The current economic landscape has forced several State Governments hitherto dependent on Federal Government allocations to look inwards for revenue. Personal Income Tax, especially those payable by high net worth individuals (HNWIs) is gradually attracting the attention of State Internal Revenue Services (SIRS). Against this backdrop, some SIRS are currently deliberating the tax revenue potentials of HNWIs.
A recent World Wealth Study reveals that the number of HNWIs in Nigeria has risen by about 400% at the turn of the 21st century. However, it is expected that such individuals would be tax literate and competent in taking advantage of the available reliefs within the tax laws to manage the tax incidences of their transactions as well as exposure on their income.
It thus becomes pertinent to inquire what marginal tax revenue a focus on these individuals would bring. This is however not to suggest that tax authorities should not seek to confirm whether or not these individuals meet expectations in terms of their tax compliant status.
The following considerations may improve the approach to resolving HNWIs tax compliance challenge:
- Proper classification of HNWIs
- Presumptive Income Tax Assessment
- Harmonization of individual data
- Voluntary Asset and Income Declaration Scheme
State tax authorities must not only innovate and strengthen the tax administration system, they must adopt compliance strategies that speak to the identified attitudes of taxpayers and/or taxable persons as follows:
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