Effects of Changes in Personal Income Tax Act on Taxable Income of Individual Taxpayers in Nigeria.

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Ogechi E. Alpheaus
John U. Ihendinihu
Joseph U. Azubike


This paper investigates the comparative effects of Personal Income Tax Act (PITA) 2004 and Personal Income Tax Amendment Act (PITAM), 2011 on the chargeable income of individual taxpayers in Nigeria.  The objective is to resolve speculations that chargeable income under the new Act is higher than previously existed and that the effects of the changes are not equitably distributed among taxpayers of different income brackets, and thus, the reforms fail to resolve the problem of high income gap between the rich and the poor. Based on the provisions of both Acts, chargeable income was computed with data collected from 319 salaried and self-employed taxpayers who filed tax assessment returns with the Abia State Board of Internal Revenue in 2014 tax year. The sample was grouped into four income levels based on established criteria. Descriptive statistics, paired samples t-test, and Analysis of Covariance (ANCOVA) were used in analysing the data with the aid of SPSS version 20.0. Results indicate that PITAM, 2011 produces a significantly lower chargeable income than PITA 2004, and that this difference cuts across taxpayers in the four income groups.  Results also indicate that the percentage of income relieved from tax decreases as one moves from low to very high income group.  The implication is that a greater percentage of chargeable income of high income earners is exposed to tax than the low income earners and thus contributing to the resolution of the income inequity problem. The paper recommends further fiscal adjustments that grant more reliefs to taxpayers to further reduce their chargeable income and enhance voluntary compliance to tax demands

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