WHAT SHOULD TAX PAYERS KNOW ABOUT TAX EVASION?

OUR STORY

Quality, not quantity

We have made quality our habit. It’s not something that we just strive for – we live by this principle every day.

WHAT SHOULD TAX PAYERS KNOW ABOUT TAX EVASION?

INTRODUCTION

Tax is a major source of generating revenue in Nigeria. Tax is as important to the government just as air is to man, without tax a country cannot thrive well. It is therefore of utmost importance for every individual within a country to pay their taxes regularly. A government’s capacity to increase the revenue generated from tax is called fiscal capacity.

WHAT IS TAX?

Tax is dues imposed on individuals by the government that is used for the betterment of the country. It is a levy imposed on individuals and companies to pay in order to meet the expenditure of public welfarism. Tax is a recognized concept in Nigeria as the Constitution of Nigeria makes provision for same. Section 24(f) of the 1999 Constitution provides that: “It shall be the duty of every citizen to- Declare his income honestly to appropriate and lawful agencies and pay his tax promptly.”

To further buttress the concept of tax, the court in Matthew v. Chicory Marketing Board, explained tax as an obligatory extraction of money by a public authority for public purpose; or accumulation of money for the purpose of supervising government budget through contribution from individuals.

WHAT IS TAX EVASION?

This is the deliberate refusal to pay tax or the underpayment of tax; it includes purposeful deception of one's actual monetary status to the tax authorities to decrease his/her tax dues. Tax evasion is the unlawful means of concealing taxable income from the tax authorities so as not to remit taxes. It is breaking the law to reduce tax bills, such as by concealing income from the Internal Revenue Service.

By way of analogy, where Mr. A earns a monthly income of 50,000 naira and claims to the IRS[6] that he earns 30,000 with intention to reduce his tax payment, that is, he is evading his obligation of paying tax due to him. This act is referred to as tax evasion. Some examples of tax evasion are, Under reporting income Illegally assigning income Willfully underpaying taxes Hiding interest

UNDER REPORTING INCOME

This has to do with giving a wrong report of one’s income so as to try not to pay a higher tax due. That is, having different sources of income and not including some in one’s report can make one liable for tax evasion.

ILLEGALLY ASSIGNING INCOME

One more approach to concealing money is by saying the money belongs to another person. If you purposely relegate money that is actually yours with an end goal to reduce your taxes, that is tax evasion.

WILLFULLY UNDERPAYING TAXES

This is where perhaps your tax officer calculated an amount of money payable as your tax due and it seems outrageous and then you intentionally do not pay the exact amount your return says you owe. A typical example is if an abroad seller owes you cash, loads of it. Rather than requesting money, you demand the merchant to buy things for you that are worth the money and then move the merchandise through an outsider, and call it a gift. There is no money paid to report since you tenaciously circumvent the details by saying you got a gift. One that incidentally turns out to merit the money the seller owes you.

HIDING INTEREST:

Where a person makes an interest from probably businesses one is involved in and deliberately conceals the interest realized or claims that there was interest realized, such act is tax evasion.

These and many others are instances that amount to tax evasion. Just as rightly established earlier, tax evasion is usually deliberate and as such because it is perceived to have been deliberately perpetrated by the offender it attracts penalties. The penalties however are determined by the judicial authorities and/or the IRS.

However, people find it rather pointless to rely on the government to provide these basic amenities as it should because of the obvious level of corruption in Government which has resulted in the citizens’ evading tax. Citizens evade tax because it is believed that most times the funds generated from tax are not put into the right use, that is, the amenities provided by the government does not commensurate with the taxes paid. Hence, they evade tax in order to alternately provide these things for themselves by themselves. An example is the uninterrupted power supply that every government is expected to provide for its citizens. Nigeria is lagging in that area for reasons that are rather not excusable because the funds generated per time is enough to solve that problem in Nigeria for citizens.

CONCLUSION

Tax evasion decreases the income estimated to be created from the total number of people in the country, thus affecting the turn out in economy. This thereby limits the country from doing what is generally anticipated of it for the advantages of its citizen. And in most cases this then gives rise to the need to borrow an incumbently large amount of money from developed countries to meet up with expenditures. The consistent nascency of low income frustrates the country's economy and hinders her from fulfilling her obligations.

NB: This article is not a legal advice, and under no circumstance should you take it as such. All information provided are for general purpose only. For information, please contact chamanlawfirm@gmail.com

WRITTEN BY CHAMAN LAW FIRM TEAM

EMAIL: chamanlawfirm@gmail.com

TEL: 08065553671, 08024230080