The Treasurer, Chartered Institute of Taxation of Nigeria (CITN), Mr Adesina Adedayo, has urged tax administrators to assess taxpayers on the basis of their expenditure rather than income.
Adedayo told newsmen in Lagos, that the current system in the country where taxpayers were assessed based on their income was becoming challenging.
He said that it was always difficult to determine the accurate income of taxpayers.
The treasurer said that once the domestic expenditures of an individual had been ascertained, then the findings could be used to estimate the taxpayer’s annual income.
“In the current situation in Nigeria, what we do is income tax assessment. It has to do with the income you made. Unfortunately, ascertaining income is becoming challenging.
“Therefore, the other alternative would have been expenditure based because if you are able to determine the domestic expenditure of an individual, then you know that for him to be able to meet the obligation of taking care of his home, taking care of his rent, taking care of his children school fees, we can equally equate that to estimate the income the man made.
“Let us say for example, the man is living in a N600,000 per annum accommodation, his children are attending school and he is paying about N1 million school fees.
“And then we look at his standard of living, if he is in the middle class, we assumed that at least in a month he will be spending about N30,000 on feeding which is about N360,000 per annum. When you add all these up, you can estimate that his income in a year would be about N2.4 million.
“So it means he would be assessed on the basis of that N2.4 million gross income by looking at his expenditure. That is the only reasonable way we can come up with something that can be difficult to challenge in court.’’
Adedayo said that small scale business operators such as petty traders could also be assessed on the basis of their expenditures to determine what they should pay as tax.