Taxes: Who’s responsible?

In Nigeria, there’s a common misconception that only salaried workers and registered companies are liable for tax payments. Many people believe that if they don’t fit into these categories, the tax laws simply don’t apply to them. However, the reality is quite different, as outlined in the Nigerian Tax Act (NTA). This legislation provides a clear definition of who qualifies as a taxable person, and it extends beyond mere employment status or age.

According to the NTA, a taxable individual encompasses a wide range of entities. This includes not only companies but also individuals, groups of individuals, families, communities, sole proprietorships, trustees, executors, and any other legal arrangements that generate income. The law is comprehensive, ensuring that anyone or any entity involved in economic activities is liable to pay taxes.

But the definition of a taxable person doesn’t stop there. If you engage in any economic activity, you fall under the umbrella of taxable individuals. This means that if you are involved in generating income through various means—whether that’s selling goods or services, renting out property, or even managing a trust—you are required to pay taxes.

In simple terms, if you operate a business, regardless of its size, you are considered a taxable person. Additionally, if you sell products or services, whether online or in person, you also fall under this classification. Renting out property for income qualifies you as a taxable individual as well. If you license your ideas or digital content for profit, you are engaging in taxable activities. Furthermore, managing an estate or trust also makes you a taxable person under Nigerian law.

This broad classification serves an important purpose: it ensures that everyone contributes their fair share to the nation’s revenue. The tax system is designed not just for large corporations or high-income earners; it encompasses all forms of economic activity, regardless of their scale.

The implications of this are significant. Many Nigerians may not realise that their side hustles or informal jobs could attract tax obligations. For instance, if you make money from selling homemade goods online or offer consulting services on the weekends, you are engaging in economic activities that are taxable.

Moreover, if you rent out property—even if it’s just a room in your house—you also qualify as a taxable person. The same applies to individuals who have small businesses selling clothes or food items at local markets. Even activities that seem casual or informal can have tax implications.

Understanding this can be crucial for financial planning and compliance with the law. It’s essential to recognise that being a taxable person comes with responsibilities. Failing to comply with tax regulations can lead to penalties and legal issues down the line.

Many people may feel overwhelmed by the thought of taxes, especially if they haven’t previously engaged with the tax system. However, it’s important to remember that there are resources available to help navigate these waters. The Federal Inland Revenue Service (FIRS) provides guidance and support for taxpayers, including information on how to file taxes and understand obligations.

In addition to individual responsibilities, there’s also a broader societal benefit to understanding and fulfilling tax obligations. Taxes play a vital role in funding public services and infrastructure development in Nigeria. When everyone contributes their fair share, it helps create a more equitable society where essential services like healthcare, education, and public safety can thrive. As we move forward in an increasingly complex economic landscape, it’s vital for all Nigerians to be aware of their tax responsibilities. Whether you are a student earning money from a part-time job, a retiree renting out property, or an entrepreneur running your own business, you have a stake in the nation’s economy and its future.

In conclusion, tax obligations extend far beyond traditional notions of salaried workers and corporations. If you earn income through any organised activity—be it formal or informal—you are classified as a taxable person under Nigerian law. Embracing this reality not only helps ensure compliance with the law but also contributes to the development and progress of our nation. So, let’s all take ownership of our roles as contributors to Nigeria’s growth and prosperity by understanding our tax responsibilities.

Dr Adeniyi Bamgboye, DBA, FCTI, FCA, FCCA, a dual-qualified chartered accountant, tax expert, and policy analyst, is the managing partner of Empyrean Professional Services, an audit, business, and financial advisory firm dedicated to enhancing its clients’ business value. 08060603156. [email protected]