ABSTRACT:
A major challenge to the government in
generating tax as a revenue is the increasing rate of tax evasion. The revenue
generated from taxation forms a major source of finance to the government which
is crucial to sustainable increase in economic development. Therefore tax evasion is an important factor
to be considered as it affects the government finances which is a key to
economic development. This paper considers tax evasion and fintech as a way out.
generating tax as a revenue is the increasing rate of tax evasion. The revenue
generated from taxation forms a major source of finance to the government which
is crucial to sustainable increase in economic development. Therefore tax evasion is an important factor
to be considered as it affects the government finances which is a key to
economic development. This paper considers tax evasion and fintech as a way out.
INTRODUCTION:
After the global financial crisis of 2008, Fintech
evolved to disrupt the traditional financial services sector in two categories:
first by the introduction of Fintech companies as competitors and second
the use of fintechs by organizations to enhance existing supplies. However,2015
can be considered the year that Fintech fully evolved.
evolved to disrupt the traditional financial services sector in two categories:
first by the introduction of Fintech companies as competitors and second
the use of fintechs by organizations to enhance existing supplies. However,2015
can be considered the year that Fintech fully evolved.
NIGERIAN TAX SYSTEM
According to Adam Smith :”A good tax
system is one which is designed on the basis of an appropriate set of
principles or rules. The tax system should strike a balance between the
interest of the taxpayer and that of tax authorities”. Is the Nigerian tax
system a good tax system as defined by Adam Smith?
system is one which is designed on the basis of an appropriate set of
principles or rules. The tax system should strike a balance between the
interest of the taxpayer and that of tax authorities”. Is the Nigerian tax
system a good tax system as defined by Adam Smith?
The Nigerian tax system has been taken
through several development processes. Several changes have been implemented.
The government is making effort to review the system on regular basis so as to
bring about more improvement and make it run more smoothly than ever before.
The effort they have been making had proved successful as out-of-date
provisions have been removed and simplification had been brought into
many aspects of the Nigerian tax system.
through several development processes. Several changes have been implemented.
The government is making effort to review the system on regular basis so as to
bring about more improvement and make it run more smoothly than ever before.
The effort they have been making had proved successful as out-of-date
provisions have been removed and simplification had been brought into
many aspects of the Nigerian tax system.
The three tiers of government are responsible
for enforcing tax payment: the federal, state and local governments. Each of
these tiers of government has its specified role in tax administration their
roles are clearly stated in the Tax and Levies Decree of 1998.
for enforcing tax payment: the federal, state and local governments. Each of
these tiers of government has its specified role in tax administration their
roles are clearly stated in the Tax and Levies Decree of 1998.
Taxes in Nigeria are all collected by the
National Federal Inland Revenue Service (FIRS).The FIRS(Establishment)Act
2007 was enacted to provide for the establishment of the Federal Inland
Revenue Service charged with the powers of assessment, collection and
accounting for revenue accurable to the government of the federation.
National Federal Inland Revenue Service (FIRS).The FIRS(Establishment)Act
2007 was enacted to provide for the establishment of the Federal Inland
Revenue Service charged with the powers of assessment, collection and
accounting for revenue accurable to the government of the federation.
Payable taxes in Nigeria include:
Personal Income tax: it is paid through
the Pay As You Earn(PAYE) system,whereby employers deduct the due tax at source
from the salaries and transfer it directly to the FIRS on a monthly basis,
while independent workers are required to file their own tax returns.Income tax
in Nigeria is levied at a progressive rates capped at 24%.
the Pay As You Earn(PAYE) system,whereby employers deduct the due tax at source
from the salaries and transfer it directly to the FIRS on a monthly basis,
while independent workers are required to file their own tax returns.Income tax
in Nigeria is levied at a progressive rates capped at 24%.
*Personal Income Tax Act
Corporate tax is paid through
Company Income Tax (CIT). Resident companies in Nigeria are subject to the CIT
on their worldwide income, while only the income from Nigerian source of
non-residents companies is taxed under the CIT. The CIT is generally levied at
a flat 30% rate, but 20% for smaller companies. Resident companies are also
charged at 2% tertiary education tax. The Companies Tax
Act(Amendment)Act,2007
Company Income Tax (CIT). Resident companies in Nigeria are subject to the CIT
on their worldwide income, while only the income from Nigerian source of
non-residents companies is taxed under the CIT. The CIT is generally levied at
a flat 30% rate, but 20% for smaller companies. Resident companies are also
charged at 2% tertiary education tax. The Companies Tax
Act(Amendment)Act,2007
Petroleum Profit Tax (PPT) is a mandatory tax to
be paid by companies operating in the petroleum industry whether resident
or not to the federal government.PPT rates vary from 50% to 85% according
to the age of the company and its relationships with the Nigerian National
Petroleum Corporation (NNPC). Petroleum Profits Tax Act
be paid by companies operating in the petroleum industry whether resident
or not to the federal government.PPT rates vary from 50% to 85% according
to the age of the company and its relationships with the Nigerian National
Petroleum Corporation (NNPC). Petroleum Profits Tax Act
Value Added Tax (VAT) in Nigeria is
levied on all products and services traded within the country and payable to
government at a 5% rate, one of the lowest in the world. Value Added Tax Act
levied on all products and services traded within the country and payable to
government at a 5% rate, one of the lowest in the world. Value Added Tax Act
WHAT IS FINTECH?
Fintech is a combination of the words
“Financial Technology “.Fintech refers to a new technology or
innovation that disrupts traditional ways of conducting financial transactions
to a digitized process. Fintech, disrupted the processes that were previously
handled with paper money and human interaction into a process that is more
fully involved in online transactions.FinTech is allowing people to conduct
transactions through their mobile phone or tablets, improving efficiency and
the customer experience.
“Financial Technology “.Fintech refers to a new technology or
innovation that disrupts traditional ways of conducting financial transactions
to a digitized process. Fintech, disrupted the processes that were previously
handled with paper money and human interaction into a process that is more
fully involved in online transactions.FinTech is allowing people to conduct
transactions through their mobile phone or tablets, improving efficiency and
the customer experience.
Fintech has influence in over 60% of the
industries in Nigeria and all over the world. In the banking sector with the
likes of ALAT by Wema bank,737 by GTBank etc,one can enjoy financial
services without stepping into a bank. Also, payments can be made easily online
through platforms like Quickteller, Paystack that are also products of
Fintech.
industries in Nigeria and all over the world. In the banking sector with the
likes of ALAT by Wema bank,737 by GTBank etc,one can enjoy financial
services without stepping into a bank. Also, payments can be made easily online
through platforms like Quickteller, Paystack that are also products of
Fintech.
Fintech as at March 2018 has a great impact
on transactions, financial management, banking industry and Online Payments. T
he rise of smartphone can be considered a key factor that has contributed to
the advancement of Fintech.
on transactions, financial management, banking industry and Online Payments. T
he rise of smartphone can be considered a key factor that has contributed to
the advancement of Fintech.
TAX EVASION
Tax avoidance which is a similar term to Tax
Evasion, according to Black Law Dictionary,” is the minimisation of one’s
tax liability by taking advantage of legally available tax planning
opportunities”.Tax
evasion is considered an illegal means of reducing one’s tax responsibility to
a lesser amount or no liability at all through legal or illegal means.Tax
evasion is a way by which tax payers violate the tax law.
Evasion, according to Black Law Dictionary,” is the minimisation of one’s
tax liability by taking advantage of legally available tax planning
opportunities”.Tax
evasion is considered an illegal means of reducing one’s tax responsibility to
a lesser amount or no liability at all through legal or illegal means.Tax
evasion is a way by which tax payers violate the tax law.
Tax evasion is globally considered morally
and legally wrong.Morally wrong in the sense that it is contrary to the
behaviour of a responsible citizen.In some cases, it can also be considered
legally wrong.This is evident in the case of SHELL v FIRS.
and legally wrong.Morally wrong in the sense that it is contrary to the
behaviour of a responsible citizen.In some cases, it can also be considered
legally wrong.This is evident in the case of SHELL v FIRS.
The problem of tax evasion can be attributed
to the government for not giving adequate enlightenment to the general public
on the importance of tax payment .A factor behind the reason for tax evasion is
the lack of patriotism among Nigerians. It is attributed to the citizens
of Nigeria that they exhibit unpatriotic attitudes toward carrying out
their civic responsibilities.
to the government for not giving adequate enlightenment to the general public
on the importance of tax payment .A factor behind the reason for tax evasion is
the lack of patriotism among Nigerians. It is attributed to the citizens
of Nigeria that they exhibit unpatriotic attitudes toward carrying out
their civic responsibilities.
EFFECTS OF TAX EVASION IN NIGERIA:
Tax Evasion has an adverse consequences on
the economy.It disrupts the growth and general development of the economy, due
to the fact that, the tax evaders and tax agents are likely to get involved in
bribery. The practice of tax payers, tax agents and tax administration
machinery has an adverse effect on the economy.
the economy.It disrupts the growth and general development of the economy, due
to the fact that, the tax evaders and tax agents are likely to get involved in
bribery. The practice of tax payers, tax agents and tax administration
machinery has an adverse effect on the economy.
BENEFITS OF FINTECH IN TAXATION
Fintech has brought about new solutions in
paying for products and services. The payment of tax is also a service, which
makes it easy for taxation to operate at the same pace at which online
transactions operate.
paying for products and services. The payment of tax is also a service, which
makes it easy for taxation to operate at the same pace at which online
transactions operate.
Benefits :-
Fintech will ease the inconveniences
Nigerians encounter during the traditional way of tax payment.
Nigerians encounter during the traditional way of tax payment.
-The workload of tax officials will be
eased.
eased.
-It will reduce tax evasion in a way.
Fintech appeals to millennials for a reason,
many of the services offered are easy to understand like borrowing money or
making a purchase. Even insurance can be basic when someone is young and
starting out. But when things get more complicated, some of these fintechs may
not be enough. “When clients get to a certain life threshold and asset
level, they will want a more personalized approach and fintech isn’t going to
do it,” says Williams of LOTUS Financial Partners.
many of the services offered are easy to understand like borrowing money or
making a purchase. Even insurance can be basic when someone is young and
starting out. But when things get more complicated, some of these fintechs may
not be enough. “When clients get to a certain life threshold and asset
level, they will want a more personalized approach and fintech isn’t going to
do it,” says Williams of LOTUS Financial Partners.
REFERENCE
:
:
1.”
Impact Of Fintech On Business Growth In Nigeria” .Retrieved from : https://invoice.ng/blog/fintech-impact-nigeria/
Impact Of Fintech On Business Growth In Nigeria” .Retrieved from : https://invoice.ng/blog/fintech-impact-nigeria/
2.
” Causes Of Tax Evasion In Nigeria And Effects On The Economy ” by
Joseph Athanasius(May 11,2018). Retrieved from : https://infoguidenigeria.com/causes-tax-evasion/
” Causes Of Tax Evasion In Nigeria And Effects On The Economy ” by
Joseph Athanasius(May 11,2018). Retrieved from : https://infoguidenigeria.com/causes-tax-evasion/
3.
“Nigerian Tax System : Details, Merits and Demerits “. Retrieved from
: https://nigerianfinder.com/nigerian-tax-system-details-merits-demerits/
“Nigerian Tax System : Details, Merits and Demerits “. Retrieved from
: https://nigerianfinder.com/nigerian-tax-system-details-merits-demerits/
4 ”
Tax Implications For Fintech ” (January 26,2017) Retrieved from :https://www.taxjournal.com/articles/tax-implications-fintech-250717
Tax Implications For Fintech ” (January 26,2017) Retrieved from :https://www.taxjournal.com/articles/tax-implications-fintech-250717
Omowale
Kofoworola is a 100Level law student at University of Ibadan. She is a
volunteer at Hadassah Humanity Foundation (HHF), and the Finance Manager of
Insightt Initiative, a student organization committed to improving the world
via education and innovation.
Kofoworola is a 100Level law student at University of Ibadan. She is a
volunteer at Hadassah Humanity Foundation (HHF), and the Finance Manager of
Insightt Initiative, a student organization committed to improving the world
via education and innovation.
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