LEGAL APPRAISAL OF PAY AS YOU EARN TAX SYSTEM AS A STIMULUS FOR ECONOMIC GROWTH IN NIGERIA

Abstract

The political, economic and social development of any country depends on revenue generated for provision of the common needs of people in the country. Taxes are among the major sources of revenue generation and wealth creation in Nigeria. Thus, there are different types of taxation in Nigeria; one of which is the personal income tax. Personal income tax applies to all employees in Nigeria, including expatriates as well as self-employed individuals, partners and trustees; it is collected through the pay-as-you-earn (PAYE) scheme. PAYE is the system by which the employee pays tax on the income he earned from his employment in a particular month at the end of that month; it is a progressive tax arrangement whereby, an employee pays income tax on his current earnings when it becomes payable. This paper is a legal appraisal of pay as you earn tax system of taxation in Nigeria. The paper adopted a doctrinal and historical methods using; books, journals, articles, research projects and publicly available data from the internet. It found that PAYE applies only to employees resident in Nigeria and to income from all sources, salaries, bonuses, commissions, directors fees and any other income from employment, among others. The PAYE system seems the most effective way of enforcing payment of tax (from employment). Since tax is deducted at source, PAYE system reduces the level of tax evasion. However, lack of secured taxpayer database, among others, tends to hinder effective enforcement of PAYE system of taxation in Nigeria. It is recommended that the government should have the political will to ensure effective assessment, collection and utilization of the tax revenue as such would improve the enforcement PAYE tax system. In that light, it is safe to conclude that, due to socio-economic benefits of taxation, Nigeria, like many other countries, have duly over-stretched their tax revenue pursuit, to a worrisome point of making taxation an impediment to the growth of other sources of revenue