TAX ORIENTATATION AND AWARENESS SERIES

NONE-PAYMENT OF TAX - IMPLICATIONS FOR THE TAXABLE PERSONS

By Igboyi, Linus

Every individual, sole proprietor, partnership or company whose income is subject to tax is expected to file returns and to pay all taxes due. Tax payment by Taxable persons is made at the appropriate tax authority on a specified date. Anything short of this attracts penalty or interest as applicable. 

Out there the average tax payer lacks knowledge of the action the revenue authorities will take in case there is a default in the payment of taxes and in the event that such taxes are eventually paid if there is any consequence for not paying as at when due. 

As a matter of fact, there is a consequence for not paying your tax, indeed very heavy one for that matter. Apart from denying one the opportunity to participate actively in political activities and governance through any elective office, or appointment, it can also ground one for the better part of life, since the consequence also includes the imprisonment of a defaulter.

In addition to the foregoing, none payment of tax is a very strong basis for disqualifying anyone from being awarded contract by any of the three tiers of government in Nigeria. 

Similarly, it is very important to also be aware that it is not just enough to pay your tax, equally very important is that you do it as at and when due. If this very simple rule is not complied with, the hammer of the applicable tax authority certainly falls on the defaulter; sometimes heavily, and at other time very light. This is because the penalty is dependent on the length of time taken before payment is made. 

PENALTY

The Advanced Learners Dictionary of current English defines Penalty as punishment for wrong-doing or failure to obey rules or keep an agreement.

For this discussion, Penalty simply means the sanction imposed by Law of the land against taxable persons for non-compliance with tax filling and tax payment requirements. 

In Nigeria, Taxable persons include individuals and Companies, and are required by law to file returns with the applicable tax office nearer to them.

For newly established companies, the rule states that filing should be done within 18 months from the date of incorporation. 

The rule is different for existing Companies. For them the rule states that they must submit their returns 6 months after the close of accounting period. 

Since the existence and knowledge of a rule does not necessarily translate into compliance, non-adherence, failure or default in payment is expected and naturally occurs. Thus, where there is a default in submission of tax returns the tax authority is empowered by law to charge the tax defaulter Penalty as applicable. 

The idea is to ensure that tax due is paid within the statutory time period. This period is indicated in the assessment notice.

Where the tax is not paid within the period prescribed under the Law an applicable penalty of 10% per annum is charged.

INTEREST

Interest is charged for late payment to compensate the revenue for the use by the tax payer of the funds that legally belong to the government from taxes. It is charged at commercial rate, in addition to the penalty (already explained) in order to forestall the creation of unfair financial advantage for those who do not pay their taxes as at and when due. In all cases, reference is made to the due date of filing or payment. 

TO BE CONTINUED