We often think of an income tax when we say “TAX,” whether it be a personal income tax, property tax, or consumption tax. Taxes, however, come in more forms than just income tax like Pay-As-You-Earn tax. They are also employed in other sectors of the economy and as payment for services rendered by the government.

“Tax is the amount of money you pay to the government in exchange for the public services you receive.” Your income determines your taxes, including your Pay-As-You-Earn tax, which are the government’s primary source of income.

The most prevalent and significant government action to redistribute money among the people is taxation. It is an effort to use a progressive taxation system to distribute the cost of economic growth. The tax burden is larger for higher-income groups and lower for lower-income ones.

The benefits of paying taxes are numerous. They assist in building and maintaining infrastructure, such as roads, and they can even help construct or maintain the institutions required for the rule of law and the smooth functioning of the democratic process. You will learn more about Pay-As-You-Earn tax in this article, including how to calculate it if you reside in Ondo state.

Pay-As-You-Earn (PAYE) Tax

Pay-As-You-Earn refers to the tax that an employee must pay after assessing certain legal deductions, as the name suggests. If the relevant tax authority so directs, PAYE may be recovered from any emolument paid to, or from any payment made on account of, the emolument by the employer to the employee.

Section 81 in the Pay-As-You-Earn regulation defines Pay-As-You-Earn as income chargeable to an employee by an assessment, whether or not the assessment has been made.

Therefore, it is essential to clarify that Pay-As-You-Earn is paid by someone who is employed. Despite the provision in section 43, which states that a person who has work as their sole source of income for any year of assessment and who earns N30,000 or less from that source is exempt from filing a return.

So when does it say that an employee’s income in Nigeria gets taxed?

It says if the employee is employed in Nigeria and the employer is located there or has a fixed basis there, he or she should be taxed for Pay-As-You-Earn tax.

Why should you pay your Pay-As-You-Earn tax?

The government makes use of the Pay-As-You-Earn tax revenue to give its people all the essential amenities and services they need to live happy, healthy lives. Here are a few advantages of paying taxes: 

1. Taxes protect the nation’s boundaries. Spending on supplies and people, R&D in defence, defence imports, foreign military cooperation, and international peacekeeping activities are all included in this.
2. Government employees’ wages and pensions are paid for through taxes. This covers the salaries and pensions of workers in the public sector, such as those employed by the federal, state, and municipal governments.
3. Taxes are used to pay for the government’s network of roads and trains. The construction of roads, highways, and other infrastructure projects, this includes the acquisition of a wide range of vehicles, such as aircraft, ships, buses, trains, coaches, tractors, and other vehicles.
4. The police, paramilitary forces, air and sea, border patrol, customs and excise, and intelligence agencies are all funded by taxes, as are other law enforcement organizations. This includes spending on personnel, tools, instruction, and infrastructure to ensure security and general safety.

How to calculate Pay-As-You-Earn (PAYE) taxes for employees in Ondo

The required point of filing for an individual’s tax is at the pertinent tax authority in the employee’s State of residence, which in this case is Ondo State. The procedures for calculating your Pay-As-You-Earn tax if you reside in Ondo state is:

The first N300,000 is subject to a 7% tax

The Upcoming N300,000 at 11%

The Upcoming N500,000 at 15%

Following N500,000 at 19%

The Next N1.6 million at 21%

The Following N3,200,000 at 24%