NATURALEZA DE LAS FUENTES Y LOS PROTAGONISTAS

146 The simple indication of the above is that government should live up to expectation in order to encourage and attract maximum compliance to payment of tax.

ii. Inequitable distribution of resources

Infrastructural development and provision of social amenities is usually politicized in Nigeria. Communities that have representatives serving in government benefit from amenities while those that do not have political office holders are benefit of such facilities. The provision of social amenities is based on nepotism rather than equity. This creates tax apathy from communities that feel marginalized. Social services must be extended to rural communities and that the legislature properly oversights the executive arm to ensure that money is applied for what it is voted for.

iii. Inefficient tax administration machinery

As observed earlier, there is no available statistics or records of business or taxable persons who pay or evade taxes. This is due largely to our crude tax administrative system and manual handling of assessment and collection of taxes as against the computerised system in other jurisdictions. It is always very difficult for them to effectively identify individual taxable persons and business for purposes of assessing them to tax.

147 enforcement of tax obligations. There are however, definitions and meanings proffered by text writers and jurists.

Tax avoidance is the arrangement of a taxpayer‟s affairs that is intended to reduce his tax liability and although the arrangement could be strictly legal, it is usually in contradiction with the intent of the law it purports to follows.⁴³⁹

It is defined as a deliberate arrangement of the taxpayers financial affairs in such a way as to take advantage of the fiscal opportunities presented by relief provisions and/or loopholes in tax legislation.⁴⁴⁰ In IRC v. Willoughby,⁴⁴¹ Lord Nolan adopted the definition as presented by the counsel to the Inland Revenue who said:

Tax avoidance is a situation when a taxpayer reduces his liability to tax without incurring the economic consequences that parliament intended to be suffered by a taxpayer qualifying for such reduction in tax liability.

In addition, the court held that avoidance is a course or action designed to conflict with or defeat the evident intention of parliament. It is thus understood to mean some acts by which a person so arranges his affairs in such a way that he is liable to pay less tax than he would have paid but for the arrangement. It is the act of winning games without actually cheating, thereby beating the internal revenue and the government to their own game. It is in effect, the act of dodging tax without breaking the law.

In I.R.C. v. Duke of Westminster⁴⁴² Lord Tomlin held;

Everyman is entitled, if he can order his affairs so that the attaching under the appropriate acts is less than it otherwise would

439 OECD, Center for Tax Policy and Administration Glossary of Tax Terms cited in O Oke, Judicial Approach to Tax Avoidance in Tax Law Journal of Nigeria, Lagos, AETA Publishers Nigeria Limited, 2012, p. 75.

440A A Olowofoyeku, et al. Revenue Law: Principles and Practice, Liverpool: Liverpool Academic Press, 2003 p.

663.

441 Cited by Lord Hope in Westmoreland Investments Ltd vs MacNiven (2001) ALL ER 865 at 889.

442 (1936) A.C 1 at 19 – 20.

148 be. If he succeeds in ordering them so as to secure this result, then

however unappreciative, the Commissioner of Inland Revenue or his taxpayers may be of his ingenuity he cannot be compelled to pay an increased tax.

It is the view of Umenweke⁴⁴³ that tax avoidance is unpatriotic and anti-social. The avoider normally increases and sheds the burden of tax on others, mainly the illiterates in the society. Weatcroft,⁴⁴⁴ view listed that tax avoidance is a transaction which:

a. avoids tax

b. is entered into or the same purpose of avoiding tax or adopts some artificial or unusual form for the same purpose;

c. is carried out lawfully and;

d. is not a transaction which the legislature has intended to encourage. In other word, it is the art of winning games without actually cheating.

Tax evasion and avoidance used interchangeably as one have been x-rayed in the above discussion. The fundamental difference between tax evasion and avoidance therefore is that whereas evasion denotes the violation of the law which makes it criminal in nature, tax avoidance does not denote the transgression of the law and may be considered as not offending the law. It is surprising that the tax administrators did not want to exploit the provisions of the law to recover the said tax. In section 17 of Personal Income Tax (Amendment) Act it provided a sufficient anti-avoidance and tax evasion measures. Section 17 PITA provides;

Where a tax authority is of the opinion that this position is not infact given to or that any transaction which reduces or would

443M N Umenweke, Tax Law and its Implications for Foreign Investments in Nigeria, (Enugu, Nolix Educational Publications (Nig), 2008) p. 172.

444 Cited in M N Umenweke, ibid.

149 reduce the amount of any tax payable is artificial or fictitious, the

tax authority may disregard the disposition or direct that such adjustment shall be made as respects the income of individual, an executor or a trustee as the tax authority considers appropriate so as to counteract the reduction of liability to tax affected, reduction or which would otherwise be affected by the transaction.

The provision of subsection 3(b)⁴⁴⁵ also deems transactions between related persons, persons who are controlled by another person or between persons, one of whom is controlled by the other as artificial or fictitious. It is clear from the above that more of administrative measures are required to combating tax avoidance and evasion menace. It is also possible, these tax issues of evasion and avoidance will continue since there is existence of many allowances and reliefs in our tax statutes. It is possible that where these allowances and reliefs are consolidated into one allowance, it will help in reducing the incidence of tax avoidance as every taxpayer would be entitled to the consolidated allowance only.

The amendment Act⁴⁴⁶ attempted this but created problems. The amendment under section 34 created a consolidated relief allowance; however, section 33 that created other allowances is still part of the law. In failing to delete section 33 it would appear that in addition to the consolidated relief, taxpayers can still rely on the provisions of section 33 to demand further reduction on the amount to be paid. However, the tax authority will maintain that section 34 of the Act⁴⁴⁷ has replaced the old 5^th schedule with new sixth schedule providing in paragraph one for a consolidated relief allowance of flat rate of N200,000 plus 20% of gross income.⁴⁴⁸ The lack of clarity in the provisions of the amended Act has created a different challenge while attempting to resolve one.

445Personal Income Tax (Amendment) Act op. cit S. 7(3b).

446Ibid.

447Ibid.

448Ibid, S. 33(1).

150 A further review and amendment of the provisions of PITA is necessary in order to consolidate all reliefs and allowances into one allowance. This will reduce incidence of tax avoidance as every taxpayer would be entitled to the consolidated allowance only.

Furthermore, administrative measures rather than legislative should also be considered.