What is voluntary tax compliance?
Voluntary tax compliance is a situation where the taxpayer voluntarily discharges his/her tax obligations as stipulated under the tax laws. The taxpayer willingly and voluntarily discharges his or her tax obligations with no interference from the tax authority. This voluntary act is in line with the self-assessment tax regime introduced in Nigeria in 1992 by the Finance Miscellaneous Taxation Decree No 2 of 1991.
The decree empowers the taxpayer to compute his/her tax liability, pay the tax due, and produce evidence of the tax paid at the time of filing his/her tax returns at the tax office.
The regime involves a series of activities beginning with:
- computation of the tax due,
- payment and filing,
- tax returns processing,
- debt management,
- compliance and
The underlying objective is to promote voluntary tax compliance and ensure that the taxpayer takes responsibility for his or her assessment.
The Role of Tax Authorities in Voluntary Tax Compliance
The tax authorities, in this case, is the Federal Inland Revenue Service (FIRS) and State Internal Revenue Services.
In order to achieve the expected high level of voluntary compliance by taxpayers and to ensure that the taxpayer is provided with all the necessary enablement to meet his obligations of filing and paying his tax liability on or before due dates, the tax authorities adopted the following strategies.
- Provide a more tailored approach for services to companies by reminding them of their due dates for filing and payment.
- Regularly providing information materials including the tax returns forms focusing on due date activities.
- Ensure the publication and dissemination of regulations that help simplify and clarify ambiguities in the tax laws.
- Provide better guidance to assist taxpayers in making payment and filing returns.
- Build and strengthen partnerships with taxpayers at all times.
- Facilitate initiatives to improve timeliness to administrative actions and returns.
- Provide guidance and explanatory notes for the completion of tax forms.
- Respond to taxpayers’ questions on the tax laws and other administrative procedures.
- Operate a nationwide television answering system for taxpayers’ questions.
- Operate a robust website where taxpayers may obtain information on various topics and download forms, instructions, and other explanatory publications.
- Consult widely with taxpayers and their representatives prior to the implementation of changes in the tax laws.
- Carry out tax audit/monitoring exercise with the aim of checking the level of compliance, effecting change in behavior, promoting voluntary compliance level, and giving tax education.
The Role of Tax Practitioner in Voluntary Tax Compliance
Voluntary Tax compliance is absolutely the responsibility of the taxpayer. However, the taxpayer has the choice to either personally discharge part of the obligation or seek the help of a specialist in understanding and complying with any or all of the obligations.
The tax professionals also known as tax consultants or tax advisers act as tax intermediaries between the tax authorities and the taxpayers in ensuring tax compliance. They use their wide knowledge of the tax laws to provide advisory and other services to clients, ensuring that they pay their taxes in the most efficient way and benefit from any tax advantage and or exemption.
Here’s how the professional tax consultants help the taxpayers to reap the benefits provided under the voluntary tax compliance:
- Ensuring timely filing of returns
- Ensure timely payment of taxes
- Correct interpretation of tax laws
- Correct determination of tax liabilities
- Making adequate and correct disclosure of tax affairs
- Timely response to tax queries
- Defending taxpayers’ rights
- Prosecute tax appeals
- Seeking review of unfavorable tax decisions
- Advice on consequences of irregular disclosure
Benefits of Voluntary Tax Compliance to Taxpayers
- It gives the taxpayers the opportunity to participate actively in the assessment process, thereby promoting a self-assessment tax regime.
- It encourages the taxpayer to discharge his tax obligations with no interference from the tax authorities
- Trust is promoted
- It is desirable for both the taxpayers and tax authorities
- Reduces compliance and administrative costs
- Reduces enforcement actions of tax authority
- Increases the tax base.
And there you have it – you just learned how to make use of voluntary tax compliance to have a say in the determination of the tax assessment of yours and your business. And if you start applying what you learned immediately, it won’t be long before you will discover that there is no big deal in the payment of tax or dealing with taxman.
However, before you start taking the first step, let me warn you: don’t make some common mistake of handling your tax matters by yourself or go to the tax office with the intention that they will help you.
This is a fairly common mistake that some small and medium enterprises always make. When they make the mistake, they will now know that they need to invite a tax practitioner, by that time, the issue must have gotten out of hands. Though you might still reap some benefits it would have been better if the tax consultant had been informed earlier.
Fortunately, it’s easy to avoid. All you have to do is be aware that such action could create bad results.
For you as the taxpayer to reap the full benefits, you need to contact a tax consultant to be in charge of your tax matters. Not only will he be there for you, but will guide you all the way.
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