Concept of Taxation (Tax)

Concept of Taxation (Tax)

To get inside understanding of the concept of taxation the following terms need to be explained.

1. Tax-Base: This is an object upon which tax levied e.g. personal income or company profits.
2. Tax-Rate: It is proportion of the tax base paid as tax e.g. if an individual earns 20,000 per month and pay 4% as tax. The 4% is the tax rate.
3. Tax-Burden – Absolute amount of money which is paid by the tax payer to coffers of government.
4. Tax-Allowance: Allowance which permits the individual to be tax free for instance an income earner may be granted allowance on old parents, dependent relatives, children, disabled person etc. the allowance will be deducted from individual gross income before tax is imposed.
5. Tax-Year: Period usually a year which tax is payable.
6. Tax-Evasion: Use of illegal method to reduce or completely dodge one’s tax liability e.g. mis-stating or omitting a source or sources of one’s income. It is also regarded as failure to pay one tax or reduction of ones tax liability through illegal returns or failure to make returns or even failure to pay tax on time.
7. Tax-Shifting or Tax-Swapping: Is a charge in taxation that eliminates or reduces one or several taxes and establishes or increase others while keeping the over revenue the same.

Nigerian Laws supporting Taxation

These sources of Nigeria tax laws are as follows: ICAN (2009) outline three sources of Nigeria tax law as:

 

Customary Laws: These are the native laws and customs governing the taxation of incomes, goods and properties of a persons or communities within an ethnic group.

Examples of taxes collected under this laws are:

1. Ishalaole: Payable in Yoruba land, to titular head of communities or th Obas on the produce from farm land.
2. Zarkat: Tax payable by adherents of Islamic faith, on their wealth, which has been in their possession for a full year.
3. Osusu-Nkwu: this is applicable in the Eastern part of Nigeria.

 Statute Laws: These are tax legislation passed by National and state assemblies and bye-laws by local governments under democracy and Decrees or Edicts under military government. E.g. the personal income tax Act CAP LFN 2004, the company income tax Act CAP LFN 2004 etc.

 

Case Laws: This is the doctrine of stare decisis that is, judicial precedents. Under this Doctrine, judgment pronounced by Superior Courts of Records, namely, High Courts, Appeal Courts and the Supreme court on principles of tax laws and their interpretations of the provision of tax statutes are binding on lower courts.