Pension) (xx)
(AYB)
Total AllowanceS & Deductions (xx)
Chargeable Income Xxx

Apply Tax Rates on Net Chargeable Income (To Compute Tax

Payable)
Chargeable Income N Rate (%) N N
st
From 1 N300,000 7% to 24% Xx
to Above N3,200,000 Xx
Xxx
TAX DUE
Less: Prepaid Taxes
(Withholding Taxes)
Withholding Taxes (xx) (xx)
Net Tax Payable/Refundable xxx(xxx)

47
*PITAM 2011, list Gratuity after CRA, NHF, NHIS, LAP, however, in practice, since it is a
non-taxable income, it need not be compensated with 20% CRA.
** F.I.I. = Franked Investment Income

CHARGES
These are allowable expenses incurred by the taxpayer, they are as follows:
A. SPECIFIC CHARGES
These are allowable expenses which can be directly related to a particular
source of income, and are deducted from the gross amount of such income, e.g.
Tenement rate, repair to roof, water rate, in relation to rental income.

RELIEFS AND ALLOWANCES-S33

Personal reliefs (PITA S.33) are intended to give some reliefs to taxpayers’ income
according to the individuals’ responsibilities and circumstances. Reliefs are Taxpayer’s
expenditure given to him (not taxed) to cushion the effect of tax on the Taxpayer.

Allowances are income actually earned by the Taxpayer but not taxed in order to
cushion the effect of tax on the Taxpayer

Reliefs and Allowances are deductible from the taxpayers’ income (Gross) before
arriving at the taxable income. The effect is that every taxpayer earns a certain part of
her/his income every year free of all income taxes. The various types of reliefs and
allowances are stated below (From June 2011):

S/N TYPE RELIEFS REMARKS

1. Consolidated Relief N200,000 or 1% of gross
Allowance income whichever is the
higher + 20% of gross income
2 Life Assurance 100% of Total premium paid Attach Evidence
in the immediate preceding
year.
3 Pension Contribution 100% sum paid (8% of the sum of the
Basic Salary,
Housing & Transport
Allowances). Effective
1st of July 2014
4 N3,000 for the disabled Limited to 10% of
Disability Allowance earned income if it is
less than N3,000
5 100% subject to the approval Effective from
Compensation for loss of of the Board January 1,1996
office
6 Retirement gratuities 100% subject to the approval Effective from
of the Board after January 1,1996
ascertainment
7 All other allowances All are taxable
48
 paid to an employee
8 National Housing Fund
9 National Health
Investment Scheme
2.5% of the basic salary Whichever is lower
subject to the maximum of
N3,000
Use whatever amount given

Gross Employment Income (Gross Emolument) can be made up of any of the

followings:
a) Basic salary
b) Housing allowance (or House Rent)
c) Transport allowance
d) Utility
e) Meal subsidy
f) Entertainment
g) Medical allowance (Provision)
h) 13th month
i) Leave passage (Provision)
j) Commission (Premium)
k) Compensation (Premium)
l) Leave commuted to salary
m) Benefits in kind e.g. car/driver, furniture, Gen set, etc.
n) Leave allowance (Leave Bonus)
o) Miscellaneous

"Gross Emoluments" means wages, salaries, allowances (including benefits in

kind), gratuities, superannuation and any other incomes derived solely by
reason of employment" S 33 (2)

Benefits-in-kind are benefits which some levels of employees receive from their
employment other than their usual salary or wages. They are sometimes called ‘perks’
or ‘fringe benefits’. They include benefits like official Chauffeur-driven cars, official
accommodation, private medical insurance paid for by the employer, cheap or free
loans, etc.

Superannuation is a type of retirement plan set up by a company for the benefit of its
employees. These types of plans use funds deposited by the company (defined benefit
plan) or by the employee (defined contribution plan), with the funds growing in value
until the employee retires.

Other Examples of Earned Income

 Commission,
 Professional Services,
 Consultancy Services,
 Management Services,
 Technical Services,
 Construction

49
  Contract of Supplies
Taxable Fringe Benefits
1. Employer’s Assets put in Employee’s use—e.g. Accommodation, Plant, etc.
2. Cost of energy by Employee where paid by employer
3. Domestic servants where provided by Employer
4. Cost of furniture where provided by Employer
5. Use of Employer’s Motor Vehicle.

Fringe Benefits Exempted From Tax

1. Meals in the Employer’s canteen or non-transferable luncheon vouchers
2. Uniforms, overalls, protective clothing
3. Reasonable removal expenses—i.e. payment to employee for relocation

Life Assurance Premium (PYB)

1. It’s for only premium paid to date
2. Computed on Preceding Year Basis (PYB)
3. Male Taxpayer can Claim for himself and wife
4. Married Women cannot claim on Spouse
5. Prorate where there are beneficiaries not entitled to claim

Practice Question (with solution)

Mr. MY HONOUR resigned his former employment to contest the 2015 elections but
was disqualified by INEC for Personal Income Tax inadequacy. He just got a contract
employment in addition to his private business, learning from his past mistake, now
required your assistance for an optimum tax in 2015 year of assessment.
Basic Salary - N 7,200,000 per annum
Housing allowance - N 4,800,000 per annum
Transport Allowance - a Car plus N50,000 per month for Driver’s salary.
Lunch Allowance - N 2,000 per working day
Hardship Allowance - N 3,000,000 per annum
Furniture Allowance - N 4,200,000 per annum
Responsibility Allowance - N 1,200,000 per annum
Dressing Allowance - N 2,400,000 per annum
Domestic Staff - N 25,000 per month each in lieu of four (4)
domestic staff
Entertainment Allowance - N 2,400,000 per annum
Utility Allowance - N 1,200,000 per annum
Medical Allowance - N 3,000,000 per annum
Education Allowance - N 2,800,000 per annum
Leave Allowance - 10% of Annual Basic Salary
Christmas Bonus - 150% of monthly Basic Salary

He gave the following additional information:

1. The cost price of the car was N6,000,000.
2. The Company works for 260 days in a year.
3. He has a life assurance policy for himself, wives and children which he pays an
annual premium equal to 50% of both his annual Hardship and Medical
allowances at ratio 3:2:2:1:1:1
50
 4. He contributes 2.5% of his annual basic salary to the National Housing Fund.
5. His employer contributes to the approved pension scheme.
6. He has year 2014 Dividend warrants amounting to N1,200,000.
7. He made a Trading profit of N5,250,000 in year 2014.
8. He received N475,000 (Net) as Professional Fee in 2014.
9. The Publisher of his Book paid him N950,000 after deducting WHT as Royalty
for four (4) years from year 2013.
10. A Publishing company where he is a Director paid him N900,000 (Net) as
Director’s Fee.
11. Evidence of N24,000,000 as Rent paid to him on his estate was found in
his file and reads 24 months from April 1, 2013.
12. He has three (3) children from his two (2) wives and maintains his aged
parents.
13. Evidence of Interest paid to him in year 2014 was also found in his file
totaling N500,000.
14. Gratuity paid to him by his former employer in January 2015 was
N10,000,000.
15. He added that his friend credited his account with the sum of N1,250,000
in January 2015 being the refund of loan he granted him in October, 2014.
16. It was discovered that he has a WHT credit of N250,000 for a Contract of
Supply which he did in May, 2014.

Solution:
MY HONOUR
COMPUTATION OF TAX LIABILITY FOR 2015 YEAR OF ASSESSMENT

Earned Income N N
7,2
Basic Salary
00,000.00
Transport Allow 5/100*6000000+(50000*12)
900,000.00
4,8
Housing Allowance
00,000.00
5
Lunch Allowance 2000 * 260
20,000.00
3,0
Hardship Allow
00,000.00
4,2
Furniture Allow
00,000.00
1,2
Responsibility All
00,000.00
2,4
Dressing All
00,000.00
1,2
Domestic Staff All 25000 * 12 * 4
00,000.00
2,4
Entertainment All
00,000.00
1,2
Utility Allow
00,000.00
3,0
Medical Allow
00,000.00

51
Education Allow 2,800.000.00
7
Leave Allowance 10/100 * 7200000
20,000.00
9
Christmas Bonus 150/100*7200000/12
00,000.00
5,2
Trading Profit
50,000.00
5
Professional Fee 100/95 * 475000
00,000.00
10,0
Gratuity
00,000.00
5,0
Contract of Supply 100/5 * 250000
00,000.00
Unearned Income
1,2
Dividends
00,000.00
2
Royalty 100/95 * 975000/4
50,000.00
1,0
Director's Fee 100/90 * 900000
00,000.00
12,0
Rent 12/24 * 24000000
00,000.00
5
Interest
00,000.00
72,
Total Assessable Income
140,000.00
Less: Non Taxable Income
1,200,000.
Dividends FII
00
Interest FII
500,000.00
10,000,000. 11,7
Gratuity
00 00,000.00
Total Income
60,440,000.00
Less CRA – (20% of GI) + (200,000 or 1% of
12,692,400.00
G.I. whichever is higher)
Life Assurance 7/10*50/100*
2,100,000.00
Premium (3000000+3000000)
NHF (2.5% of Basic
2.5/100*7200000 180,000.00
to a max of 3000)
Contributory 8/100 * (7200000 + 16,0
1,032,000.00
Pension 4800000 + 900000 04,400.00
44,
Chargeable Income
435,600.00
Apply Graduated Tax Rates
First 300000 @ 7%
21,000.00
Next 300000 @ 11%
33,000.00
52
 Next 500000 @ 15%
75,000.00
Next 500000 @ 19%
95,000.00
3
Next 1600000 @ 21%
36,000.00
9,8
Next(44,435,600-3,200,000)-41,235,600@ 24%
96,544.00
10,
Tax Due
456,544.00
Less Tax prepaid
25,000.
Professional Fee 5/100 * 500,000
00
250,000.
Contract of Supply 5/100 * 5,000,000
00
12,500.
Royalty 5/100 * 250,000
00
100,000. 3
Director's Fee 10/100*1,000,000
00 87,500.00
10,
TAX LIABILITY
069,044.00

Practice Question (without solution)

After 35 years of meritorious service in one of the Hospitals of Kogi State Government, Dr
Saliu Ogbaru retired but was retained on Contract basis, since his expertise is pivotal to
the success of the Hospital. He consults for private hospitals also. The following financial
information were as contained in his submitted Form “A”:
N
Consultancy Services 1,350,000(Net)
Gross Emolument 4,600,000
Rent (20 months from October 01, 2010) 880,000(Net)
Interest 1,240,000
Dividend 400,000
Royalty 750,000
National Insurance Scheme 720,000

Dr. Ogbaru’s Gross Emolument is made up of: N

Basic Salary 2,400,000
Housing Allowance 960,000
Transport Allowance 360,000
Pension Income 700,000
Others 180,000
The Management
of Dr Ogbaru’s Hospital operates the approved Contributory Pension Scheme. You are
required to compute his Tax Liability for 2013 Year of Assessment.

53
TAXATION OF INCOME/PROFIT OF SOLE PROPRIETOR
Under section 3 (1) of PITA 1993, as amended, tax is payable for each year of
assessment on the aggregate amounts, each of which is the income of every taxable
person for the year from a source inside or outside Nigeria.

Non Taxable Incomes

These are regarded as EXEMPTED INCOMES, although all incomes are supposed to
be subjected to income tax in the hands of the earners, but certain incomes are
exempted from tax, because of the status of the earners. In this regard, it should be
pointed out that it is not the nature of the incomes that makes them to be
exempted from tax, but rather the purposes to which such incomes are to be
applied or the nature and or status of the earner.

For income to be exempted, an allowable and disallowable deductions must, as

applicable under CITA, satisfy the conditions of being “Wholly, Reasonably,
Exclusively, Necessarily” incurred and borne by the resident or non-resident
individuals and companies (Taxpayers) in the production of the income. Allowable
and Disallowable deductions can be in form of an expenses and or restriction
on amount claimable on allowances/benefits derived from incomes.

Wholly: Expenditure is not deductible if it reflects more than one purpose (DUALITY
TEST). However, where an exact apportionment is possible (as with motor expenses)
relief can be claimed on the business element.

Reasonably: This is relative and depends on the level of activities and performance of
the business. What is reasonable to an individuals or company may be unreasonable
to another individual or company.

Exclusively: Expenditure is not deductible if it is not for the purpose of the trade or
business (REMOTENESS TEST). The expenses must have been incurred solely for the
purpose of the business that is, solely with the object of promoting the business or its
profit earning capacity. E.g. A customer was injured by falling machinery when
sleeping in an Inn. He obtained compensation from the company. The payment to him
is not deductible as the loss sustained by the customer was not really incidental to
their trade as Inn keepers.

Necessarily: The expenditure must have been incurred because trading activity is
taking place. It is necessary for the purpose of generating income or profit for the
business and without these expenses, it could have been impossible to make profit.

54
DISALLOWABLE DEDUCTIONS (Expenses Disallowed For Tax Purposes)
Section 21 of PITA 2004 and CITA 1993, as amended, mentioned the following items,
shall not be allowed as deductions for the purpose of ascertaining the assessable
income of a taxpayer. These are:
a. Government fines and penalties
b. Depreciation of assets
c. Any sum reserved out of profits, e.g. retained earnings; except there is an
express permission of section 20 of PITA 1993, as amended.
d. Donations. It is only applicable to CITA and not to PITA. It must be made out of
profit; it must be capital in nature; it must not be greater than 10% of the
company’s adjusted or chargeable profit; and must be given to any of the listed
bodies in the fifth schedule of CITA 1993, as amended
e. Any expenditure that is capital in nature and any capital withdrawn from a
trade, business, profession or vocation.
f. Provisions for income tax or bad debt or doubtful debt of a general nature.
g. Personal drawings either in cash or goods (domestic or private expenses)
h. Value of theft by senior officers of the business
i. Legal expenses like:
i. Acquisition of a new lease either long or short
ii. Renewal of long lease
iii. Cost of defending tax appeal
iv. The cost of defending a traffic offence
j. Traffic fines
k. Loss on sales of fixed assets
l. Cost of stamp duties
m. Loss on sale of business or investment
n. Any sum withdrawn out of business capital.
o. Any loss or expense recoverable under an insurance or contract of indemnity.
p. Rent or cost of repairs to any premises or part of premises not incurred for the
purpose of producing income.
q. Taxes on income or profits levied in Nigeria or elsewhere, except as provided in
Section 13 of the Act.
r. Any unapproved payment to a pension, provident, savings, or widow’s orphan
society, fund, scheme except as permitted by paragraphs (f) and (g) of sub-
section 20 of the Act.
s. Any expenses incurred within or outside Nigeria for the purpose of earning
management fees unless prior approval of an agreement giving rise to such
management fees has been obtained from the Commissioner/Minister.

EXPENSES ALLOWED FOR TAX PURPOSE

The following expenses when incurred by a sole trader in the cause of his business are
allowed for tax purposes:

a. Legal expenses if only incurred for the sustenance of the business. Some of these
are:

55
 i. Renewal of short lease
ii. Protection of company’s property
iii. Legal advisory services charge
b. Bad debt that is specific in nature

c. Interest on loan meant for the use of the business

d. Rent of staff quarters

e. Wages and salaries paid to staff

f. Contribution to a Pension scheme if approved by the Joint Tax Board (JTB)

g. Other expenses incurred for the purpose of the business

Adjusted Profits/Loss
In ascertaining Tax liability, the procedure to be adopted in arriving at the Tax
payable would depend on the law governing the administration of the Tax itself. Thus,
there is no universal procedure as elements of each tax computation vary from tax to
tax. The procedures and elements hereunder enumerated relate primarily to
companies and personal income tax in Nigeria. They are largely symptomatic of the
procedure and elements in other commonwealth countries.

The determination of tax payable is by the process known as “TAX COMPUTATION”. In

Nigeria, Tax Return is different from Tax computation. Essentially, the latter is based
exclusively on the former. Also, very importantly is that tax returns have to be
submitted under the certification of a public auditor recognized and given special
competence by the law.

Elements of A Tax Computation

There are certain important elements of a taxpayer’s return that must necessarily be
determined by way of their arrangement in the computation, in order to arrive at the
Tax payable and finally Tax liability of the taxpayer (companies or persons). These
include:
1. Net Profit/Loss.
2. Adjusted/Assessable Profits or Losses.

NET PROFIT/LOSS
The net profit or loss of a company or individual is the ‘trading’ result of the trading
period. The profit and loss accounts prepared by companies and individual traders
does not discriminate against expenses. It is arrived at after the manufacturing,
trading, profit and loss accounts have been drawn up. All payments and all
apportionments or write offs, including those expenses that are of personal nature are
usually considered before arriving at the business net profit/loss. Where the earnings
of the trading period exceeds the expenses, is a case of a NET PROFITS, but where the

56
earning is less than the expenses in the period in question, then we have a case of a
NET LOSS.

ADJUSTED/ASSESSABLE PROFIT OR LOSS

The net profit or loss provided in annual returns by a taxpayer, does not follow the
requirement for tax computation, in other words, the tax authorities need to re-adjust
the net profit or loss, it is very important to note that the disallowable items
enumerated above are to be ADDED BACK only when adjusting a net profit and
DEDUCTED when dealing with a net loss, in the treatment of adjusting and
assessing of incomes and expenses for tax purposes. The elements required for the
adjustment are:
1. Incomes chargeable to tax may not have been included.
2. Expenditures chargeable to tax may not have been deducted.
3. Profits included in the accounts but which are not taxable, and
4. Expenditures which is deductible, but which has not been charged in the
accounts.

NON-TAXABLE PROFITS/LOSSES (Income or Profit Disallowed For Tax Purposes)

Some extra ordinary profits/losses are not to be allowed to increase or decrease
income tax, since they are not business profit/loss. Where we have such profits,
they are to be deducted from net profit or added to net loss in the computation
of assessable profit. On the other hand, where it is a loss, it is to be added to net
profit or subtracted from net loss in computing assessable profit.

There are five types of receipts which may be found in the accounting profits, but
which must be excluded from taxable profits. These are:
a. Capital receipts-Income/profit from disposal of fixed assets;
b. Income taxed in another way-Capital gains taxed under the CGTA;
c. Income specifically exempted from tax;
d. Profit or income from the reversal of any previously disallowed expense like
depreciation, general provision for bad and doubtful debts, etc; and
e. Profit or income from the disposal of investment.

57
COMPUTATION FORMAT
Lagbaji Enterprises
Computation of Tax Liability for 2014 Year of Assessment
NGN NGN
Net profit/(Loss) Reported XXX
ADD: Non-Allowable Expenses X
Taxable Income not reported X XX
XXXX
DEDUCT: Non- taxable Income Included (X)
Allowable Expenses Reported (X) (XX)
ADJUSTED /Assessable PROFIT/(LOSS) XXX
Losses b/f X
ADD: Loss for the year X
XX
Loss relieved (X) (X)
LOSS C/F X
ADD: Balancing Charge X
XXXX
Capital Allowance b/f XX
ADD: Capital Allowance for the year X
XX
DEDUCT: Capital Allowance Relieved (XX) (XX)
Capital Allowance c/f XX
TAXABLE PROFIT/ (LOSS) XX

TAX PAYABLE: Taxable Profit * Tax Rate XX

Question (with solution)

1. Below is the Profit and Loss Account of Mr. Dapo Ademowo Enterprises, a sole
corporate, which had been in business of consulting for a number of years.

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST JULY, 2014.
N N
Gross Profit 60,000
LESS: EXPENSES:
Wages and Salaries 7,000
Rent and Rates 2,000
Depreciation 1,500
Bad debt written off 150
Provision against a fall in price of raw material 10,000
Entertainment expenses 1,500
Patent royalties 2,000
Bank interest 5,600
Legal expenses on acquisition of new factory 500 (25’650)
34,350

58
 Additional information:
A. Salaries include N500 paid to Mrs. N. Ademowo, who work full time in the
business.
B. No staff was entertained.
C. The provision of N10,000 is charged because of an anticipated trade
recession.
D. Patent royalties was paid net but has been shown gross.
REQUIRED: Compute the adjusted profit of Mr. Ademowo

Solution:
MR.DAPO ADEMOWO ENTERPRISES
COMPUTATION OF ADJUSTED TRADING PROFIT
TAX YEAR: 2015 YEAR OF ASSESSMENT.
N N
Net Profit Reported 34,350
ADD:
Prov. Against a fall in R/M prices 10,000
Depreciation 1,500
Entertainment expenses 1,500
Legal expenses 500
13,500
ADJUSTED TRADING PROFIT 47,850

2. Chief Olowo is the sole proprietor of Olowo Enterprises. The following is a summary
of the profit and loss account of the business for the year ended 31 st December, 2013.
N N
Gross Profit 4,970,000
Discount on purchases 105,000
Profit on sale of fixed assets 60,000
Rent received (net) 540,000
5,675,000
Less:
Salaries 2,900,000
Bad debts 610,000
Depreciation 220,000
Legal and Professional charges 164,000
Donations and subscriptions 250,000
Repairs and renewals 273,000
Car expenses 350,000
Stock lost in transit 57,000
Postage, telephone and stationery 280,000
Rent, rates and electricity 240,000
Bank interest and charges 185,000 (5,529,000)
Net Profit 146,000

59
Notes:
a. Rent was received net of WHT.
b. The cost of goods personally consumed by Chief Olowo has been deducted from
the purchases. The selling price of the goods was N60, 000. The business
usually sells its goods at cost plus 20%.
c. Included in the salaries are N300,000 to Chief Olowo’s wife and N130,000 to
Chief Olowo’s Son who acted as a part time bookkeeper for the year.
d. Bad debts
Bad debt written off 180,000
Provision of 2% on sales ledger balances 470,000
Defalcation by Cashier 200,000
Less amount recovered under fidelity
Guaranty Insurance 90,000 110,000
760,000
Less ex employee’s loan written off, now recovered 150,000
610,000

a. Legal and professional charges:

Legal Charges (re debt recovery) 30,000
Fines for contravention of the law 15,000
Audit and Accountancy 100,000
Gift to customs officials to facilitate clearing of goods 19,000
164,000
b. Donations and subscriptions:
Trade subscriptions 30,000
Subscriptions for business Newspaper and Journals 40,000
Donation to Heart Foundation 100,000
Burial expenses of Chief Olowo’s Father in Law 80,000
250,000
c. Repairs and renewals:
Repairs to fixed assets (excluding cars) 98,000
Purchase of warehouse 150,000
Acquisition of new lease 25,000
273,000
d. It is estimated that Chief Olowo travels 50,000 km per annum in the car of
which 10,000km are for private purpose.
e. Rents, rates and electricity are in respect of a building used for business in
which one-sixth is used as Chief Olowo’s family residence.
f. Bank charges amounting to N45,000 which were debited to the profit and loss
account in the previous year were waived or refunded by the bank during 2013
but were omitted from the P & L a/c.
g. Capital Allowances for the year in respect of Chief Olowo’s business assets and
property let out are N155,000 and N18,000 respectively.
h. Chief Olowo has a life assurance policy on his spouse and pays N54,000
annually as premium.

Required:
Compute the tax liability of Chief Olowo for the relevant year of assessment.

60
 CHIEF OLOWO
COMPUTATION OF TAX LIABILITY FOR 2014 YEAR OF ASSESSMENT
N N
Net Profit as reported 146,000.00
Add Disallowable expenses
depreciation 220,000.00
Profit on consumed good-
20/120*60000 10,000.00
Wife deduction 300,000.00
Bad debt 320,000.00
Fines 15,000.00
Gift to Custom 19,000.00
Donation 100,000.00
Burial of In Law 80,000.00
Purchase of Warehouse 150,000.00
New Lease 25,000.00
Personal use of car 1/5*350000 70,000.00
Rent, Rate & Electricity personally
consumed =1/6*240000 40,000.00
Bank Charges 45,000.00 1,394,000.00
1,540,000.00
Less:
Profit on sale of Fixed Assets 60,000.00
Rent Received 540,000.00 600,000.00

Adjusted Profit 940,000.00

Add rent 100/90*540000 600,000.00

Total Assessable Income 1,540,000.00

Less:
Capital Allowance business assets 155,000.00
Capital Allowance property lent out 18,000.00 173,000.00
1,367,000.00
Less CRA and tax exempts
CRA (Higher of 200,000 and 1% x
1,367,000) + 20% x 1,367,000 =
200,000 + 273,400) 473,400.00
Life Assurance Premium 54,000.00 527,400.00
839,600.00
Apply Graduated Tax Table
First 300,000 @ 7% 21,000.00
Next 300,000 @ 11% 33,000.00
Next 239,600 @ 15% 35,940.00
Tax Due 89,940.00
Less WHT on Rent
10/100*600000 60,000.00
Tax Liability 29,940.00

61
Practice Question (with no Solution)
Mrs. Jumai Patti has been trading for several years in Obalende Lagos State. She lives
with husband and four children in Lagos. Her Profit and Loss Account for the Year
Ended December 2012 is as shown below:
N N
Income
Trading 150,610
Agency 69,580
Rental Income 126,510
Other Income 3,010
Profit on sale of Vehicles 9,000 358,710

Less Expense
Travelling 17,980
Staff Salaries 66,200
Printing and Stationery 9,700
Postage and Telephone 7,880
Rent Payable 2,400
Entertainment 41,640
Vehicle Repairs 18,400
Bank Charges 4,220
Donations 4,180
Subscriptions 620
Electricity 7,270
Periodical and Journals 250
Accountancy Fees 630
General Expenses 770 182,140)
Net Profit 176,570

You ascertained that:

i. One-eighth of the vehicle expenses relate to private use
ii. Included in Salaries was amount totalling 18,120 paid as allowance to his aged
mother
iii. Rental Income of N9,240 was not accounted for.
iv. Allowable expenses of 88,500 have been omitted from the accounts.
v. 50% of the entertainment expenditure was not related to the business
vi. “Other Income” were receipts in the ordinary course of business
You are required to compute adjusted profit for tax purposes and her tax
payable for the relevant year.

62
MAJOR PROVISIONS OF THE PERSONAL INCOME TAX (AMENDMENT) ACT, 2011

1. Removal of pensions from chargeable income;

2. Replacement of the previous reliefs and allowances with enhanced consolidated

reliefs and allowance.

3. Deletion of various obsolete provisions;

4. Increase in penalty rates for violation of the laws to bring it in line with existing
realities;

5. Inclusion of courier service as a means of serving assessments on taxpayers;

6. Provisions relating to obtaining and verification of Tax Clearance Certificates;

7. Replacement of the Federal Civil Service with the Joint Tax Board as the
appointing authority for the Secretary Joint Tax Board;

8. Provisions relating to persons eligible for appointment as Chairmen of the

State’s Board of Internal Revenue and the provision of a cost of collection
funding for the State Boards of Internal Revenue;

9. Strengthening of enforcement provisions in the law;

10. Provisions of powers to the Minister to make regulations for the

administration of the Act;

11. Amendments of the Interpretation Section and relevant sections of the

law, particularly the Income Tax Table.

12. Redefining the time threshold for Residency Rule with respect to
expatriates holding employments in Nigeria;

13. Provision of powers to the tax authority to call for returns from
professional associations and bodies in a prescribed format

14. Exemption of income earned from the following sources from personal
income tax:
(a) bonds issued by Federal, State and Local Governments and their
Agencies;

(b) bonds issued by Corporate including Supra-nationals; and

(c) Interest earned by holders of the bonds and short term securities.

15. Introduction of a Presumptive Tax regime applicable to persons within an

income threshold;

16. Replacement of the Body of Appeal Commissioners with the Tax Appeal
Tribunal under Section 59 of the FIRS (Establishment) Act and the deletion of
other relevant sections in this respect.

63
Reliefs and Allowances
Old Reliefs and Allowances
20% of earned income, plus N5,000
Rent allowance of N150,000 per annum
Transport Allowance of N20,000 per annum
Leave allowance of 10% of annual basic salary
Meal allowance of N5,000 per annum
Entertainment allowance of N6,000 per annum
Utility allowance of N10,000 per annum
Child allowance of N2,500 per child subject to a maximum of four
children and dependent relative allowance of N2,000 subject to a
maximum of two relatives
Life Assurance Relief of premiums paid to and insurance company
Disability allowance of N3,000 or 20% of earned income, whichever is
higher.

Consolidated Reliefs and Allowances

20% of gross emoluments, plus ‘the higher of 1% of
Gross Income or N200,000’
Tax exemptions on contributions to:
(a) National Housing Fund
(b) National Health Insurance Scheme
(c) Life Assurance Premium
(d) National Pension Scheme
(e) Gratuities

Tax Rates
Old Income Tax Rates
First N30,000 @ 5%
Next N30,000 @ 10%
Next N50,000 @ 15%
Next N50,000 @ 20%
Next N160,000 and above @ 25%
New Income Tax Rates
First N300,000 @ 7%
Next N300,000 @ 11%
Next N500,000 @ 15%
Next N500,000 @ 19%
Next N1,600,000 @21%
Next 3,200,000 and above @ 24%

64
 ORGANISATIONAL STUCTURE
The Lagos State Internal Revenue Service is the autonomous operational arm of the Lagos
State Board of Internal Revenue set up to assess all persons chargeable with tax in Lagos
State, collect, recover and pay to the designated account any tax or levy due to the State
Government, enforce payment of due taxes, carry out and sustain public awareness and
enlightenment campaigns on the benefits of tax compliance within the State and carry out
such other activities as are necessary or expedient for the full discharge of all or any of the
functions prescribed under the Lagos State Revenue Administration Law.

The Agency headed by the Executive Chairman, is comprised of six (6) Directorates which
perform various functions, namely; Personal Income Tax, Administration and Human
Resources, Finance and Accounts, Legal Services, Tax Audit, and New Growth Areas.

A. OFFICE OF THE EXECUTIVE CHAIRMAN

Units reporting directly to Executive Chairman are:

Board Secretary's Office

The office assumes the role of the Secretary to the Agency. It is saddled with the responsibility of taking
charge of all technical issues in the Administration. It represents the Agency in the corporate world, the
media and it relates with the Departments and Units within the Agency as regards to technical areas in
Taxation.

Relationship Management
This Unit is made up of Account Officers operating as an interface between the Agency and
the Companies or clients in the corporate sector. The Unit headed by a deputy director who is
also the special assistant to the Chairman monitors the remittances of tax liabilities of
several sectors in the economy. It attends to matters of objections on assessment made on
Companies. The Account Officers grouped under different sectors ensure that Companies
remit monthly PAYE and withholding tax. It accounts for the Top Companies within these
sectors and ensure that they comply with payment of taxes.

Internal Audit
The Internal Audit Unit is responsible for the audit functions of the Account department of LIRS,
ensuring that the books of account are in order. The unit ensures that the running cost incurred by the
organisation such as fuelling of vehicles, pool cars, stationeries is minimal and also ensures that day to
day materials are not misused. It periodically reviews the Salary section, TAMA’s commission (Tax
Audit Monitoring Agents) records of Tax Stations and units, which includes properties, inventories of
assets staff strength, data base, issuance of demand notices and outstanding tax liabilities. It carries
out all other duties as assigned by the management.

Stamp Duties & Land Matters

The Unit was established to ensure that all individuals concerned with land matters such as Stamp duties
on all Land title documents such as Certificate of Occupancy(C of O), Governor’s Consent
(subsequent transaction on land through the secondary market i.e., change of ownership or
transfer of ownership), capital gains and all perfection of any land documents and agreements are
subjected to tax. In the process, the tax compliance of the parties involved is identified and if Tax is
65
already paid or is inadequate, particularly in the case of the private sector, tax is applied or verified
accordingly.

Tax Assessment
This unit engages in verification and assessing the validity of payments and documents tendered in the
course of acquiring government’s seal on property. They authenticate the Electronic Tax Clearing
Certificate (E-TCC) or receipts of payment of personal income tax; determine adequacy of tax payments
in line with the value of property and location and computation of tax liability of allotees.

Strategic Audit
The Unit reviews, verifies and investigates files of Taxpayers who are yet to pay their taxes
or with outstanding taxes, reconciles the tax liabilities of tax payers, thereby providing
information on unrecovered revenue. It submits its reports to the Chairman, highlighting
its observations, opinions and recommendations. Strategic Audit carries out special tax audit
exercise on Individuals and Companies as directed by the Chairman in cases such as

a. Where there is discrepancy between two audit year reports.

b. Special request is made by a company.
c. Conflict between a company and the TAMA that carried out the audit.
d. On request by RMU.
e. Petition from aggrieved ex-staff or others.
Other functions include re-opening and reconciling of Distrained companies.

Public Sector Contract

The Unit ensures that aspiring contractors or contractors already awarded contracts by the Lagos
State Government are in the tax net and have paid their taxes. It receives files from State Tender Board
and ensures adequate payment of tax. This serves as a check to ensure that this sector is complying with
payment of tax and outstanding tax liabilities.

Corporate Affairs
The Unit is responsible for promoting the corporate image of LIRS, branding of the
Agency and managing relationship with the media, Government and the public through
placement of LIRS adverts on television, radio, magazines and other mass media, by
educating, enlightening and informing the public on Tax matters. Oversees Brand Visibility
where and when the Agency sponsors Events. It coordinates events, stakeholders’ forum,
and town hall meetings for markets associations, artisans and other tax payers. The Unit
takes charge of distribution, circulation of corporate items to staff as well as to taxpayers
and stakeholders.

Protocol
This unit handles every logistic involved where there is an official trip to be undertaken both locally and
internationally by the Agency. Such trips include when events such as Conferences, Seminars, Joint Tax
Board etcetera are organised. All hotel accommodation, venues for events inclusive of transportation
where necessary are also taken care of by the unit.

Distrain/Criminal Prosecution Unit

66
The Unit is solely responsible for carrying out all distrain and enforcement procedures on Companies and
Individuals in accordance with the Personal Income Tax Act. It enforces the payment of established tax
liability. It brings all tax evaders and avoiders into the tax net and also helps to contribute to
voluntary tax compliance. Following all due procedures, the Legal Department applies for an ex-parte
order from the Court to carry out distrain which is supported by a letter of Authority duly signed by the
Chairman, to the Distrain Team Lead for enforcement which involves the process of taking over
movable/ immovable properties of taxpayers to recoup tax liabilities.

Criminal Prosecution Unit: This Unit was set up to address all internal and external matters. Internal
criminal issues include such as those relating to fake tax certificates, fake educational/qualification
certificates and all complaints of compromise by staff of the organization. External criminal issues
include criminal prosecution of tax defaulters as well as criminal prosecution of tax payers with fake
certificates

Tax Audit Review

This unit is headed by a deputy director and reports to the chairman. Its function mainly is to ensure that
information being used for audit is adequate. All data gathered by TAMA & audit staff are forwarded to
this unit by the Audit Report Process Unit. Review unit then scrutinizes and where there is other
information, it includes such before sending the new report to the Tax Audit Assessment Unit.

Tax Audit Assessment

This is the unit that computes the assessment due based on audit. It collates all data gathered from
Review, RMU and audit field staff/TAMA. It generates liability, and forwards it to the Director Audit
who comments /recommends to the chairman for eventual issuance of letter of demand notice.

B. PERSONAL INCOME TAX DEPARTMENT

Units reporting directly to Director, PIT are:

PIT Directorate-Headquarters
PIT serves as the brain network for all Tax Stations, overseeing their activities; ranging from controlling,
monitoring, liaising and linking Tax Stations with Alpha-beta Consulting (ABC)

PIT ensure that all respective taxes are accountable for and all operational procedures are well
observed, thereby encouraging and guiding the taxpayers in fulfilling their civic duties as regards to
payment of tax.

The Tax Stations have been grouped into three regions namely: Lagos Island, Lagos Mainland and Ikeja.
The Stations are supervised by Regional Coordinators ensuring they help to enhance the capabilities of
the various Stations in each region in the area of revenue generation and the harmonization of the various
operations promoting uniformity.

Tax Stations

67
Tax stations are established to bring tax services closer to tax payers. Their functions include, though not
limited to, the followings:
 Revenue generation
 Monitoring taxpayer remittance and compliance
 Information outlet to tax payers
 Enumeration of companies and individuals within the jurisdiction so as to capture more people
into the tax net
 Continuous tax education and enlightenment of tax payers on taxation (its meaning, importance
and benefits)
 Assessment of tax payers to ensure prompt payment of adequate tax to the government from time
to time
 Tax compliance monitoring and gathering of relevant tax information on companies and
individuals
 Any other assignment as directed by the management.

Self-Assessment Review
The focus of the Self Assessment Scheme is to encourage voluntary compliance, reduction in tax
evasion and give Tax payers the challenge to be more responsible. The Unit reviews all self assessment
forms already processed by ABC, ensuring that Taxpayers who pay inadequate tax are identified and
made to pay the outstanding.

ABC Liaison
The Unit liaises with Alpha Beta Consulting (ABC) ensuring that tax clearance cards are processed. They
prepare an update on taxpayers yet to receive the tax clearance card, and ensure that the cards are
distributed to the appropriate quarters.

LIRS/LASTMA
The Unit was set up to work side by side with the LASTMA and VIU officials who arrest members of the
public for disobeying traffic and motor vehicle laws. The Unit ensures that road, traffic and vehicle
offenders who are outside the tax net are captured into the net, and otherwise, evidence of payment of
tax shall be produced on arrest. The Unit does not tax traffic offenders for the offence rather; they tax for
non-payment of tax liability. In addition to the duties, it is responsible for ensuring that, those who
commit environmental offences and litter the roads are brought into the tax net.

Religious Unit- Christian / Muslim

The Unit was created to assess Religious Bodies that engage in business activities, i.e., Churches or
Mosques operating profitable business aside their religious organisation’s activities. The Unit ensures
that income derived from these business activities such as establishment of educational institutions,
letting of properties, transportation, production and sales of Books, Journals, Periodicals, Audio &
Video CDs, are taxable.

Also, it ensures that PAYE of employees of the Church/Mosques, Direct Assessment of the Clergy and
Withholding Tax from the contracts of supply and services are remitted to the Agency by the Religious
Bodies

68
LIRS/Judiciary
The Unit's objective is basically to ensure that sureties standing in for accused persons in Courts are in
the tax net and have paid their tax, if not, they are assessed and brought into the tax net before such
standing can be carried out in the Courts of Law throughout the State.

LIRS/LASPPPA LIASON UNIT

This unit is to abridge and fast-track the processing of tax assessment on building approvals and reduce
the turn-around response time it takes to secure these permits. It reports to the Executive Chairman
through the Deputy Director PIT.

C. ADMINISTRATION AND HUMAN RESOURCE DEPARTMENT

Units reporting directly to the Director, Administration and Human Resource are:

The Human Capital Management

Recruitment/Payroll Team- responsible for keeping accurate data on all employees.
Staff Welfare Team- ensures the standard up-keep of the Staff, (Salaries, Leaves and Leave allowances,
and other benefits)
Training and Development-
Pension and Benefits-
Human Resource Operations- This includes all Leaves, Bank Loan processes etc.

Administration
Logistics and Transport Team- ensures that insurance, maintenance and repairs of assigned vehicles
are up to date. It carries out inspection process on all vehicles assigned to Stations and Units, as well as
Pool cars. In addition, it is responsible for the fuelling of the LIRS official vehicles and buses.
Responsible for the drivers assigned to official vehicles and all pool cars.

Premises and Assets Team- ensures the maintenance, insurance and repairs of the
Headquarters, Annex and Station premises, servicing of air conditioners, prompt payment in rented or
leased premises and also charged with purchase of properties for the Agency.

Procurement and Outsourcing Team- responsible for carrying out procurement functions of the
Agency, keeping track of all inventories, taking or stocking inventory, stock keeping, and obtaining
needed materials for day to day operations amongst other things called for by Management. Also takes
charge of all outsourced services such as cleaning, security & drivers’ sectors.

Information Technology
Information Technology Unit is the team within the LIRS that supports, maintains and secures all
information technology of both external (taxpayers) and internal (Agency & staff) sources to better
enable the Agency meet its service delivery mandate. It is responsible for:
 Developing IT Solutions for the effective use of management and staff of the
agency.
 Installing and testing of IT equipment,
 Distribution of IT equipment to staff,
69
  Maintenance and supervision of repairs of IT equipment,
 Provision of IT training courses to enhance staff’s basic knowledge and skill in
using office automation applications, such as Microsoft Word, Excel, Access,
PowerPoint, Tax Calculator etc.

Allocation Unit
On submission of Companies names to the Chairman’s office, a comprehensive list is then
forwarded to the allocation unit which ascertains the availability of companies for audit.

Allocation letters are then printed out and sent to the Chairman for signature. The duly
signed letters are given to the tax audit field staff whose names are on the letters for onward
delivery to the companies for the audit exercise. The unit ensures it updates its database so
as not to issue letters to companies previously audited. It also attends to enquiries from TAMA
and Audit field staff.

Training School
The Lagos State Internal Revenue Service Staff Training School undertakes and coordinates training
programmes for Staff to build an effective and efficient personnel support, to understand the vision and
mission of the Agency. The training includes the induction course programme, conducted for newly
employed staff, in-house training and other internal and external training programmes organised by
the Management to achieve its policy on the implementation of a continuous training process for the
Staff. In addition, the Unit is responsible for ensuring that a Library with updated readable materials and
information can be assessed by all Staff.

D. TAX AUDIT DEPARTMENT

Units reporting directly to the Director, Tax Audit:

Audit Report Process

All audit reports pass through this unit. Initial reports from audit field staff/TAMA are submitted to the
unit which then collate and forward such to the Tax Audit Review unit. After review, the subsequent
generated liability from Assessment unit is sent back to this unit (Tax Audit Report Process) and if there
is need for further impute, maybe from RMU, the report is returned back to Assessment unit for updated
Demand notice.

The final demand notice is then forwarded to the director Audit for comments and recommendation to the
chairman for issuance of letter.

All processes are handled by this unit thereby it is able to forward the list of those who have not complied
with payment to the Legal department.

IT Support (Tax Audit)

The Section is responsible for all data input on companies, tax payment schedule, demand notices,
processing of TAMA's commission using the Tax Audit Package.
70
 Audit Correspondence
The Section handles all records and correspondence activities of Tax audited companies. All demand
notices are dispatched to the various companies through this section.

Commission Section
The Section ensures that payment (commission) is made promptly to TAMA consultants based on a
proper audit exercise

Tax Audit field Unit

The Tax Audit Field Unit works hand in hand with TAMA (Tax Audit Monitoring Agents) to serve
companies notification for Audit exercise. It carries out Audit and ensures that reports submitted By
TAMAs are accurate and submitted as at when due.

E. LEGAL DEPARTMENT

The Directorate/Department is responsible for all civil litigation procedures for or against LIRS .It
ensures that legal processes are duly followed during Tax litigations.

Legal Advisory Services

The Team advises and represents the Agency on all legal matters.

Legal Drafting
Drafting of documents such as
a) Rental agreements
(b) Contractual agreement between the Agency and other parties.

Criminal Prosecution
Oversee the criminal prosecution of all High Net worth - individual.

F.FINANCE & ACCOUNTS DEPARTMENT

The following units report to the Director of Finance &Accounts Department:

 Funds Management - The funds management section deals with the preparation of
payment vouchers and monthly expenditure returns.

 Salary - The Salary section ensures that Staff’s salaries are disbursed to Staff bank
accounts appropriately.

 Financial Information System - This is where the final account of LIRS is being
prepared. The Unit gathers and collates all the financial data (money) and prepares all
necessary books of accounts in line with the established standard.

71
 Central Pay Office - The Central Pay Office is in charge of banking transactions,
treasury operations, bank reconciliations, disbursements (cash or cheques) and
preparation of cash book.

Collections & Accounts

The Unit ensures that up to date information on the trend of revenue items, i.e. Collections by Agency
and Revenue, by all Government agencies (LIRS and other governmental agencies) is accounted for. It
collates the information, analyzes and submits the compilation as a report to the Management of
LIRS, House of Assembly and the Commissioner for Finance on a daily basis for effective
accountability.

G: NEW GROWTH AREAS DEPARTMENT:

This department was formerly a unit, now a full directorate and has the following units under it:

SPECIAL DUTIES

Tax Education & Enlightenment Team

TEET is in charge of creating awareness on tax in the public arena, checking level of tax compliance
of existing tax payers, fishing out those not in the tax net as well as serving as a bridge to close the
gap between Taxpayers and Tax Stations. It educates and enlightens the taxpayers. TEET deals
directly with the public; hence, it identifies the problems and complaints of taxpayers.
This unit is also in charge of Mini Tax Stations.

Informal Sector-Markets
This sector is in charge of collection of tax revenue from market men and women in various markets in
the State. One of the numerous reasons for the creation of the Informal sector/Markets was for easy,
voluntary tax compliance of market men and women (in or out of tax net) operating and carrying out
various business transactions inside the Markets within the Community Development Areas.

Informal Sector-Professional
The sector was established to look into tax payment and compliance of members of professional bodies and
associations, which includes Nigerian Institute of Surveyors, Nigerian Medical Association, Chartered Institute of
Taxation, Pharmaceutical Society of Nigeria, Institute of Personnel Management of Nigeria, Nigerian Bar
Association, etc. It liaises with the MVAs (Motor Vehicle Administration) to bring to tax net Motor vehicle owners
with Regular plate numbers, Special plate numbers such as Fancy plate numbers and Out of series plate
numbers. The parties involved are expected to submit evidence of tax payment and if this is inadequate, a further
assessment will be charged.

Informal Sector- Trade Artisan

The sector monitors the activities of craftsmen or skilled manual workers who use tools and machinery in
a particular craft such as tailors, plumbers, carpenters, shoemakers, mechanics, hairdressers, electricians
etc. The Informal sector/Artisans deals with the tradesmen to enlighten educate and collect tax from this
sector of the economy.

Consumption Tax/ Hotel Occupancy

The Unit is responsible for the collection of the 5% Consumption tax on all goods and services
purchased from Hotels, Restaurants, Fast Foods and Event centers across the State. The consumption tax
72
is charged on the consumers, withheld by the service providers and remitted to Lagos State Internal
Revenue Service.

Withholding Tax
The Unit ensures that all withholding taxes deducted at source are paid to the Tax Authority. Withholding
taxes can be charged on director’s fees, dividends, rent, interest, royalties, construction and contract of
supplies, commissions, professional services, technical services, consultancy services, management
services etc. The Unit basically deals with individuals and enterprises. On withholding taxes, the amount
charged may vary in percentage depending on the item of income. It serves as a form of advance payment
or tax credit in settling tax liabilities.

High Net-Worth Individuals

This Unit is charged with the assessment of high net worth individuals. The assessment is based on the
way of life, status and other related income. These individuals are grouped into the various sectors of
the economy such as professional services, manufacturing, oil and gas etc.

Research Intelligence / Unit

The Research section provides research support services to all Departments, Stations and Units. It
assists the Management with clear research information and analysis for effective performance and
informed decision making in the development of its policy. It acts as a follow up unit which reviews
reports forwarded to it by the Management, conducts investigation on tax issues and administration,
proffers solutions and forward recommendations to the Management.

Intelligence
This section is charged with the responsibility of gathering and analyzing information about taxpayers particularly
the High Network Individuals and also maintaining a database of information for civil/criminal investigation for
use by LIRS. They use the internet to gather this information and maintain working relationships with relevant
Government agencies that have information on taxpayers.

MDA’S
This unit has interaction with Federal, States and Local Government as regards the ministries, departments and
agencies under them. It operates as advisory unit where issues arise as to tax matters and also collaborates with the
MDA’s where necessary.

CONCEPTS OF TAX SYSTEM MANAGEMENT

73
Tax Sensitivity has always been one of the hallmarks for most taxpayers and this has provided areas of
opportunities to reduce the bite of taxes, both legally and illegally. Taxpayers source for best strategies
for reducing their taxable income thereby re-arranging their financial affairs which ultimately reduces
revenue generation, disrupting the flow of funds to finance government expenditures.

Tax Compliance
Tax Compliance is paying the right amount of tax at the right time and at the right place. The focus of
Revenue Agencies is now centred on encouraging voluntary compliance by taxpayers rather than
emphasizing taxpayers’ obligations and their rights.

Facilitations for Increase in Tax Compliance:

In order to make voluntary compliance easier, we must not only meet legal requirements, but must walk a
mile in the taxpayers’ shoes and help them navigate the system through some of the following means:

Define Tax Compliance.

 Provide clear, precise and timely information.
 Strengthening customers’ service.
 Ensure courtesy, considerate, indiscriminative treatment.
 Respond to enquiry, complaint, and request.
 Explain grounds for tax assessment and actions.
 Assist new taxpayers to register/comply.
 Create an environment that promotes compliance.
 Continually invest in staff and the tools to deliver future outcomes.
 Expedite and improve issue resolution.
 Provide timely guidance and outreach to taxpayers.
 Strengthen partnerships with tax practitioners and professionals to ensure effective tax
administration.
 Ease Complex Tax laws.

The Tax Authorities’ approach towards improving the climate for voluntary compliance initiatives should
be geared towards making taxpayer obligations as easy as possible for those who wish to comply, and as
difficult as possible for those who purposefully do not comply.

Tax Evasion
Tax evasion means avoiding the assessment or payment of a tax in an illegal manner. This can be referred
to as the process of using fraudulent means to avoid paying the proper amount of tax due or unlawfully
escaping tax liability. It is concealing the true state of affairs to the tax authority to reduce tax liability.

74
Tax Evasion is a way of stealing from the Government purse. It is a criminal act punishable under the
law.

Types of Tax Evasion: Tax Evasion can be categorised into two:

PARTIAL EVASION- This is when the taxpayer underreports/understates his income for tax purposes.

TOTAL EVASION –This is the act of being unpatriotic, resulting to failure to register and be identified
as a taxpayer. This is however a criminal act punishable under the law.

Methods of Tax Evasion

In an attempt to evade tax, the following are some of the methods used by taxable adults:
 Failure to pay tax at all.
 Under-reporting Income.
 Filing of a return that does not contain sufficient information to determine the correct liability.
 Failure to file in return of income in a manner to delay or to impede the administration.

Not reporting taxable income paid “under the table”.

1. Failure to pay personal income tax on additional income earned received or realised
from business, trade, employment, vocation, profession.
2. Claiming personal expenses as business expenses.
3. Keeping two different sets of books- Audited and Management Accounts.
4. Using false Invoices.
5. Dealing only in cash.
6. Omission to state gross amount of dividends, rent, or interest received.
7. Failure by taxable person to deliver a return of income to the relevant tax
authority within the specified time.
13. Hiding money and its interest in offshore accounts.

Factors Contributing To Tax Evasion

1. Corruption by Tax Administrators.
2. Role of Middlemen between Taxpayers and Tax Administrators.
3. Lack of follow up
4. Level of evasion and punishment.
5. Lack of Social amenities and Infrastructures.
6. Tax protesters and Tax resistance.
7. Failure to tax all sources of economic power.
8. Size of the underground economy.
9. Sense of general unfairness of tax system.
10. Wasting and siphoning of tax revenue.
11. Attitude towards government spending program.

75
 Tax Avoidance
Tax avoidance can be defined as the legal utilization of taxation to personal advantage.
It is the deliberate action of the taxpayer in reducing the amount payable or pays no
tax by using means that are within the law. It may be considered to be the dodging of
one’s duties to society. The taxpayer thus arranges his affairs in such a way that he
pays less tax than might otherwise pay. Avoidance however, reduces government
revenue.

Tax Avoidance are realised by:

1. Using tax reliefs such as; Personal, Children, Dependant allowances to claim
maximum deductions irrespective of whether due or not.
2. Investing in small businesses schemes promoted by the government.
3. Paying extra into a pension scheme.
4. Electronic trading on the internet.
5. Establishing a charitable foundation, trust, to which one’s property or wealth is
donated.
6. Moving to a Tax Haven such as Switzerland.
7. Avoiding tax by emigrating or becoming a perpetual traveller.

Differences between Tax Evasion & Avoidance

TAX EVASION TAX AVOIDANCE
The practice of not paying tax by illegal The practice of paying less tax.
means.
Illegal/Criminal and a form of tax fraud Perfectly Legal
Conceals the true state of affairs Discloses full material information
Deliberately misinterprets facts Takes advantage or loopholes of the tax law
to find ways to reduce total tax liability
Punishable under the law with fines, Not punishable until proven guilty
penalties and/or imprisonment

Fails to register and identify as a Registers as taxpayer

taxpayer

Similarities between Tax Evasion & Avoidance

1. Designed to reduce the amount of tax to be paid or pay no tax
2. Dodge duties and responsibilities
3. Exhibit act of being unpatriotic
4. Steal from the Government
5. Dishonest tax reporting

Tax Corruption
Tax Corruption is the misuse of official powers for private gain in the delivery of services. Corrupt tax
officials cooperate with taxpayers who intend to evade taxes. Tax corruption raises black money, hidden
income used for briberies and this poses serious problems for tax administration in a huge number of
developing and underdeveloped countries.
76
Causes of Tax Corruption
1. Unstructured Tax Administration
2. Complex and unclear tax laws and procedures.
3. High Level of ignorance
4. Weak Enforcement, no risk of detection and punishment
5. High compliance cost.
6. High tax burden.
7. Detesting tax education.
8. Poor taxpayer service.
9. Non transparent hiring mechanisms.
10.Low level of skill.
11.Low pay.
12.Lack of rewards and incentives.
13.Get-rich-quick syndrome.
14.Insufficient checks and balances within the system.

Good-Practice Reform Measures

1. A simplified tax instruments and processes reduces tax officials’ discretional power and
abuse of tax laws.
2. Provide ethics training and capacity building for tax officials.
3. Don’t assist for a fee in form of an appreciation except a “Thank You”.
4. Establishment of Institutional Autonomy.
5. Implement human resource management policy.
6. Institutionalize e-service and automation, to electronically support clerical functions.
7. Incentive mechanisms, and check balances in tax administration.
8. Enforce tax compliance.
9. Severely punish corrupt tax officials.
10.Use information technology to combat tax corruption.
11.Conduct tax outreach and education.
12.Institutionalize an effective control on tax audit system.
13.Transparent tax appeal procedure.
14.Set up an independent anti tax corruption organisation.
15.Inform Taxpayers of their rights.

Collection & Payment Enforcement Practices

The unprecedented fiscal challenges, often faced by governments today have compelled them to deliver
services at the minimal cost, thereby reducing spending. However, an often-overlooked approach is to
increase revenue generation through the implementation of more efficient collection and payment
processes.

To enhance these processes and to achieve maximum revenue, the followings are to be considered:
1. Encourage and facilitate voluntary compliance.
2. Effective decision support tools.
3. Automated workflow (minimize revenue leakages).

77
 4. Compile extensive taxpayer data.
5. Ability to source for information from the Internet.
6. Provide multiple channels and opportunities for convenient payment.
7. Provide for collection and payment during any taxpayer contact.
8. Use available technology to manage collections.
9. Support customer service and collection staff.
10.Comprehensive and educational payment procedures.
11.Timely collection and enforcement actions.
12.Monitoring of Taxpayers.
13.Communicate clearly and concisely.
14.Ensure casual taxpayers are converted to permanent taxpayers.
15.Minimize the cost of revenue administration.
16.Increase the level of ethics and integrity.
17.Create a level playing field (promoting taxpayers’ rights as well).
18.Improve media reporting on tax issues.
19.Reduce friction and level of disputes.
20.Provide tax information on the Agency’s website.

RELATIONSHIP MANAGEMENT
Relationship Management is the process of fostering good relations with customers to build
loyalty and increase sales. This involves identifying and knowing who the customers are and
what their needs entail. For every goods supplied and services rendered, there is always a
CUSTOMER and the notion of every business entity is retaining all customers to sustain its
business.

Who Is A Customer?
A Customer is an individual or a group who has/have business relationship with an
individual/organisation. A customer buys and uses, or is directly affected by the product and
services of the organisation he buys. In relation to Tax Administration, “A Customer is a
Taxpayer who uses the services of the Revenue Authority”.

In enhancing Tax services, Tax Administrators, must therefore be regarded as effective

relationship managers whose responsibility is to maintain positive relationship with taxpayers
and stakeholders. As a relationship manager, there must be a demonstration of strong
customer knowledge and the use of such knowledge to understand the taxpayer’s
perspectives.

78
However, to achieve success as a Revenue Authority, there are three (3) key pieces of
information that must be communicated to Taxpayers.
1. We are here (taxpayers must be aware of our presence).
2. Here is what we do (what we do, how we do it).
3. Here’s how to contact us (where we are located). s

Customer Care/Service
Good customer services include:

 Treating every customer with respect, satisfying all their needs and exceeding their
expectation.

 Putting customer first-prioritising their needs and delivering a swift friendly and
efficient service.

 Establishing a valuable relationship with customers based on trust, reliability, empathy

and the ability to deliver on promises.

 Making commitment to the customers and keeping it.

 Being passionate, precise, proactive and professional in all your dealings with
customers.

Achieving Excellence in Customer Care

Below are practical customer care guidelines:
 Study customer behaviour and link it with customer satisfaction.
 Change the environment to suit customer demands (be fully/constantly aware of
customer needs).
 Make compliance to your business convenient (Customers want to spend less for more).
 Attain, Retain and Develop (ARD) (retain and use old customers as a platform for
winning new ones).

Display Key rules to keep and attracting taxpayers include:

1. Understand of what you do as a Tax Administrator
2. Understand the taxpayers (who, where)
3. Ensure effective communications, advertise your service.
4. See and listen to taxpayers’ view and complaints.
5. Identity and respond to taxpayers’ needs.
6. Support and assist taxpayers.
7. Involve taxpayers in setting standards and monitoring performance.
8. Ensure all taxpayers have equal access to information and assistance.
9. Make taxpayers feel comfortable with tax/service
10.Identify a loyal taxpayer as a referral to potential taxpayers
11.Maintain regular contact with tax payers
12.Observe corporate values- Reliable, credible, attractive, and responsive.

Method of Communication with Taxpayers

Communication with taxpayers is a two-way process and it involves listening as well as giving
information to them. To ensure taxpayers receive the best service, information can be passed
through:

79
 1. Written material-Tax forms and documents must be clear, in plain language and
available at all times.
2. Telephones calls- Calls must be answered promptly and efficiently.
3. Interviews –Interviews should be documented and authenticated.
4. Reception facilities- Taxpayers visiting the tax stations must see the image of the
surroundings as positive and impressing.
5. Publications-Providing an understanding of taxation and tax administration.
6. Audio visual materials e.g. LIRS CDs
7. Press release and Reports.
8. Bulk Mail.
9. Leaflets.
10.Adverts (Signs and Billboards)
11.Use of TV Programmes (Tax Talk)
12.Newspapers.----
13.Questionnaire-Seeking the views of the taxpayers.

Rights & Obligations of a Taxpayer

Rights of taxpayers protect them against the misuse of power by tax administrators,
while the tax authority expects tax obligations accompanying these rights to be duly
observed by the taxpayers.

Basic Taxpayer Rights Basic Taxpayer Obligations

1. The right to be informed assisted 1. The obligation to be honest

and heard
2. The obligation to be co-operative
2. The right of objection and appeal
3. The obligation to provide accurate
3. The right to pay no more than the information and documents on time
correct amount of tax
4. The obligation to keep records
4. The right to certainty on
application of tax laws 5. The obligation to pay taxes on time

5. The right to privacy 6. The obligation to comply with all

other obligations imposed on the tax
6. The right to confidentiality and payer by the tax laws.
secrecy.

Taxpayer Behaviour & Concern

In satisfying and providing tax services, it is of utmost importance to understand the
different behaviour demonstrated by taxpayers as this will create a means of
identifying each taxpayer uniquely.

Taxpayer Behaviour- The types of behaviour that could be expected from a taxpayer
include:

80
Honesty, Frankness, Dishonesty, Rudeness, Violence, Deceit, Timidity,
Inquisitiveness, Suspicion, Sensitive, Ignorance, Craftiness, Evasion, etc.

Taxpayer Concerns- Expectations of taxpayers from Tax Authority

i. Recognition – Respected and Personally known ( remembering birthdays)
ii. Appreciation - Enjoying a beneficial/rewarding business relationship.
iii. Responsiveness - Promptly cared about whenever and wherever in need.
iv. Satisfaction - Providing/servicing the needs all the time.

Taxpayer Complaints & Handling

Complaint is an expression of dissatisfaction by a customer on product or service
purchased. Complaint is the best customer behaviour that sustains an organisation.
Statistically, about 50 percent of the unsatisfied customers never complain; instead
they leave and tell everyone how bad you are!!
Complaints are:
i. A means of truly knowing your customer and yourself.
ii. A means of identifying weaknesses.
iii. A way of learning about unmet customer needs.
iv. A valid form of and tool for feedback.

Fundamental Causes of Taxpayers’ Complaints

There are several causes for taxpayers’ complaints. Below are instances:
1. Empty promises - did not get the promise/ expectation.
2. Rudeness - someone was rude to them.
3. Negligence - no one went out of the way to help.
4. Arrogance - not listened to.
5. Absenteeism – nobody available to handle matters.

Tax Complaint Handling Tips

1. Welcome taxpayers courteously with a smile.
2. Clearly understand taxpayer’s dissatisfaction and complaint (listen attentively to
Cultivate cooperation).
3. Ask questions politely for clarification.
4. Establish full facts/claims presented by taxpayers.
5. Write down particulars of complainant and details of complaint. It gives taxpayer
assurance of your seriousness with issue.
6. Summarise to complainant the salient issues to assure taxpayer you got it right.
7. Apologise and provide a polite response either by:
a. Explaining the situation – what happened and why and the next steps to address the
problem or to prevent recurrence OR
b. Promising - to look into the complaint and explain precisely when and how to provide
feedback.
8. Apply procedure no matter whether taxpayer was at fault.
9. Remain firm and live up to professional standards as a Tax Administrator.
10. Analyse complaint trend (keep an eye on taxpayers’ complaint).

81
 11. Always calm a taxpayer in case of arguments (use your paper, pen and not your
mouth)!
12. Reinforce by emphasizing the benefits of paying tax and promptly too.
13. Bring in a team member or a superior if you cannot properly tackle a complaint.
(Make sure you introduce him/her).
14. Create a file on taxpayers’ complaints as this will serve as a reminder.

For follow up on complaints:

1. Always file follow up remarks on complaints made by taxpayers.
2. Pass on complaints register to your superior at the end of the day’s work.
3. Endeavour to provide solutions to taxpayers’ complaints at an agreed time, work
on complaints long before your next meeting.
4. Acknowledge taxpayers’ input during conversation.

Dishonesty within the Organisation

Dishonesty can be simply defined as an act of untruthfulness or lack of integrity.

General Forms of Dishonesty

1. Cheating.
2. Lying.
3. Deliberate deception.
4. Lacking in integrity.
5. Corruption.
6. Falsifying information.
7. Stealing
8. Fraud, etc

Specific Dishonesty in the Tax Arena

In a Tax Administration, dishonesty can be of different forms, ways or means which
include but not limited to the following:
1. Charging fee for free things e.g. freely available tax forms/information booklets.
2. Collecting fees to fast track the processing of TCC.
3. Complicating tax procedures to instigate a deal.
4. Turning a blind eye to tax fraud/non tax registration etc.
5. Disclosure of confidential information.
6. Destroying taxpayer’s files/documents.
7. Outside consultancy- in conflict of interest.
8. Stealing time to pursue outside interests (employment).
9. Misuse of equipment/facilities – cars, computers, stationeries, toiletries etc
10. Wrong claims on subsistence & travel allowances.
11. Theft of goods – office papers, pens, etc.
12. Receiving gifts from taxpayers.

82
 INTRODUCTION TO STAFF POLICY

1. Understanding the Agency

The name of the Agency is Lagos State Board of Internal Revenue (LSBIR), and its
autonomous operational arm is Lagos State Internal Revenue Service (LIRS) with
headquarters at The Good Shepherd Building, Block H, Plot H1, Central Business
District, Opposite Lagos State Secretariat Main Gate, Alausa, Ikeja, Lagos State.

The LSBIR was set up by the Lagos State Revenue Administration Law, 2007. The Law
made provisions for the Administration and collection of Revenue due to the State
Government and Local Government Councils in Lagos State. It established the LSBIR
as a body corporate with perpetual succession and LIRS as its operational arm.

The primary responsibility of LSBIR is to carry on the business of revenue generation

from taxes for Lagos State. The Vision and Mission statement of LIRS as defined as
follows:

Vision Statement
To operate a responsible, effective, efficient and transparent internal revenue
agency that is adequately equipped to collect the proper amount of tax
revenue at the least cost, while serving the public with respect, quality
services and products, thereby warranting the highest degree of public
confidence in our expertise, efficiency and integrity.

Mission Statement
To serve the residents, business community and government agencies within
the state, through the provision of fair, accurate and timely information as
required from the Internal Revenue Service by all taxpayers in the state,
while providing high quality and transparent customer-oriented service.

In view of the foregoing, every employee therefore has a responsibility for efficient,
effective and qualitative service delivery to the tax payers and the government of Lagos
State. Employees are to work together to achieve efficient service delivery which
translates to enhanced revenue for the state.

All employees should therefore ensure that all that is done either as a group, unit or
as individuals should not in any way interfere with or disrupt the success of their
colleagues in other groups and units. Employees are expected to act in ways reflecting
favourably on LIRS and to avoid activities interfering with the agency’s operations or
with the right of other members of staff.
Other Expectations from LIRS Employees are:
 serve LIRS faithfully,
 obey all lawful instructions given to them,
83
  refrain from actions that are likely to be detrimental to the vision of the agency,
 take proper care of all agency property provided for their use or entrusted to
them,
 make creative suggestions for the improvement of members and the efficiency
and working conditions of the Agency,
 establish and maintain cordial relationships with fellow employees,
Management and members of the public, and
 do all such things as may seem incidental and or conducive to the attainment of
the agency’s objectives.

2. Conditions of employment
All offers of appointment are made by formal letters and an employee shall be
requested to sign for and acknowledge receipt of the document setting out the terms
and conditions of his/her employment which shall constitute a contract between the
employee and LIRS.

All new employees are referred to Agency designated hospitals/clinics for medical
examination.

Each employee shall submit personal information in the format of the personal data
form to be supplied by the Human Resource Unit. The Human Resource Unit should
be promptly informed in the event of any changes that may occur in the information
supplied. The employee is enjoined to notify the unit of such changes in his/her
Personal Data especially with respect to Next of Kin, Marital Status, Number of
Children, Residential Address and Academic/Professional qualifications.

The official working days and hours of LIRS are:

Monday – Friday:
8.00am – 5.00pm
Drivers and Office Assistants’ working hours shall be dependent on the
demands of duty.

Staff Privileges
Employee whose employment is confirmed is entitled to the followings, subject to the
convenience of the Agency:
* Leaves
* Medical Care
* Staff Pension Fund

3. Rules of Office Practice

The Agency has set of rules, and may make directives from time to time concerning
the followings and all employees must adhere strictly to these rule. However,
clarifications could be sought from Heads of Department or Unit Heads when and
where necessary:
 Using the Agency’s Name and Logo
 Use of Letter Head Papers and other stationeries
 Authorisation of Signatories
 Orderliness in the office
 Use of Phone/Facsimile equipment/Internet Access
 Protection of Personal Property
 Office Supplies
84
  Use of Store and supplies
 Relocation of LIRS property
 Maintenance of LIRS property
 Management of General Information
 Management of Business Information
 Maintenance of Uniforms & other assigned amenities
 Custody of office keys
 Use of office on work free days
 Locking up of office premises
 Eating in the office
 Staff Training and Development
 Staff Advancement
 Limit of Overall Monthly Deductions
 Voluntary Termination of Appointment
 Resignation
 Redundancy
 Retirement
 Dress code etc.

4. Disciplinary Procedure
Whenever an employee commits an offence that warrants disciplinary action, his/her
supervising officer may begin disciplinary action in any of the steps listed below
depending on the gravity of the offence so committed:
1. Verbal Warning from the Supervisor
2. Written Query
3. Referral to Disciplinary Committee.

Composition of Disciplinary Committee Members

1. Director, Administration and Human Resource
2. Director, Legal Services
3. Director, Personal Income Tax
4. Head, Internal Audit
5. Board Secretary as the Secretary to the Committee.

It should be noted that Disciplinary action will lay emphasis on correcting the problem
rather than punishment of the offender, thereby maintaining the employee’s dignity
and self respect. Therefore, depending on the nature of the offence, the disciplinary
action may take any of the followings:

o Caution
o Poor Performance Notice
o Warning
o Suspension
o Involuntary Termination of Appointment
o Summary Dismissal

5. Performance of Duties
An LIRS employee:
85
  Avoids being involved in or being seen to be associated with commission of any
form of tax evasion;
 Strives to achieve the objectives of LIRS cost-effectively and cost-efficiently
without compromising the legitimate expectations of the public;
 Is creative, seeks innovative ways to solve problems and enhances effectiveness
and efficacy within the context of the law;
 Is punctual and reliable in the execution of his duties;
 Executes his or her duties in a professional and competent manner;
 Does not engage in any action that is in conflict with the execution of his/her
official duties;
 Will recluse himself or herself from any official action or decision-making
process which may result in improper personal gain, and declares this interest;
 Accepts the responsibility to avail himself or herself to ongoing training and
self-development throughout his or her career;
 Is honest and accountable in dealing with funds of the LIRS and uses LIRS
property and other recourses effectively, efficiently, and only for authorised
purposes;
 Promotes sound, efficient, effective, transparent and accountable
administration;
 In the course of his or her official duties, reports instances of fraud, corruption,
nepotism, mal-administration and any other act which constitutes an offence
or which is prejudicial to the interest of the LIRS;
 Gives honest and impartial advice, based on all available relevant information,
when asked;
 Honours the confidentiality of matters, documents and discussions classified or
implied as being confidential or secret by any Law;
 Contributes towards maintaining a work place which is both healthy and safe.

6. Personal Conduct and Private Interest

An LIRS employee:
 Dresses and behaves in a manner that enhances the reputation of the Service
whilst on duty and shall not do anything that brings LIRS into disrepute;
 Shall not be under the influence of alcoholic beverages or any other substance
with an intoxicating effect whilst at work;
 Does not use his or her official position to obtain private gifts;
 Does not use or disclose any official information;
 Does not, without approval, undertake remunerative work outside his or her
official duties or use office equipment for such work;
 Does not release to or discuss with any member of the media and or discuss
LIRS material, to any member of the media unless specifically authorised.

7. Offenses that attracts Summary Dismissal

An employee may be summarily dismissed by the Executive Chairman for certain
offences covered by the broad heading of gross misconduct.

Such offences include proven cases of:

86
i. Theft, fraud, dishonesty, and irregular practices in respect of cash, vouchers,
records, returns, or taxpayer accounts;
ii. Collusion with taxpayer, consultants, or any person with a view to
underpayment of tax to the state;
iii. Willful disobedience of lawful order;
iv. Serious negligence or recklessness;
v. Drunkenness or taking drugs other than for medical reasons, rendering the
employee unfit to carry out his duties;
vi. Intentionally divulging confidential information;
vii. Conviction for a criminal offence;
viii. Prolonged and/or frequent absence from work without leave or reasonable
cause;
ix. Fighting and assault or engaging in disorderly behaviour during working
hours on the office premises or within its immediate surroundings;
x. Deriving any benefits in the course of his official duties which places him in
such a position that his personal interest and his duty to the Agency or the
state or to taxpayers are in conflict;
xi. Failure to report any irregularity, that could adversely affect the business of
the Agency, on the part of any other employee after having knowledge of
such irregularity;
xii. Use of abusive and/or insulting language or behaviour to any taxpayer which
is prejudicial to the business interest of the Agency.

87