The provisions of the new Personal Income Tax (Amendment) Act now make it compulsory for the personal incomes of all categories of workers, including the President, governors and their deputies as well as ministers and other top political office holders to be liable to taxation.
The new law signed into law by President Goodluck Jonathan last June also reviewed income exempted from tax to include bonds issued by government and corporate entities.
“With the review of income exempted from tax, the President, Vice president, governors and deputy governors of state and other categories of political office holders will now pay tax on all their income as is done by every other taxpayer,” Chairman, Joint Tax Board, Ifueko Omoigui Okauru, said at a media briefing to formally unveil the new Act in Abuja.
Mrs Omoigui -Okauru, who doubles as the executive chairman, Federal Inland Revenue Service (FIRS), said the amendments were coming more than 19 years after a similar exercise was carried out on the Personal Income Tax Act (PITA) in 1993, pointing out that under the new law, it is obligatory for all political office holders hitherto exempted from taxes on their incomes to pay.
Some key amendments to the Act include replacement of obsolete and unrealistic reliefs and allowances with enhanced and easy-to-compute benefits as well as strengthening of personal income tax administration at federal and state levels in the country.
Others include consolidation of reliefs and allowances of N200,000, in addition to 20 per cent of gross income as deductible allowance; introduction of new income tax rates and table, provide closer income bands and lower income tax rates leading to a reduction in tax payable, provision of a uniform, independent and cost-effective process of dispute resolution as well as enhanced administrative powers to tax authorities.
The new tax table shows that the first N300,000 of income earned would attract seven per cent tax rate, while about 11 per cent would be paid as tax on the next N300,000 income and 15 per cent on the next N500,000; 19 per cent on the next N500,000; 21 per cent on the next N1.6million and 24 per cent tax rate on incomes above N3.2million.
Under the new tax regime, minimum tax rate for the lowest possible income earners previously at 0.05 per cent has been raised to 1 per cent, while the use of the Taxpayer Identification Number (TIN) as a tool for tax administration has received statutory backing, and presumptive tax regime introduced for the informal sector and other categories of persons, whose incomes were not easily verifiable.
“One of the major reasons for the Amendment Act was to bring the Personal Income Tax Act up to date with existing realities of the Nigerian economy, especially in relation to how the Act impacted low and middle income earners,” she said.
“From the onset therefore it was conceived to ensure that personal income tax is administered equitably and that its major provisions reflected the focus of the overall tax reforms, which included introducing a more equitable tax system by the introduction of realistic tax rates, efficient and effective administration system, simplification of laws, empowering tax authorities, and a shift from direct to indirect taxation by lowering of direct tax rates amongst others.”