Taxes in the dark

Sequel to our last offering on unsung taxes, JANET OGUNDEPO looks at other taxes and levies from the informal sector that the payers are not clear about

Mrs Blessing Godwin, together with her husband, owns a provision shop at a mall. Aside the yearly rent they pay to the developer, every month, local council officials collect lock-up shop levy, shop extension levy, signage levy and environmental levy. According to her, some of the collectors come in uniforms and with receipts, while some are just the usual faces that come around to collect the levies.

However, Mrs Godwin is still not classified as a tax-payer because despite her monthly remittances to the government, she does not have access to tax clearance. When her daughter, who, in a few years, will be eligible to enrol into the state’s secondary school, Mrs Godwin will have to get an illegal tax clearance at a fee or use that of her civil servant neighbour.

This raises a poser of what passes for tax. A tax lawyer, Lawrence Ihebie, said not all payments or levies can be classified as tax by government.

Who pays tax?

Mr Ihebie explains, “Everyone, who earns income, including non-civil servants, are legally expected to pay taxes, except if they or their incomes are exempted under relevant laws.”

However, on Personal Income Tax,  the Lagos State Internal Revenue Service says, “Tax is imposed on individuals, who are either in employment or are running their own small businesses, under a business name or partnership.”

In the case of Mrs Godwin, while she makes all sorts of payment to the government and gets receipts, she is not considered as a tax-payer.

Business premises levy, according to LIRS, “is a tax on property used for the production of income, including rental houses, office buildings, factories etc. Business premises registration is N10,000 while N5,000 is for renewal in subsequent years for urban areas, and N2,000/N1,000 respectively in rural areas.”

Meanwhile, despite these levies, shop owners are still expected to pay taxes.

“Government may ask for tax clearance certificate from market women and traders because they are expected to pay income taxes,” the lawyer said.

LIRS states on its website, “Taxes from self-employed persons are collected via Direct Assessment. This is an assessment raised directly on self-employed persons (eg. professionals, contractors, traders, landlords etc).

“The self-employed person will, without notice or demand, file a return of income earned in the preceding year using Tax Form A.”

No tax clearance for levies

Mr Taiwo Oyedele, a tax expert, says, “Tax clearance is given by law based on payment of PIT or Company Income Tax. You can only get receipts for other taxes.”

If this is so, why then does the Lagos government require tax clearance from parents whose children attend public schools?

A teacher in one of the public schools, Titilope Abiodun, said, “The document is requested, for the authorities to be sure the parents are paying taxes, since their children are coming to benefit from government’s free education. It is the taxes they (government) use to pay their West Africa Examinations Council fees. So, if they are not paying tax, there is no reason for them to benefit from what other people are paying for.”

According to her, those who do not have the tax clearance may have to collect from someone in the civil service and shares the same surname with them.

She noted, “Some go to Federal Inland Revenue Service office and are asked to pay some amount of money to get it. Some pay up to N10,000 for this.”

What happens to the levies?

Efforts to reach the LIRS to inquire of the final destination of the levies proved abortive, as inquest sent to it was not responded to till press time.

But Ihebie said, “The various levies shop owners, traders and artisans pay could have been collected by the traders associations or local councils and attached to some services like refuse clearance. It could also be local council levies or taxes.”

Last line

There seems to be inadequate public education on the issues of tax and levies, as well as those assigned to collect money from people, how it should be collected, what documents should be in place and the general accountability of whatever money is collected. This may have made businessmen to always complain of multiple taxation.

“In Nigeria, there are different taxes and levies. People simply need to know the ones applicable to them and pay. They should challenge the ones not applicable to them,” Ihebie counselled.