No fewer than 41 clauses, including amendments to Cap.P8 LFN, 2004, 36 sections, First Schedule, Third Schedule, Sixth Schedule and Short Title of the old PITA law were reviewed.
The new act would provide more disposable income to the lower income earners following the amendment of the income tax table and adjustments in the applicable income tax incremental bands, which brings it in line with current income levels.
The Act also simplified the compliance processes by consolidating the reliefs and allowances stipulated in the Act and lowering the burden on low income earners as well as widening the tax base by bringing in a huge number of potential taxpayers, especially in the informal sector, into the tax net
The act also removes obsolete, unrealistic and outdated reliefs and allowances associated with the former Act, replacing the previous reliefs and allowances with enhanced consolidated reliefs and allowances
Principally, section (5), sub-section (1) of the Act states, “There shall be allowed a consolidated relief allowance of N200, 000 subject to a minimum of 1 percent of Gross Income or whichever is higher plus 20 percent of the Gross Income and the balance shall be taxable in accordance with the Income table in the Sixth Schedule to this Act.’
The Schedule provided tax exemption on National Housing Fund (NHF) contributions, National Health Insurance Scheme, Life Assurance Premium, National Pension Scheme and Gratuities.
Sub-section (3) of the Schedule provided a graduated tax rate of Gross Income or whichever is higher on First N300, 000 at seven percent, Next N300, 000 at 11 percent, the next 500, 000 at 15 percent, next 500, 000 at 19 percent, Next N1.600, 000 at 21 percent and above N3.200, 000 at24 percent.
The new Act supports the use of taxation as a tool for income redistribution and wealth creation by imposing lower tax burden on low income earners and higher tax burden on the higher income earners.
The Act also supports government’s intention to implement a shift in focus from direct to indirect taxation, by lowering the overall income tax burden so that there is more disposable income in the economy, leading to higher value added tax collection and higher economic activity amongst others.
Under the new Act, it is now obligatory for government agencies, professional bodies, and trade associations to provide information to tax authority that would assist them in the performance of their duties.
The Act also provides greater leverage to the Minister of Finance, Tax Authorities and the Accountant General of the Federation in administering the law, including the power to deduct at source from its budgetary allocation, unremitted taxes due from Ministry, Departments and Agencies (MDAs) and transfer such deduction to the relevant State upon request by state.
In a way, the act professionalized the appointment of Chairmen for the State Internal Revenue Service. This is because such appointments are now subject to the confirmation by the State Houses of Assembly and three members representing a Senatorial District in the state as contained in section (30) (a) of the Act.
Tax authorities are empowered to enforce payment of taxes due from taxable persons that has been properly served with an assessment notice as specified by the law.
In particular, Section 104, sub-section 1 (a) and (b) states that: ``the relevant tax authority may in the prescribed form, for the purpose of enforcing payment of due, distrain the taxpayer by his goods, other chattels, bond or other securities.
“Distrain upon any land, premises or places in respect of which the taxpayer is the owner and subject to the provisions of this section, recover the amount of tax due by sale of anything so distrained.’’