A warm welcome to you. Happy New Year. It’s the first episode of our weekly tweetax session in 2016 – #TaxWiseNG. We are already 6 days into the year. If FG’s target of N1.45 trillion tax revenue is accrued daily, N23.8 billion should be in the kitty by now. It’s 25 days to the end of the month and by extension, 25 days to employer’s annual tax returns. If you’re an employer of labour, are you ready for 31 January deadline?

The Pay-As-You-Earn (PAYE) scheme that is operated in the country makes the employer an (unpaid) agent of Government for collection of employees’ taxes. The law mandates employer to withhold appropriate taxes from salaries and emoluments payable to their employees and remit same to the relevant tax authority(ies). Every employer is further mandated by law to file an annual return with the relevant tax authority, not later than 31 January of the subsequent year. The return cover remuneration paid and taxes withheld/remitted in the prior year for all individual in the company’s employment.

PAYE taxes withheld are required to be remitted to the relevant tax authorities within 10 days of the subsequent month. This provision is laid out in Paragraph 7(1) of PAYE Regulation states as follows:

Within ten days of the end of every month, an employer shall pay to the nearest tax office or to any bank (as may be prescribed or designated by the relevant tax authority) all taxes deducted under these Regulations.

In addition to monthly withholding and remittances, an annual return is expected from the employer on or before 31 January of the following year. Section 81, subsections 2 and 3 of PITA states as follows:

Every employer shall be required to file a return with the relevant tax authority of all emoluments paid to its employees, not later than 31st January of every year in respect of all employees in its employment in the preceding year.

Any employer who contravenes the provisions of this section shall be liable on conviction to a penalty of N500,000 in the case of a body corporate, and N50,000 in the case of an individual.

The relevant tax authority is the State Board of Internal Revenue Service of the respective employees’ State of residence. Theoretically, an employer may be expected to submit annual employer’s return to 37 different Tax Authorities. If an employer has employees spread across all the States of the Federation, including FCT, then 37 different returns will be expected.

This is one of the aspect of the tax system in dire need of simplification. Encouraging compliance by simplifying the process is a needed impetus. With a paper-based tax return, physical visits to 37 different States (plus FCT) comes with some measure of avoidable logistics burden.

The idea of independent Revenue Authorities for each State flows from the federal system of Government. The Federating States are autonomous with each State having separate Tax Authority. An employer that is “fortunate” to have the federal character reflected in the spread of its workforce and employees spreading across different States is caught up with responsibility to multiple Tax Authorities.
There are other countries where the federal system of government exist, and taxpayers are answerable to their respective State Tax Authorities. However, the responsibility is often that of the taxpayers and not their employer. The requirement in Nigeria is that the responsibility rests squarely on the shoulders of employers. Non-compliance attracts fines and penalties.

An employer who is in breach of this requirement is liable upon conviction to a penalty of N500,000 (if a corporate body) or N50,000 (in case of individuals). To illustrate this, imagine and employer who is expected to submit returns to 36 Tax Authorities, but failed to meet the deadline. The penalty adds up to N18m. Penalties only, excludes potential additional tax that may be due and related interest and late remittance penalties. Beyond avoiding monetary penalties, it is a sign of responsible corporate citizenship for organisations to comply with relevant provisions of the law.

With 25 days to D-day, it is important to appraise the level of preparedness of the compliance team to meeting this deadline. The least item on the KPI of a compliance officer is meeting statutory deadlines. No stories! As the compliance burden grow, many organisations look towards outsourcing of this important function. There’s the peace of mind that comes from knowing that your burden is placed on the shoulders of competent hands. Internal resources can be deployed to the core activities of the organisations. Level of effectiveness is at its highest in area of expertise. Successful organisations focus on their areas of core competence and allow professionals take charge of important compliance functions.

As Government pushes harder in raising the compliance level, attention must be focused on simplifying the system. It has never been easy to persuade all taxpayers to comply with tax laws anywhere in the world. By making the process simple, more people are encouraged. Reducing the revenue losses arising from non-compliance with tax laws is a critical objective of all tax authorities.

This is the right time to invest in electronic tax filing across the federation. With advancement in technology, paper-based return is no longer tenable. It is a misnomer to expect tax remittances to be done electronically but for heaps of files to be piled up at tax offices from paper returns. Real time collection made possible by e-remittance can also be matched with real time access to useful tax data for planning via e-filing.

Reasonable effort is already being made at the Federal level with ITAS (Integrated Tax Administration System). Lagos State is also making good effort in the use of technology for tax administration. However, it must be understood that e-tax goes beyond e-payment of taxes and issuance of electronic Tax Cards. It is a complete automation of the processing. From registration, to payments, to filing, to processing of clearance certificate. It must be the entire process. When from the comfort of taxpayer’s office, all aspect of the compliance cycle can be completed.

If tax authorities will invest in complete automation of the tax compliance process, the return on investment will be unimaginable. This is the way to go. It’s the way that leads to the future.

As the days draw closer, be sure to tie this important compliance knot. Seek professional support for the invaluable inputs that they add to the process. You will be glad you did.
Foonote:
This article was posted in verses via my Twitter handle, @YomiOlugbenro, on Wednesday, 6 January 2016. Every Wednesday at 17:00 WAT (CUT+1), I run a “tweetax” session with hashtag – #TaxWiseNG –  where topical tax issues are discussed. The tweets are subsequently posted on my blog www.yomiolugbenro.com and my social media accounts – facebook.com/YomiOlugbenro and LinkedIn.com/YomiOlugbenro.