Punishment for Tax Evasion in Nigeria will be explicated here. This will act as a caution to Nigerians who find pleasure in evading tax payments.
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The government of a country is responsible for the provision of basic amenities in such a country. To do this, the government needs financial resources.
One way through which the government makes money to be able to exercise its constitutional functions is through taxation.
Tax is a mandatory financial levy imposed by the government on an individual or a corporate body. In simpler terms, tax is the money paid to the government by individuals and corporate bodies.
Such financial charges are used to fund public expenses. Taxation is the art and system of obtaining tax from taxpayers.
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Personal tax is deducted from an individual’s gross income, defined as “all income from whatever source derived’. For corporate bodies, tax is deducted from their business income.
In Nigeria and the world over, individuals and corporations are known to always find ways to avoid tax payments. This is called tax evasion.
Tax evasion is the illegal dodging of tax paid by individuals and corporations mostly by a false declaration of income.
The offense of tax evasion is committed when there is a willful act of commission or omission on the part of a taxpayer with a willful intent to deceive tax authorities by deliberately concealing, misrepresenting, and withholding hard facts.
Tax evasion in Nigeria should never be confused with tax avoidance. While tax avoidance is an illegal way of avoiding the payment of tax, is a legal way of avoiding or lessening tax payment by exploiting tax rules. Tax avoidance is legitimate and not hidden whereas tax evasion is illegitimate and done with impure intent. Tax avoidance is done without breaking tax laws and regulations.
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Taxation in Nigeria is carried out by the Federal Inland Revenue Service (FIRS). The FIRS has the power to demand tax and punish tax defaulters.
Here is a breakdown of acts that constitute Tax Evasion in Nigeria:
- Intentional failure to register for taxes or failing to keep required income and tax records
- Nondisclosure of offshore incomes and businesses
- Deliberately understating or omitting income (the source or morality of such source notwithstanding)
- Fictitious claims on expenditure or pension schemes
- A deliberate claim of undue tax credits (such as capital allowance)
- Falsifying tax receipts and tax clearance certificate
- Withholding tax credit notes, etc.
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Punishment for Tax Evasion in Nigeria
Some acts set out or govern tax rules in Nigeria. These acts include:
- Companies Income Tax Act (CITA)
- Federal Inland Revenue Service (FIRS) Act
- The Nigerian Personal Income Tax Act (PITA)
In the FIRS Act of 2007, the following Punishment for Tax Evasion in Nigeria are stipulated for different categories of tax offenses:
Failure to remit or make tax returns shall attract imprisonment of not more than 3 years. The unremitted tax shall also be paid with a 10% penalty of the total tax amount as well as some interest following CBN interest rate.
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Section 66 of the Companies Income Tax Act (CITA) stipulates that FIRS should seize and sell the goods, chattels, and premises (in extreme cases) of taxpayers who default to recover the owed tax.