Effect of Personal Reliefs and Allowances on Tax Liabilities and Tax Burdens of Individual Taxpayers in Nigeria

This paper examines the various statutory provisions for granting Consolidated Relief Allowance (CRA) and other tax-free allowances in Nigeria. The objective is to resolve existing disparities in the application of tax law provisions and thus harmonize the rules for granting tax-free reliefs under the Personal Income Tax (Amendment) Act, (PITAA), 2011. Hypothetical data of gross income and relevant domestic circumstances of individual taxpayers were generated. CRAs and other specified tax variables were computed based on provisions of S.33 and the sixth schedule to the Act. Data were analyzed using mean, t-test statistics and ANOVA. Results indicate that S.33(1) and the sixth schedule of the Act produced CRAs that differ significantly, and that the exclusion of tax-free reliefs in S.33(4) of the Act in practice has significant effect on tax liabilities and tax burdens of individual taxpayers in Nigeria. The paper concludes that observed disparities in statutory definitions for CRA and the use of practice guidelines that are inconsistent with clear provisions of tax laws could widen the gap between tax practice and tax statute, and eventually mar the goals for certainty and equity in tax administration. Consistent with judicial decisions, the paper posits that the provisions in paragraphs (1) and (3) of the sixth Schedule to PITAA, 2011 cannot override the clear and unambiguous provisions in S.33(1) of the Act, and therefore recommends among th other policy adjustments, that the definitions of CRA in the 6 schedule should be reviewed to harmonize them with S.31(1) of the statute, and that the other tax-free allowances in S.33(4) should be adopted in practice since they were not repealed in the 2011 Act.