The Imperative of Personal Income Tax Filing in Lagos State
The Lagos State Internal Revenue Service (LIRS) is intensifying its efforts to ensure that all residents fulfill their constitutional and statutory obligation of filing annual tax returns. This drive is anchored in Section 24(1)(F) of the Nigerian Constitution, which mandates every citizen to truthfully declare their income and pay due taxes. This obligation is not merely a legal requirement but a fundamental civic duty, crucial for financing government services and infrastructure development. The deadline for filing returns is March 31st of the following year, although filing can commence as early as January 1st. Failing to file within the stipulated period constitutes an offense with attendant penalties.
The LIRS emphasizes that the obligation to file returns extends beyond employees to encompass everyone earning income from any source, including the self-employed, business owners, and individuals with multiple income streams. While employers deduct taxes from employees’ salaries, this deduction only covers employment income and may not capture other sources like rental income, income from agricultural ventures, or other business activities. Filing returns ensures that all income sources are accounted for and appropriately taxed. Furthermore, it provides a crucial check and balance, protecting employees in situations where employers fail to remit deducted taxes to the LIRS. Filing returns allows individuals to have a clear record of their tax payments, which can be essential for obtaining tax clearance certificates and avoiding complications in various transactions.
Failure to meet the March 31st deadline incurs penalties, including monetary fines and potential prosecution for tax evasion. Beyond the penalties stipulated in Section 95(1) of the Personal Income Tax Act (PITA), individuals who fail to declare income from other sources could face prosecution for tax evasion. To facilitate compliance, the LIRS has streamlined the filing process through its e-tax platform, making it user-friendly and accessible to all taxpayers. The simplified process eliminates the need for complex paperwork and allows individuals to file returns conveniently from anywhere with internet access.
The PITA provides legal safeguards for taxpayers, outlining clear procedures for objecting to assessments. Upon receiving an assessment notice, taxpayers have 30 days to file an objection, clearly stating the contested aspects while paying the uncontested portion. The LIRS is obligated to review the objection, supported by documentary evidence, and revise the assessment accordingly. If the provided evidence is insufficient, the LIRS can request further documentation. Taxpayers dissatisfied with the LIRS’s decision after the review can appeal to the Tax Appeal Tribunal, an independent body established under the PITA. This tribunal adjudicates on unresolved tax disputes between taxpayers and the tax authority.
The Tax Appeal Tribunal, an independent body constituted at the federal level, provides an impartial platform for resolving tax disputes. Both taxpayers and the LIRS can approach the tribunal to seek redress. The tribunal’s decisions are based on the evidence presented by both parties and are enforceable through the Federal High Court. To effectively file returns, taxpayers need to maintain proper records, including statements of financial transactions, computation of income from all sources, supporting documents for deductions and allowances, employment income details, and records of self-employment earnings, business profits, and investment income. These records can be maintained digitally, simplifying record-keeping and providing readily available documentation for verification.
The LIRS verifies the records of self-employed individuals by examining their books of account. Maintaining accurate and comprehensive financial records is crucial for substantiating declared income and expenses. Failure to keep proper records can lead to the LIRS using its best judgment to assess tax liability, which may result in higher assessments. The LIRS emphasizes that tax is a first-line charge on income, taking precedence over other expenses. Taxpayers are expected to prioritize tax payments before allocating funds to other obligations. While the methods of tax collection may differ for employed and self-employed individuals, the underlying principle remains the same – everyone is paying personal income tax. Maintaining proper records is crucial for all taxpayers, regardless of their employment status, to ensure accurate assessments and avoid potential disputes.
The LIRS also addresses the taxation of the informal economy, acknowledging the challenges of formal record-keeping in this sector. Presumptive tax, a minimum annual tax payment, applies to individuals in the informal sector such as market traders. However, as businesses in the informal sector grow and formalize, they are expected to transition to standard tax filing procedures. The LIRS monitors the progress of businesses in the informal sector and encourages them to formalize their operations as they expand. Enforcement of tax compliance, including seizures, is a measure of last resort. The LIRS emphasizes its preference for voluntary compliance but will utilize legal means to recover unpaid taxes, which can involve garnishee proceedings against bank accounts. The LIRS underscores the importance of tax revenue as the lifeblood of government, enabling the provision of essential services and infrastructure. Paying taxes is not merely a legal obligation but a civic duty crucial for national development and creating a better society for all.
