Culled from BusinessDayOnline - Source

Slams N0.62m tax on luxury car

In what appears to be a new  strategy devised to lure every taxable Lagosian to declare their earnings for personal income tax, the Lagos State Government through its Internal Revenue Service (LIRS) has started taxing luxury cars.

This approach, Business Day authoritatively gathered from the LIRS which is their best of Judgment approach targets using Lagosians expenditure to evaluate their earnings/income, thereby administering personal income taxes on them.

The LIRS had written a letter signed by one Hakeem Abiru, coordinator (informal sector 1), to a Lagosian (name withheld) a copy of which was made available to BusinessDay seeking the payment to tax liabilities to the tone of N627,899.25 kobo on her new car (Toyota Rav 4 Jeep) with a stated registration number.
Part of the letter dated September 11, 2009 states: “Ref: Personal Income Tax Matters. Demand Notice on Liabilities for years 2006-2008.
“Further to our earlier letter dated 10th June, 2009 duly served on you on 24th of June, 2009 in respect of your new car (Toyota Rav 4 Jeep) with registration number …, your failure to respond to the above letter within the statutory time limit has since rendered this assessment notice final and conclusive by virtue of section 66 of Personal Income Tax Act Cap 8 LFN 2004.

“Accordingly, and pursuant to section 76(1) and 77 of the same act, you are required by law to effect payment of the assessed liability N471,750:00 plus 10 percent penalty (N47,175:00) and 21 percent interest (N108,974:25) totalling N627,899:25 (Six hundred and twenty-seven thousand, eight hundred and ninety-nine naira, twenty-five kobo only) within seven (7) days from the date of service of this demand notice to Government coffers through any of the designated banks without further delay using the following codes: Agency Code: 4250003; Revenue Code: 4010002. Failure to comply with the above, this office will not hesitate to impound the vehicle involved and also prosecute you to enforce payment.” 

Section 38 of the Capital Gains Tax Act (LFN 1990) which made provision for Motor Cars states that “a mechanically propelled road vehicle constructed or adapted for the carriage of passengers shall not be an asset for the purpose of this Act unless it is a vehicle of type not commonly used as private vehicle and is unsuitable to be so used.” 

When BusinessDay reached Abiru on phone through the corporate communications department of LIRS to confirm if the letter actually emanated from his office, he affirmed its authenticity, saying the letter targets bringing the owner of the car to declare his or her income.

When BusinessDay contacted some tax experts on the new dimension to tax drive taken by Lagos State to evaluate residents’ earnings, Eben Akinyemi, partner, Tax Ideas, noted that it is within the rights of the LIRS to assess people to tax on their best of judgment. According to him, “such judgment could be based on the expenditure of the tax payer. In this instance, expenditure would be seen to demonstrate earnings/income.”

He, however, queried the rationale for taxing a car or the threat to impound the vehicle as contained in the letter. “No tax is payable in respect of a car in itself because
the owner must have paid customs duties, Value Added Tax (VAT), import duties, licensing permit. There is no personal income tax or capital gains tax attached to vehicles. What basis should the LIRS impound the vehicle in question?” Akinyemi said.

According to the tax expert, the car itself should not be assessed to tax based on the law. “The car may be used as a basis to estimate a best of judgment assessment of the owner’s income, but the car itself is not liable to tax under Personal Income Tax Act (PITA) or Capital Gains Tax Act (CGTA),” Akinyemi said.

He said the onus is on the person assessed to object within the provision of both Personal Income Tax Act (PITA) and Capital Gains Tax Act (CGTA).
“Firstly, where someone buys an asset out of his savings on earnings on which proper tax has been paid, no further tax should be payable on the income. This would typically apply to those in paid employment, whose employers had deducted Pay As You Earn (PAYE) in their income. Here, any issue relating to additional assessment should be raised with the employer. Secondly, in the case of a housewife who has no income of her own, whatsoever, and then receives a gift or an asset from her husband or relative, this should definitely not fall under the ambit of Personal Income Tax Act (PITA) because gifts are subject to tax under Capital Gains Tax Act (CGTA). Specifically, Section 39 of the CGTA (2004 LFN) exempts motor cars from Capital Gains Tax.
Section 40 of CGTA (2004 LFN) also exempts gifts and disposal of gifts.

Akinyemi stated: “PITA however requires every one to file tax returns. It does not exempt the unemployed. Also Section 37 of PITA (LFN) imposes a minimum tax of 0.5 percent of total income on any one with no chargeable income. Therefore, there is no income. 0.5 percent of total income will yield a nil tax.” 
Section 39 of Capital Gain Tax Act (LFN 1990) which also provides for gifts stated: “Subject to the provision of this Act, where a person disposes, by way of gift, an asset acquired by him by way of a gift or otherwise (not being an acquisition on a devolution on death), the person making the disposal shall not be chargeable to capital gains tax under this Act by reference to that disposal. In this section, GIFT has the same meaning as in section 7 (2) of this Act.”

Absolute Power Corrupts.

The Lagos State Government is clearly drunk with power and is increasingly unaccountable to the residents of the State.

New anti-people, anti-economic progress, anti-self determinism policies emanate from this government.

We are blinded by the propaganda of new roads and street lights and we no longer see the rape of our liberties.

We need a strong opposition (not necessarily a change of governor) at the next election. A real opposition that can bring this AC government to account.

A one-party state is not good for Nigeria, and is certainly not good for Lagos State.

This is funny!

This is good oh, now we will see how many people will be able to keep up bisg boy and bisg girl image. I can imagine, after colleccting bank loan to buy Jeep where they money for tax will come from

@ aisha
I can see ur frustration, ur beef for the priviledged ones clouded your thinking in this matter. Did you read the whole story? where you able to deduce that car tax is unfounded?

kidsam:

@ aisha
I can see your frustration, your beef for the priviledged ones clouded your thinking in this matter. Did you read the whole story? where you able to deduce that car tax is unfounded?

I dont have Beef for privilaged peeps, am privilaged too, but its crazy and idiotic the lenghts lots of people go to keep up with an image. I am by the way entitled to my veiws. Lots of people buy these cars to keep up with the Joneses, Most times they cant afford it, Imagine collecting a loan of 12 million to buy a range rover

@aisha, if that is your argument, i understand, but we cannot say because a finger is bad then we cut the whole arm. Imposing such taxes will not stop people from living above their means, it will only make them device other ways of living above their means. No disrespect meant anyways

kidsam:

@aisha, if that is your argument, i understand, but we cannot say because a finger is bad then we cut the whole arm. Imposing such taxes will not stop people from living above their means, it will only make them device other ways of living above their means. No disrespect meant anyways

Thanks, I get your point too. You could be right but I guess the Governor needs money to execute the Mega city plan and since they have been stopped from implementing the hotel tax they came up with this. Thanks for your gentlemanly response, we dont see a lot of that on Nairaland.

Good to see people discussing issues like adults.
kidsam ,aisha2 KUDOS

I hope this so called act is no respecter of persons

@ kidsam  and  aisha2
 We hardly find such sensible display of maturity in dicussion of issues on Nairaland these days- it takes intelligence to discuss without throwing darts at each other.  if most people are like this on this site- a lot more members will be actie in the long run!!
nice!!

@ post
    The tax thing should be thrown into the bin. period

I have one of such letters from them already.

LIRS is getting crazy. I only became taxable in Lagos state in 2008 and my employers have settled my tax under PAYE. However, I have the letter with tax computation between 2006-2008 amounting to over 1 million naira. My Tax Advisers are currently looking at them and will file a response soon.

Lagos is turning to something else! Crazy and Desperate Assumptions by LIRS!

Na wa ohhhh! No be small tin.

SO, what if you purchase a car off friend, do you still need to pay tax to the government for that purchase?

Section 38 of the Capital Gains Tax Act (LFN 1990) which made provision for Motor Cars states that “a mechanically propelled road vehicle constructed or adapted for the carriage of passengers shall not be an asset for the purpose of this Act unless it is a vehicle of type not commonly used as private vehicle and is unsuitable to be so used.” 

What cars are considered luxury cars and what cars do not qualify?

He, however, queried the rationale for taxing a car or the threat to impound the vehicle as contained in the letter. “No tax is payable in respect of a car in itself because
the owner must have paid customs duties, Value Added Tax (VAT), import duties, licensing permit. There is no personal income tax or capital gains tax attached to vehicles. What basis should the LIRS impound the vehicle in question?” Akinyemi said.

According to the tax expert, the car itself should not be assessed to tax based on the law. “The car may be used as a basis to estimate a best of judgment assessment of the owner’s income, but the car itself is not liable to tax under Personal Income Tax Act (PITA) or Capital Gains Tax Act (CGTA),” Akinyemi said.

He said the onus is on the person assessed to object within the provision of both Personal Income Tax Act (PITA) and Capital Gains Tax Act (CGTA).

“Firstly, where someone buys an asset out of his savings on earnings on which proper tax has been paid, no further tax should be payable on the income. This would typically apply to those in paid employment, whose employers had deducted Pay As You Earn (PAYE) in their income. Here, any issue relating to additional assessment should be raised with the employer. Secondly, in the case of a housewife who has no income of her own, whatsoever, and then receives a gift or an asset from her husband or relative, this should definitely not fall under the ambit of Personal Income Tax Act (PITA) because gifts are subject to tax under Capital Gains Tax Act (CGTA). Specifically, Section 39 of the CGTA (2004 LFN) exempts motor cars from Capital Gains Tax.

Section 40 of CGTA (2004 LFN) also exempts gifts and disposal of gifts.

This is some serious stuff!

This is senseless, But of course it's not a democrazy, rather fashola military.

I am so afraid to still live in Lagos, if I park here, they'll carry my car, and still tell me I am not paying one tax or the other.

Now I don't even have car.

Forget all this mega dreams, I pay at least 100k for fuel every month, If fashola is man enough let him fix the most important things like electricity. Then I will pay him 150k per month.

He's going GAGA, and he's forgetting that he needs a supportive people for a successful admin.

I really don't know whats up with this lagos state govt. they are coming across as wolf in a sheep's clothing

@ damola
Thats what i think fashola wants to achieve, he wants to chase as many people as possible out of lagos

I have said it before and i will say it again:

The priase wey Fashola dey get don dey enter him head small small.

can somebody relate this with what isd obtainable in london. there is this talk that high tasking on luxary cars prevent many londoners from 'FLASHING'. well, i feel there will be problem assesing the values of these so called luxary cars.

Lekside, we cannot compare this with what obtains in london, in london, people don't have to buy 4 wheelers because of bad roads, but here u need to save up for one for the bad roads to be bearable. I believe you have been to london or maybe you are there now, are the ammenities over there comparable with what we have here? and this is grossly the fault of the kind of governance we've had so far. Then why does our govt. find it so easy to subject us to similar taxes as londoners when we don't enjoy 1/1000th of what the londoners enjoy.

IS IT COMPULSORY TOHAVE A MEGA CITY ,when people are still jobless,no power,all some roads are abandon for two years creating hardship, Iju Road, Yaya Abatan both in Ogba are Example. Can he please account for all Federal allocations collected so far, Internal Generated revenue, what economic benefits is the 100,200,300,400,500,600, days anniversary, what is the, please spare me Mega City !

No need complaining . . . responsible citizens pay they taxes.

STOP 'N SEARCH, CRAZY!!. WILL THIS BRING THE DESIRED CHANGE

@ Nezan
What kind of taxes are responsible people supposed to pay

In London, the Pay-As-You-Earn (PAYE) system of taxation affects every employed person. It is a progressive system of taxation. PAYE has no relevance to the car you drive, car or no car.

The Road Tax system in London covers every car on the road. High Emission cars in London pay higher Road Tax.

All luxury cars in London do not pay high Road Tax. In fact, some luxury cars have Road Tax exemption if it is environmentally friendly e.g. Electric cars, etc.

High Emission cars in London, whether luxury or not, are paying high Road Tax.

There is only one Road Tax all over the United Kingdom.

However, in Central London, there is a daily Congestion Charge or Congestion Tax. If you avoid the affected areas in Central London, you will escape the payment.

@beknown
Please can you now relate your explanation to what lagos is trying to do.
thanks

If the tax is fair on everyone, everyone will pay it without complain.

It looks like the new tax system is not fair.

Lagos State Government should do better.

Income tax and Car tax should be differentiated.

kidsam:

@ Nezan
What kind of taxes are responsible people supposed to pay

Probably any tax that comes out of the mouth of Fashola, Fair or Not, No questions asked. Roflmao!!!

@kobojunkie
Then that makes us all Fasola zombies

Taxes are taxes. In developed countries, they are as common as death.

It is only natural there will be backlash. In countries such as Canada, the USA and Britain, the Local governments are responsible for utilities, schools, hospitals, and so on. Everyone is taxed, in Canada and America, there are no payments transferred from the Federal Government to local governments. LGs must fend for themselves AND pay to the federal government for national services such as professional army, land taxes and so on.

This is another push for true Federalism from the Fashola Administration which is trying to move away from the dependence of federal allocations.

Paying taxes hurts, but not paying them hurts even more in the long run.

Many Nairalanders complain about the "north" sucking the south dry, well, this is a first step to real federalism, revenues being generated locally through tax collection.

The Oil won’t be there forever, generating revenue at the grass-roots must start somewhere.

kidsam:

@kobojunkie
Then that makes us all Fasola zombies

YOu mean there are those who are not Fasola Zombies already?? No make the Fashola-Patrol hear that one from you ooo!!!Roflmao!!

strangleyo:

Taxes are taxes. In developed countries, they are as common as death.

It is only natural there will be backlash. In countries such as Canada, the USA and Britain, the Local governments are responsible for utilities, schools, hospitals, and so on.

Why compare Nigeria with these countries for God sake ! are we enjoying same amenities as their citizen, you cant beat something on nothing.