LEGISLATIVE AND JUDICIAL EXAMINATION OF TAX COMPLIANCE STRATEGY FOR REVENUE GENERATION IN NIGERIA
The issue of tax can be understood to mean a compulsory and mandatory contribution by way of payment of money made by the citizens of a country to their government for the purpose of financing public activities. Its major objectives are to raise money to finance government or public expenditures on utilities so as to achieve efficient and economic development and to distribute the nation‟s wealth in a manner as equitably as possible. All governments in the world rely on revenue from taxation to finance public utilities and other essential services .Taxation therefore is a civic responsibility on the part of the citizens. Until this idea is inculcated on the tax payers, the question of voluntary compliance to tax payment becomes a mirage. Consequently, this can lead to tax evasion and tax avoidance which eventually warrants the imposition of civil and criminal sanctions against the tax defaulters. The problem of this study hinges upon the idea that tax payers in developing countries particularly in Nigeria detest tax payment. The origin of this negative attitude is from the colonial era when the government were considered alien. The citizens were compelled to pay tax and the revenue so raised was seen as it is used for unknown reasons. The majority of the citizens who were illiterates do not consider it important to pay tax. However, this is not to say that taxes were alien to Nigeria. Before the colonial rule taxes were imposed in some parts of Nigeria. The refusal to pay tax by the Nigerian citizens continued even after independence both in the public and private sectors of the economy. It is in this vain that this study examines ineffectiveness or otherwise of the various tax legislative provisions against tax offences. The penalties were made to guard against any prospective tax evaders or avoiders. However, in spite of the fact that several taxing provisions provided sanctions for any breach of tax, it seems the penalties are not formidably effective to control tax evasion and tax avoidance. Hence this study is to review the state of penal provisions relating to tax offences and penalties by examining the doctrinal method of research into the tax statutes, case laws, text books, legal seminars and articles as well as internet sources to achieve is goal. Thus, it was observed that, there is the need to examine the criminal and civil sanctions under the Nigerian income tax legislation with a view to ascertain their effectiveness. Hence, it is recommended that a comprehensible tax law reforms, good taxpayers awareness of their duty to pay their taxes coupled with effective penal sanctions against tax defaulters that can guarantee tax compliance strategy for revenue development in Nigeria.
CHAPTER ONE GENERAL INTRODUCTION
Income tax is wholly the creature of statute. That is to say, there is no common law of taxation. No principles of law are applicable other than those principles, which are found in the taxing Acts themselves according to their true meaning and effect. In any tax case, it is consequently necessary for the court or tax commissioners to determine the true meaning and effect of the particular statutory provisions in question. The actual problem in connection with tax administration is that of enforcing tax payment. It is against this background that the Personal Income Tax Act of 1993 (as amended)1 as well as Companies Income Tax Act of 1990 (as amended) made penal provisions against any violations of their provisions. These are categorized into civil and criminal offences and penalties.
The Personal Income Tax Act2, (P.I.T.A) for instance, lays down income tax offences and penalties for their breach, such as legal proceedings, distraint of property, public auction of seized properties and monetary penalties for various income tax offences.3 Likewise, part XXI of Companies Income Tax Act (C.I.T.A) 1990, (as amended) listed various offences and penalties against any tax defaulter such as failure to comply with the provisions of C.I.T.A or rules, failure to comply with notices or summons, failure to answer questions on tax matters, failure to furnish returns, statement, information or keep correct records of income.
Preliminary examination of these penal provisions reveals their ineffectiveness to check the activities of tax defaulters. This study examines and analyse the penal provisions with a view
to suggest better methods of making effective penal provisions in our tax statutes. The present penalty provisions do overlap and are in some places mutually inconsistent, especially in terms of the severity of the penalties and are thus defective and ineffective to deal with current economic trends in our fiscal policies. This calls for thorough review and re-arrangement of the penalty provisions on a more adequate and rationale basis.
Additionally, the attitude of the tax officials, the law makers and the courts leaves much to be desired as a result of their lukewarm behaviour towards tax offences. This adversely affects income tax compliance efforts.5 The courts responses are usually slow and are passive in taking decisions.6 Thus, even though the law provides sanctions against those defaulters, these provisions are hardly used by the tax officials.7
The basic problem that these studies seek to work on, is the difficulty in the assessment and ascertaining of the areas in the penal provisions that are weak and ineffective in all the income tax statutes which are numerous. There is no clear cut demarcation between tax evasion and tax avoidance, since even the tax statutes do not offer us any cogent definition of the two terms.8 Neither do the case law also offer us any help.9 Thus, it is hard to assess the effectiveness or ineffectiveness of the civil and criminal sanctions under the Nigerian income tax laws.
What is more, most of the penal provisions seem to overlap against each other. A good example is the penal provisions relating to monetary sanctions which are found in both the Personal Income Tax Act10 and the Companies Income Tax Act11. In addition to this, Nigerian
fiscal policies seems to have undergone drastic changes over the years as a result of constant increase in the revenue generation through the oil companies income tax and petroleum profit taxes, value added and withholding taxes since the military regimes up to the present day civilian democratic governments.12
The result is that, several amendments were made in the whole tax statutes in Nigeria especially the penal provisions. Hence, going through these large volumes of the fiscal policies that touches on several aspects of the penal provisions, and also, the effects of courts decisions due to these changes as stated above is a difficult task. Another problem which the research work faces includes the differences between offences that depend on the presence of fraud, and proceedings in respect of which offence should be taken before the superior courts of record such as the High Court and Federal High Court on the one hand, and other offences which may not be of great culpability which can therefore be taken to tribunals like the Tax Appeal Tribunals or inferior courts. In some developing countries, there are problems associated with the appropriate courts to which tax offences should be taken for adjudication.13
Assessing the effectiveness of penal provisions in income tax becomes problematic especially in the process of assessing the reasons for negative tax compliance attitude by the tax payers and the tax authorities due to their limited knowledge of tax legislation generally. It is not easy to assess the effectiveness of the tax system unless it can be seen by what degree the penal provisions deal with tax offences. The legislation made to counter tax offences can be among the most complex in our tax code, but, it can also be among the simplest. The case law on penal provision will show us the problems posed by legislation and statutory purpose in this study