Tax Substitution As Double Taxation

The power to levy tax in Nigeria, being a federation, is shared between the Federal, State and Local governments. To avoid double taxation, the tax system spells out which government unit (federal, state or local) has the power to levy tax on specific persons and matters.

The Federal Inland Revenue Service Establishment Act 2007 provides in Section 25 that the Federal Inland Revenue Service (FIRS – primary tax agency of the federal government) shall have power to administer the following taxes:

  1. Companies Income Tax Act (CITA).
  2. Petroleum Profits Tax Act.
  3. Personal Income Tax Act (PITA).
  4. Capital Gains Tax Act.
  5. Value Added Tax Act.
  6. Stamp Duty Act.
  7. Taxes and Levies (Approved List for Collection).

In Nigeria, CITA is applicable to companies registered under Part A of the Companies and Allied Matters Act 1990 while PITA is applicable to individuals and Business Names. For this discourse, our focus will be on PITA. PITA is the tax payable by all individuals, registered businesses and partnerships which are not companies. Part II of the Taxes and Levies (Approved list for collection) Decree No. 21 of 1998, LFN which is incorporated into the 2007 Act, provides that it shall be the sole responsibility of the states to collect all personal income tax in respect of ‘Pay As You Earn’ (PAYE) and Direct Assessment. The PAYE model is applicable to those in paid employment, while those in businesses carry out Direct Assessment and remit their taxes to the state. In effect, reading both legislations together ({Approved List of Collection} Decree No. 21 of 1998 and Federal Inland Revenue (FIRS) Establishment Act 2007), the FIRS have no authority to collect taxes from individuals, registered businesses and partnerships which are not registered companies, these falls under the remit of the state tax authorities.


Source: The Nigeria Lawyers