Taxes.

Last week Monday, we talked about taxes and how they affect us in our day to day activities. Today we’re looking closely at some of the taxes that affect us as individuals in our transactions. Last week we stated clearly that the taxes collected by Federal Inland Revenue Service, which is the establishment charged with the collection of tax administered in Nigeria are

• Companies Income Tax
• Petroleum Profit Tax
• Value Added Tax
• Personal Income Tax
• Withholding Tax
• Educational Tax
• Stamp Duties
• Capital Gains Tax
• And lastly, National Information Technology Development Fund Levy

Today however, we will touch two out of the 9 listed above to briefly explain and relate them to our daily activities. Let’s begin with the Personal Income Tax which is the tax levied on the income earned by a person. A person in this context may mean an individual, a partnership, a body or an estate. Each tax rate varies for each individual according to the amount of income earned and when calculating personal income tax for a corporation, you separate your personal earnings from your profits and tax is charged on your earnings. Personal Income Tax is charged on the total gross earnings of an individual from all income sources, such as: salaries and wages, employer contributions to pension plans and so on.

Next and Last for today is the Withholding Tax which is a tax charged by employers on employee income as a government requirement for the payer of an item of income to withhold or deduct tax from the payment, and pay that tax to the government. It varies according to each employee based on their income with little or no income tax paid by low earners and a high rate applied to middle to top earners. Most governmental laws state that withholding tax be paid before deduction from the account of the employee. Penalties for defaulting on tax payments can be severe and vary based on each government and their laws so don’t default on your taxes.

Have a lovely Wednesday.