Self Assessment Tax System in Nigeria

Topics: Tax, Taxation, Taxation in the United States Pages: 34 (9313 words) Published: February 27, 2012

The overriding objective of self assessment function is to ensure that all taxpayers, within a defined tax jurisdiction, are brought into the tax net and assessed correctly in order to block all possible leakages. Generally, taxpayers are categorized according to the legal status of their businesses. In this research work we are interested in Corporate Entities/Public Companies which are limited liability companies or public companies registered with profit - motive in mind. Their tax affairs are being handled by the Federal Taxing Authority .Assessment function in an Integrated tax System (ITO)or Large Tax Office (LTO)which is agreed to include filing and assessment duties with respect to all taxes being collected by that office -among which are: PPT, CI T, VAT,. W H T, CGT etc. The Nigerian Tax System has undergone significant changes in recent times. The Tax Laws are being reviewed with the aim of repelling obsolete provisions and simplifying the main ones. Under current Nigerian law, taxation is enforced by the 3 tiers of Government, i.e. Federal, State, and Local Government with each having its sphere clearly spelt out in the Taxes and Levies (approved list for Collection) Decree, 1998. Of importance at this juncture however are tax collections pertaining to the Federal Government. Companies Income Tax

This Tax is payable for each year of assessment of the profits of any company at a rate of 30%. These include profits accruing in, derived from brought into or received from a trade, business or investment. Also companies paying dividends to its shareholders are first obliged to pay tax on its profits at the companies tax rate. Generally, in Nigeria Company dividends or other company distribution whether or not of a capital nature made by a Nigerian is liable to tax at source of 10%. However dividends paid in the form of bonus share or scrip shares to individual shareholders are not subject to tax. Also where a company is a shareholder in another company then such dividends are excluded from the profits of the company for the purposes of computation of the tax.Assessments are normally raised on the Income or Profit of companies or corporation arising from trade or business carried on in Nigeria. Assessment is to be imposed on the "Profit" of an enterprise in relation to an accounting period. There are two (2) principal classes of assessments, namely ; 1 Self-Assessment:- This assessment scheme aims at shifting the duty of raising of assessment to the taxpayers themselves. Under this system, the taxpayer is expected to accompany its tax returns with self-assessment notice and an evidence of payment to the FIRS through appropriate designated collecting bank. 2 Government Assessment: - This is an assessment raised on behalf of the Government by the Tax Authorities, examples of which are: - Assessment raised in accordance with audited accounts and computations filed by the taxpayers. - Best-of-judgment (BOJ) assessment based on estimated profit or profit perceived to be fair and reasonable. - Protective/jeopardy assessment.

- Amended/additional assessment.

The Nigeria tax system has gone through various structural reforms along certain prescribed norms, ostensibly to enable it meet the new challenges of development in the future. A number of reforms have been affected by successive Governments to make the Nigeria Tax system efficient and effective. Most Companies today still evade tax, besides the dynamic nature of the tax environment in which companies operate, companies lack the capacities and capabilities to address tax related issues especially with the self assessment system. Therefore collection of tax revenue is an ever-present challenge. Therefore this research work seeks to find out the effectiveness of...
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