The Tax Burden Essay

1431 words - 6 pages

Background
Companies world over are expected to pay tax for each year of assessment on its profit accruing in, derived from, brought into or received in the company’s jurisdiction in respect of all kind of income. This income may be derived from a trade, business or investment. Insurance companies in Nigeria, as respected business entity are expected to contribute to the growth and sustainable development of the Country by paying all applicable taxes.
Recall that in September 2000, the then attorney general of the federation and minister of justice Chief Bola Ige (SAN) of blessed memory, constituted a Law Revision Committee to prepare a revised edition of the Laws of the Federation up to ...view middle of the document...

In most developed countries, Insurance companies are typically the biggest investors in infrastructural development projects. This naturally translates into a ready source of long term stability, financial security and growth of our dear Country.
In a study by Arena Marco in 2008 on whether insurance market activity promotes economic growth, he discovered that there is a “robust evidence of a causal relationship of insurance market activity on economic growth. Both life and nonlife insurance premiums have a positive and significant effect on economic growth”. This tend to confirm that our industry has enormous potential to redefine our economy
The potentials of the industry in Nigeria cannot be over-emphasized; you will agree with us that Nigeria, with a population of over 160million has an insurance density of about 5-12% which is a far cry of 40-50% in some developing nations and almost 90-98% in developed countries. According to the 2006 Sigma Report, “the life sector alone in South Africa raked in $33.1bn while Nigeria earned a paltry $112m within the same period."
Recently, with concerted effort of our regulator – NAICOM and Nigeria Insurance industry stakeholders coupled with the introduction of the local content act 2010, the insurance business in Nigeria has witness an unprecedented growth.
The future outlook and potential of the Nigeria markets presented a persuasive case for foreign players entrance into the market. For instance, Old mutual acquired Oceanic Life, NSIA invested in ADIC insurance while Sanlam acquired a minority stake in FBN Life. In fact, there are strong indications that more foreign interest may enter into the market.
With sound economic, favorable legal and political environments, the Nigeria Industry can thrive on a fertile ground for robust insurance markets. The provisions of the Companies Income Tax (Amendment) Act 2007 as it affects the Insurance sector may threaten the fertile ground for the industry to grow.
The Companies Income Tax
Certain provisions of the Companies Income Tax (Amendment) Act 2007 are not favorable to the Insurance companies, continued implementation of these provision may eventual lead to the collapse of the entire industry as it imposes huge tax burden on insurance companies to the extent that the premium income being paid by to arrange insurance contract is taxed.
Section 14 of the act requires an insurance company other than a life insurance company shall be allowed as deductions from its premium the following reserves for tax purposes-
“(a) for unexpired risks, 45 per cent. of the total premium, in case of general insurance business other than marine insurance business and 25 per cent of the total premium in the case of marine cargo insurance;

(b) for other reserves, claims and outgoings of the company an amount equal to 25 per cent of the total premium, so that, after allowance under the Second Schedule to this Act as may be restricted, has been allowed for in any year of...

Find Another Essay On The Tax Burden

Progressive Taxation Better for Fairness Essay

2274 words - 10 pages , one of them is the faire distribution. The fair distribution of the income tax burden has long been a central issue in policy making (Diamond & Saez, 2011, p.1). A large number of academic literature has developed two types of income tax theory to cast light on the problems of fair distribution—— progressive tax system and flat tax system. A flat tax (short for flat tax rate) is a tax system with a constant marginal rate, usually applied to

Political Science Essay

622 words - 3 pages Progressive tax is defined as a tax that takes a higher percentage of income from high-income persons. According to www.britanica.com, progressive tax is, “Tax that imposes a larger burden (relative to resources) on those who are richer.” The United States federal income tax is considered to be a progressive tax. A taxpayer’s income is examined, the more one earns the more taxes they will have to pay. In the book, The State of Texas

Taxation System in Bhutan. Good or Bad?

1693 words - 7 pages Royalties are also classified under Direct tax (National Revenue Report, 2012-2013). Indirect Tax includes: Sales Tax, Exercise Duty on domestic goods, Green tax on motor vehicles, sales of revenue stamps, and Customs Duty (National revenue Report 2012-2013, 2013). Tax Deducted at Source is a preliminary approximation of tax payable on a “Pay as You Earn” basis. It is a mode of collection on a current income basis, so that the burden of tax

The FairTax Act

1733 words - 7 pages purchases up to the poverty level. For instance, if a family was estimated to spend $26,400 a year on basic necessities, based on a 23% sales tax, their annual tax burden would be $6,072. This tax burden is paid to the family in monthly installments at the beginning of each month. With this prebate, all families living under the poverty level will pay no federal taxes (Boortz & Linder 2005). Arguably, the most appealing aspect of the FairTax proposal

Michigan Sales Tax: Sales of Cars, Who Should Pay?

1304 words - 6 pages retailers. As such, the Court of Claims ruled that because the sales were made in Michigan from Michigan retailers that the burden of proof fell on the retailer for tax liability, not Andrie. Upon appeal, the Court of Appeals concluded that sales tax is imposed on the retailer and the retailer is obliged to pay the tax due (Andrie, 2013). The Federal Reserve Bank of Chicago v Department of Revenue court ruling cites MCL 205.52(1) as precedence

Corporation Tax and the Harberger General Equilibrium Model

937 words - 4 pages corporate tax. The first variable is the intensity of capital or labour used in each industry. If the taxed industry is relatively more labour intensive than the untaxed industry (non-corporate), then labour will bear a larger tax burden than employers of capital, in the form of lower wages. This would occur as the tax would cause the corporate industry to eject some of its labour and capital. As the corporate industry is more labour intensive than

Double Taxation

1712 words - 7 pages foreign countries can be deducted at home if the home tax rate exceeds the foreign tax rate. • Deduction System Under a deduction system, a resident may deduct the taxes paid to a host country as deductions in calculating his taxable income in his residence country. The burden on taxpayer is very heavy if is using deduction system. A country that chooses the deduction system indicates that it prefers to increase tax revenues even though

Canon of Taxation by Adams Smith

2434 words - 10 pages . METHODS, which are I. Proportional Tax II. Progressive Tax III. Regressive Tax According to Aamir et al (2011), A direct tax is one in which the burden is precisely borne by the individual who levied. This is a tax imposed directly on the taxpayer or property of the taxpayer. It is those individual taxpayers that bear the burden and the incidence of the tax, and these burdens cannot be shifted to any other persons or individuals. These taxes are

Tax Compliance Cost an Important Aspect of Tax Policy

1440 words - 6 pages Tax compliance cost has become an important aspect of tax policy. This is because of its connection with the tax compliance and the government revenue in turn. Unnecessary burden of compliance cost either on individual or business taxpayer may have negative effect on the tax compliance and eventually reduction in the tax revenue. Tax compliance cost is one of the determinants of tax compliance behavior. Unnecessary high tax compliance cost

Flat Tax System

2264 words - 9 pages people have more money but there will be more open jobs which will help the economy. By not penalizing the people who have high incomes, there will be more encouragement to want to make more money as all social classes will be under the same tax burden and will equally lose the same amount of money. There are critics of the flat tax who argue that this type of taxation comes from nations with a lower economy (Pascale). This is untrue as there are

Why the Flat Tax is Better for America Than the Income Tax

1576 words - 6 pages services. "There would no longer be an inheritance tax or a capital gains tax. The government would impose a 17.65 percent tax on the value of all final sales to consumers. To protect lower-income citizens, the government would send all households periodic rebate checks, the net effect of which would be to offset the tax burden on purchase up to the poverty level." (Mitchell) With the flat tax, everyone would be taxed at one rate. "Under

Similar Essays

Who Bears The Burden Of Proof In Tax Litigation

3057 words - 13 pages Involved in federal civil tax litigation? Wondering who has the burden of proof in litigation? Burden of proof is the responsibility to prove the entries, deductions, or statements made on a taxpayer’s return. In order to deduct certain expenses they are substantiated by proof. When the burden of proof is on the taxpayer, the taxpayer keeps adequate records to prove their expenses or has sufficient evidence to support statements. Generally

Brazil's Tax Burden Gives Negative Effect

1197 words - 5 pages Net taxes on products (% GDP) Net taxes on products (net indirect taxes) are the sum of product taxes less subsidies. Product taxes are those taxes payable by producers that relate to the production, sale, purchase or use of the goods and services. Subsidies are grants on the current account made by general government to private enterprises and unincorporated public enterprises. Brazil’s tax burden has grown from 29% of GDP in 1998 to 35% 2004

The Flat Tax Essay

992 words - 4 pages thereby increase aggregate demand” (Gwartney, et al., 2013, p. 237). Thus, a flat tax rate offers a reduction in the taxpayer’s rate, releasing productive energy in terms of increased work and capital investment, stimulating economic activity and growth. The flat tax model, designed by Robert Hall and Alvin Rabushka in 1981, uses a uniform 19 percent tax rate, minimizing the financial and administrative tax burden by taxing individual and corporate

Tax Structure: Habitat For Humanity Essay

1693 words - 7 pages income criteria placed on their homeownership. Furthermore, these homeowners end up paying more for property taxes than their mortgage and homeowner insurance combined. While equity in property taxes ensures everyone shares the burden, fairness in distribution assures the tax burden is equal with their ability to pay. Providing tax breaks to Habitat for Humanity homeowners guarantees fairness in distribution of the tax burden. Second