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Income tax has been impose by most of the countries of the world in a progressive manner which means that a person who earns high pays higher amount in terms of tax and vice versa.
Under the progressive tax system it is also to be noted that the corporations as well as large multinationals needs to pay more tax as compared to the individuals who are working for the economy of the country. Tax codes are therefore defined in a very easy manner to make sure that before filing a return the exact amount is calculated so the entity does not have to go through all the process again. In most of the countries of the world the income from the employees is generally collected by the employers who in return make sure that a combined return is filed to avoid any hassle. The income tax codes may vary for such organizations who the n implement them with the help of the professionals who are hired for the same purpose.
With the passage of time the term tax evasion has given birth to loop holes identification to make sure that the income tax systems are monitored strictly. It is also known as tax avoidance which makes sure that the income tax is always ignored or not paid by using legal means that are permitted by the law. All such practices have also tend the governments to create income tax inspectors who visit the entity to make sure that the return filed is true and nothing has been concealed in this regard. The need of the hour is to make sure that the tax avoidance is eliminated totally from the world’s economy as it leads to more vicious ideas related to the phenomenon making the idea even hard to understand.
TYPES OF INCOME TAXES
There are several types of income tax that are imposed on the individuals as well as the companies when it comes to the advanced societies of the west. But in Nigeria there are several forms of income tax that are imposed to make sure that the economy runs in a smooth manner and the government gets enough funds to back the projects of social interest. The government of Nigeria also ensures that the best possible types of income tax are provided to the companies as well as individuals so that they can file the returns in time. Following is a brief description of each and every income tax law applicable in Nigeria:
The first and foremost types of income tax are the personal income tax. These rules are relatively tough for the people who earn their livelihoods in the country. According to this income tax rule following are the conditions according to which a person is taxed under the Nigerian income tax laws:
A person fulfilling any of the three conditions mentioned above are taxed by the state authorities.
These types of income tax rule have been specifically defined by the state authorities to make sure that the corporate entities are taxed. The companies that are Nigeria based are taxed according to the income they make all over the world whereas the foreign companies are taxed according to their profits. The Education Tax Act imposed by the Nigerian government also ensures that all the incorporated companies pay 2% of their assessable profits to this fund. It is also worth mentioning that incorporated company is the one that has an identity separate from its owners.
It is a form of tax that has been imposed on all those entities that are engaged in the activities related to gas and petroleum under the Petroleum Profit Tax Act or PPTA. However the government has also granted leverage in this regard so the income that is taxable under the companies income act is exempted under the Petroleum Act.
It provides that the consumers of chargeable goods and services pay 5% of total value of the purchase price as tax. The VAT is handled by The Federal Inland Revenue System or FIRS that ensures that the system of VAT is maintained for the local bodies, federal government and state. The collections of the VAT are then distributed among the mentioned stakeholders.
These types of income tax are imposed on the businesses that are importing certain types of goods and services. It is also to be noted that the duty is collected by the Nigerian Customs Department who then makes sure that the earnings are forwarded to the state government who is the sole owner of all the excise duties that are collected.
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