By Dr. Tom Ohikere
Compliance with tax laws is important to keep the system working for all and supporting the programs and services that improve lives. One way to encourage compliance is to keep the rules as clear and simple as possible. Overly complicated tax systems are associated with high tax evasion.
For global businesses, accurate tax compliance is an instrumental piece of the tax puzzle. Getting this piece right is increasingly complicated because of the rapid pace of legislative and regulatory change, and the increasing digitalization of revenue authorities, Dr. Tom Ohikere elucidates on the benefits of tax compliance to the economy of Kogi State.
Complying with tax laws and regulations that are constantly changing is a challenging one. But we can help from tax filing to tax planning by introducing Tax laws which provide for the charging of additional tax and penalties equivalents to the defaulted amount and interest, where a client fails to adhere to its provisions.
For the Kogi Internal Revenue Service, reviews, amendments and modifications to tax legislations are continuous, evolving with global best practices and in keeping with the local socio-economic realities. The review and amendment of tax legislation is in keeping with the formal tax amendment process as provided for in the Nigerian constitution.
Complemented with an easy payment process that is simple and straight forward with a few steps. The tax type is calculated and paid at one of the collecting banks or on one of their online platforms with the correct revenue head for proper documentation. E-receipts and Tax Clearance Certificate can then be collected at the KGIRS head office.
All these efforts are modelled to effect optimum tax compliance but evaluating the tax compliance level in the state, much still need to be done in order to be able to mop up required revenue to meet up with the economic challenges of the state, in some cases, fines, prosecution and imprisonment may be effected depending on the nature of the default to ensure compliance.
However, taxpayers can avoid these unnecessary penalties by being tax compliant. Regular audits should be conducted by the state government to check compliance and to correct problem areas identified, as well as to educate the clients where necessary.
The benefits of tax compliance can never be overemphasized as tax income within the state can be evaluated in numerous ways including the funding amount based on the emphasis, scope, and variety of the state’s hegemonic power, and its usage as a fiscal policy tool.
It is a de facto assumption for all countries that tax income cannot be gained in its entire potential (tax capacity). The same is also valid for the efforts aimed at minimizing the loss of tax revenue (tax effort). It is undeniable that applications for taxpayers both socially and psychologically are also needed in order to prevent possible loss of tax income along with the technical efforts made by tax legislators and tax offices. Thus, tax compliance takes place in the scope of the efficiency of the tax implementation such as the completeness of legislation, inspections, and sanctions.
Clients should note that benefits of tax compliance are mainly derived from proper record keeping.These benefits include the following:
-The information kept by businesses is used to effectively manage the businesses as well as check and show company performance;
-Business efficiency is also derived from good record keeping;
-When business systems are up to date and properly managed, there is improved decision making;
-Updated records enable a clear assessment of the current affairs of the company;
-Proper records facilitate audits and reduce the time taken by auditors;
Records can be maintained in either manual or automated form. The law requires that all records be kept in English language.
However non- compliance to tax payment could come in various forms that could invariably affects business growth:
-Court cases that may affect the image of the business;
-High collections costs, as well as possible legal fees;
-Extra costs in additional tax and penalties that may negatively affect cash flows.
Therefore it becomes important that clients avoid such costs by:
-Keeping proper records;
-Adhere to due dates for payment of taxes or submission of returns;
-Pay the correct amount of tax;
-Declare the correct amount of taxable income in their tax returns;
Conclusively, staying current on tax developments at the local and national level, while meeting the demands needed for more transparency and financial information, strains the resources of tax departments and further complicates tax compliance.