TAXS
TAXS
Ad-valorem
These are duties that vary with the amount of consideration and are in accordance with a scale
prescribed by the Act. The Commissioner of Stamp Duties or adjudicator will need to know the
amount involved in the transaction. This will enable him determine the appropriate duty to be paid.
Examples of instruments that are assessed based on ad-valorem basis are:
Deed of assignment;
Sales agreement;
Tenancy or lease agreement;
Insurance policies;
Contract agreements;
Vending agreement;
Charter-party;
Contract notes;
Legal mortgage and debenture loans;
Share capital of companies; and
Promissory notes.
Fixed
Fixed duties
These are duties that do not vary with the consideration for the document being stamped.
Examples of instruments assessed by fixed duties are:
Power of Attorney (POA);
Certificate of occupancy (C of O);
Appointment of receiver;
Memorandum of understanding (MOU);
Joint venture agreements (JVA);
Ordinary agreements and receipts;
Guarantor forms; and
Proxy form.
Instruments exempted
Instruments that are specifically exempted are as follows:
Those relating to agreements between the Federal Government and
January 15, 2016, titled “Currency and Remittance of Statutory Charges or Receipts to Nigerian
Postal Service under the Stamp Duties Act”, the following transactions are exempted from stamp
duties:
Transactions relating to savings accounts holders, salary
Payments and deposits for self to self-transactions whether inter or intra-bank; and
Payments for goods supplied or services rendered if the amount is under N1,000, payment of salaries
or wages, pensions, gratuities, etc;
“clarifications on the provisions of the Stamp Duties Act” No: 2020/05 dated April 29, 2020.
(ii) Provide the basis for future tax legislations and administration;
b. The tax system usually involves a tripartite aspect, namely the tax policy, tax laws, and tax
administration.
i. Tax policy
The tax policies are general statements of intention, which guide the thinking and the action of all
concerned towards the realisation of the set goals. They usually include:
Movement of emphasis from income tax to consumption tax that
taxpayer participation in the tax assessment process, which is considered to be realistic in approach.
The policy can also include movement from coercive method of taxation to voluntary compliance as
in the case of Nigeria in recent time.
ii. Tax laws
The tax laws include the following notable tax legislations in Nigeria:
Personal Income Tax Act Cap. P8 LFN 2004;
Companies Income Tax Act Cap. C21 LFN 2004 (as amended);
Petroleum Industry Act 2021;
Capital Gains Tax Act Cap. C1 LFN 2004 (as amended);
Value Added Tax Act Cap. V1 LFN 2004 (as amended);
Education Tax Act Cap. E4 LFN 2004(as amended);and
Stamp Duties Act Cap. S8 LFN 2004.
In Nigeria, the Constitution vests the legislation of income tax, whether personal or corporate on the
Federal Government in order to promote uniformity. However, the three tiers of government share
the administration of the various taxes. Tax laws are reviewed periodically in line with the changes in
social, political and economic conditions of the country.
The power to impose tax in Nigeria is within the exclusive legislative authority of the Federal
Government. There are various machineries set up by the government to ensure strict compliance of
these laws; non-compliance attracts penalties and fines.
iii. Tax administration
This involves practical interpretation and application of the tax laws. The bodies charged with the
administration of tax in Nigeria are the Federal, State and Local governments. The tax authorities of
these tiers of government derive their formation from the relevant laws which include:
The Federal Inland Revenue Service (FIRS), sections 1, 2,
This is a relief that is granted to a business that has incurred a qualifying capital expenditure in the
basis period of the year or in the year the qualifying expenditure was incurred. Initial allowance is
granted to give an immediate relief from the huge expenditure incurred by the business. Initial
allowance has the following attributes:
It is claimable only once throughout the useful life of the asset;
Initial allowance is never prorated on account of the basis period being less than twelve months.
However, if the relevant tax authority establishes that the asset has been put to private use, the
amount of initial allowance that will be allowed as a deduction from profit shall be restricted to the
proportion attributable to the business use of the assets.
This relief is granted annually on the residue of qualifying capital expenditure incurred on the
qualifying capital expenditure after deducting initial allowance. Annual allowance has the following
It is determined by dividing the cost of the assets less initial allowance over the assets useful life,
taking into consideration the specified rates;
Annual allowance shall be prorated where the basis period of a year of assessment is less than
twelve months;
A book value of N10 shall be deducted from annual allowance claimable in the last year of the
assets life and retained until the asset is disposed off.
Investment allowance
This is an incentive granted to a business that incurred qualifying capital expenditure on plant
and machinery. Investment allowance has the following features:
It is granted only once in the life of the asset;
Initial allowance is never prorated on account of the basis period being less than twelve months.
However, if the relevant tax authority establishes that the asset has been put to private use, the
amount of initial allowance that will be allowed as a deduction from profit shall be restricted to the
proportion attributable to the business use of the assets; and
It is never used in determining the tax written down value of the asset. In other words, investment
allowance does not impact the tax written down value of the asset. However, it should be added to
other capital allowances i.e. IA and AA, and deducted from assessable profit.
These shall arise upon the disposal of a qualifying capital expenditure in a year of assessment. The
disposal may result in either:
Balancing allowance
This is arrived at when the tax written down value of the qualifying capital expenditure is greater
than the sale proceeds at the time of disposal. Balancing allowance shall be added to other capital
allowances that is IA and AA and deducted from assessable profit; or
Balancing charge
This is arrived at when the tax written down value of a qualifying capital expenditure is less than the
sale proceeds at the time of disposal. Balancing charge being a gain shall be added to assessable
profit. However, since balancing charge is a claw back of capital allowances previously enjoyed on
the disposal asset, the amount to be added back to profit shall not exceed the relief previously
enjoyed. Consequently, the excess of balancing charge being capital gains shall be assessed under the
Capital Gains Tax Act.
(b)
SOLUTION 5
(a) Most often, the terms “e-business” and “e-commerce” are used interchangeably; however, they
are not synonymous. E-commerce refers to buying and selling online, while e-business encompasses
all business conducted online. Therefore, e-commerce can be viewed as a subset of e-business.
authorities; and
Increasing revenue generation accruing to all tiers of the
government.
ii. Items to be contained in returns to be filed by companies to FIRS
Section 55 of the CITA, Cap C21, LFN 2004 (as amended) provides that all companies (including
businesses granted exemption from incorporation) to at least once a year without notice or demand
from the Federal Inland Revenue Service (FIRS), file a return with the FIRS in a prescribed form and
containing prescribed information together with the following documents:
Audited financial statements;
Income tax and capital allowance computation schedules;
Completed copy of Companies Income Tax (Form IR3C-4Coy);
Completed copy of Tertiary education tax (Form 4D EDT);
Evidence of payment of companies income tax liability; and
Evidence of payment of Tertiary education tax liability.
SOLUTION 6
(a) Employment
Employment is an agreement between an employer and an employee that the employee will provide
certain services on the job and in the employer‟s designated workplace to facilitate the
accomplishment of the employer organisation‟s goals and mission, in return for compensation. The
agreement can be verbal, implied or an official employment contract.
In employment, the employer determines where, when, how, why and what of the work that is
performed by the employee. The degree of input, autonomy and self-directedness that an employee
experiences on a job is a by-product of an employer‟s philosophy of management and employment.
Employment ends at the prerogative of the employer or the employee.
Vocation
A vocation is a specified business, occupation, profession, or trade to which a person is specially
drawn or for which he or she is suited, trained or qualified. Vocation can either be an activity that
serves as an individual‟s regular source of livelihood or as an activity engaged in especially as a
means of passing time.
Profession
A profession refers to an occupation that requires specialized education, knowledge, training and
ethics. Although professionals make their living in what they do, this paid work is often more than
just a job or occupation alone. Whether the occupation is law, medicine, plumbing, writing, interior
design or accounting, those who are in it are expected to meet and maintain common standards.
Professions are, ideally, made up of people who should have high ethical standards, special
knowledge and skills. The responsibility of people in certain occupations to the public is an
important distinction from those who may participate in the fields on an amateur or non-professional
basis. For example, if a home owner hires a non-licensed plumber to save money, he or she wouldn‟t
be able to hold this person to the same standards as a licensed professional in the same industry.
SOLUTION 4
4a. Ethics and the law
Ethics consists of normative standards that guide human actions. These standards are not backed by
sanctions. Law on the other hand has the same function as ethics but has sanction attached for their
violation.
Generally speaking, it is considered unethical to break the law. However, there are some instances in
which people believe that certain laws may be broken on ethical grounds because such laws are
considered to be unethical. For example, the law that requires Germans not to assist Jews during the
Second World War was widely considered to be unethical or immoral.
Another example is that while it is unethical to lie to one‟s employer, it might not be illegal to do so
under certain circumstances.
b. An ethical (moral) dilemma involves a conflict between two moral principles whereby it can be
argued that both perspectives are fair and reasonable. Ethical dilemmas typically arise in situations
whereby a particular action is likely to benefit one stakeholder whilst harming another.
In summary, an ethical dilemma is a situation where guiding moral principles cannot unequivocally
resolve the conflict and determine which course of action is right or wrong. It arises when there is a
difficulty in determining what the morally right or good course of action is.
c. CONSEQUENTIAL THEORIES (TELEOLOGICAL THEORIES) OF ETHICS
Consequential theories of ethics are also known as teleological theories or results-based theory. This
is the theory that “of all the things that a person might do at any given moment, the morally right
action is the one with the best overall consequences”.
According to this view, nothing is inherently „wrong‟: it all depends on the outcomes or
consequences. Whether something is right or wrong depends only on results. This means that faced
with a moral dilemma, an individual should choose the action that will provide the best possible
consequences (or the „least-worst‟ consequences).
Individuals may not think about the consequences of their decisions or actions every time they are
faced with a moral dilemma, because they do not have the time. Instead they might rely on a
generally-accepted view of what is right, based on the normal outcomes from similar situations. For
example, a person may choose not to tell a lie because there is a generally accepted view that telling
lies is „bad‟ based on experience that lying usually has bad consequences.
Utilitarianism
A variant of consequential ethics is utilitarianism. Utilitarianism is the view that the morally correct
decision in any situation is one that produces the best possible outcomes for people (for „mankind‟).
The aim should be to maximise well-being or „utility‟ for people.
Ethical egoism
Another variant of ethical consequentialism is ethical egoism. This takes the view that people should
always do what is in their own best interests, not what is in the best interests of people generally.
Consequential/teleological ethics and the profit motive
Teleological ethics can be used to justify the profit motive in business. It can be argued that when a
business is profitable, many people benefit. Shareholders benefit from higher returns and dividends;
employees benefit from the employment that a profitable business provides; customers benefit from
the goods and services that a profitable business is able to provide (that it would not be able to
provide if it did not make a profit); the general public benefits from the benefits to the economy from
profitable businesses and additional economic activity.
Teleological ethics can also be used to justify actions in business that might otherwise seem morally
„dubious‟ or „wrong‟, such as:
cutting costs (including making employees redundant);
down-sizing (which involves making people redundant); and
doing business in a country with a dubious political system, such as a tyrannical government.