Following the signing into law the Personal Income Tax (Amendment) Act 2011 by President Goodluck Jonathan, the president, vice-president, governors as well as their deputies are to pay tax on all their official and non-official earnings effective April 1, 2012.
Before now, only their non-official income was subject to taxation.
Also, income from bonds issued by government and corporate entities are to be taxed.
The new regime took effect from June 14, 2011 when the amended Act was passed, but administrative formalities delayed the implementation.
Speaking Monday in Abuja at a press briefing to explain the implications of the Amended Act, Chairman, Joint Tax Board (JTB), Mrs. Ifueko Omoigui-Okauru, also unveiled new income tax regime which suggested a cut in tax payment for low and medium income earners.
She said some of the major changes in the new tax reforms were expected to bring out “a more reflective and efficient personal income tax administration at the state and federal levels”.
In the new income tax rates formulation, a first earning of N300,000 would attract 7 per cent tax, while subsequent income in same amount would be taxed at 11 per cent.
Those who earn N500,000 would be made to pay 15 per cent of it as tax in the first instance, while 19 per cent would be charged in the next earning of same amount.
In addition, earnings of N1,600,000 would attract 21 per cent tax, while income above N3,200,000 attracts 24 per cent in tax.
But under the old rates, an initial income of N30,000 attracted 5 per cent in tax and 10 per cent of same amount subsequently. Also, 15 per cent was deducted as tax from earnings of N50,000 at first and 20 per cent in same amount the next time.
A tax payer who earned N160,000 had to part with 25 per cent of that amount in tax under the former rates.
The new Act also witnessed an increase in Minimum Tax Rate to 0.1 per cent from 0.05 per cent for lowest possible income earners. But this would not be a burden to the low income group, according to the JTB boss.
The new Act also provided for a consolidated relief allowance of N200,000 plus 20 per cent gross income as deductible allowance from income before computing tax on the balance, a method of calculation which replaces the outdated and cumbersome process of computing allowances under the old Act.
This is the basis of the new income rates and tax table which provided closer income bands and lower income tax rates leading to reduction in tax payable by low earners.
Omoigui-Okauru said one of the objectives of the amendment was to ensure that the incidence of taxation was not borne by an individual more than once.
She described the reform as unprecedented in the history of tax administration in the country where there is an effort by government to give back to the low income earners.
She said those who had been honest in declaring their real income would realise a drastic reduction in tax payment.
The JTB boss, however, warned those in the habit of circumventing tax to turn a new leaf or face the wrath of tax administrators who are further empowered to search, seize and embark on risk-based audit of any organisation.
She said: “As we commence the implementation of the Personal Income Tax (Amendment) Act 2011, let me invite everyone to partner with the Joint Tax Board, State Boards of Inland Revenue, Federal Inland Revenue Service and government at all levels to ensure the successful implementation of the law.
“Without a doubt, this is a milestone in the area of personal income tax in Nigeria and we believe it is a step in the right direction for Nigerian tax system and one which gives us a platform to work towards ensuring that taxation becomes the pivot of national development in Nigeria.”
Omoigui-Okauru added that the law was conceived to make up for the lapses in the old Act “especially with respect to its impact on the take-home earnings of low and middle income earners, which is the band within which most of us fall”.
Continuing, she said: “With the new Act, government has demonstrated that it has a listening ear and reduced the overall burden on low and middle income earners, while recouping these from high net individuals who will be expected to bear a higher burden given their level of earning.”
She further stated that the amended Act, which introduced a simplified process of compliance expected to induce higher rate of voluntary compliance and widen tax payer base of tax authorities would in turn lead to higher yield in personal income tax collection.
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