In Nigeria, specific regulations stipulate how various taxes are to be paid to the government. The idea behind the Pay-As-You-Earn (PAYE) tax, the deductions that can be made, the advantages of paying these taxes, and how to calculate Pay-As-You-Earn (PAYE) taxes for employees in Anambra will be examined in this article.
A tax is a mandatory financial charge or another sort of levy placed on a taxpayer (an individual or legal entity) by an administrative body to pay for various public expenditures and government spending. Failure to pay tax, as well as fines evasion or defiance of taxation, is prohibited by the law.
What is Pay-As-You-Earn (PAYE) taxes
The mechanism FIRS uses to collect income tax from employees (which helps fund services like education and healthcare) is called Pay-As-You-Earn (PAYE).
Important things to note about Pay-As-You-Earn tax as an employer in Nigeria:
- Expenses and payments: Payroll deductions for PAYE must also be made when paying your employees.
- Compensation for your staff: Your company will pay your employees’ salaries or wages, as well as any tips or bonuses, as well as benefits like statutory sick or maternity leave.
- Withholdings from their pay: For the majority of employees, you must subtract tax and national insurance from these payments. You could also need to deduct money for pension contributions or student loan repayment.
Advantages of paying your Pay-As-You-Earn tax
Imbibing a culture of tax compliance will be beneficial for Nigeria as a nation and for all socially responsible and law-abiding individuals, groups, organizations, and corporate citizens. The advantages that can be derived include, but are not limited to:
- Supplying sustainable financial resources and funding for public and social services, governance, and economic growth.
- Encouraging more important social and economic sectors while discouraging less important ones.
- Encouraging civic engagement, patriotism on the part of individuals, and corporate social responsibility.
- Based on their level of tax compliance, individuals and corporate entities are granted certain advantages, rights, and privileges inside the system.
- Granting taxpayers the moral and legal authority to demand and therefore foster an accountability culture.
- Achieving wealth redistribution and eradicating stark gaps in the standard of living.
- Serving as a barometer for assessing the size, development, and health of economic entities and activities.
- Law-abiding persons can avoid the repercussions, fines, and sanctions of non-compliance by paying their taxes on time.
Anambra State Inland Revenue Service for Pay-As-You-Earn tax
The Anambra State Revenue Administration Law (ASRAL) of 2010 specified that “there should be a Service – Anambra State Internal Revenue Service (AIRS), autonomous, which shall be the operational arm of the policy-making body—The Board.” This law gave rise to Anambra State Inland Revenue (AIRS).
The primary duties of Anambra State Inland Revenue (AIRS) include identifying (possible) taxpayers and taxable activity.
- Calculate the Assessable Incomes
- Assess individuals and/or entities for Personal Income Tax and any other applicable tax systems or levies
- For the sake of accountability, and to collect the assessed amounts and document the assessment and
- Collection of operations.
How to Calculate Pay-As-You-Earn (PAYE) Taxes for Employees in Anambra.
However, the minimum Personal Income Tax rate is 1% (if the annual income of the individual is less than ₦300,000). If your income is greater than ₦300,000, the rates are calculated differently. Read on below:
The first ₦300,000 of your income are taxed at 7%
The next ₦300,000 are taxed at 11%
The next ₦500,000 are taxed at 15%
The next ₦500,000 are taxed at 19%
The next ₦1,600,000 are taxed at 21%
The tax rate for income above ₦3,200,000 is 24%
You can apply the formula above to your taxable income to estimate how much you need to deduct from your employees for your Pay-As-You-Earn tax.
Regardless of the legal restrictions placed on taxes, it is a fundamental tenet that Pay-As-You-Earn tax funds be utilized to fund initiatives that are relevant to and helpful to the country’s population.
Additionally, the government put in place programs like the National Housing Fund plan, the Pension Fund Scheme, the Social Insurance Trust Fund, and others to assist in ensuring the working population’s health, housing, and financial stability.
A real nation is one whose government is made up of, by, and for the people, as is frequently said. To protect the social and economic prosperity of the nation, the government and its people must work together.