Let me add my view to the expert and not too expert opinions on the taxability and tax dynamics of Laycon’s prize(s) as the winner of the just concluded Big Brother Nigeria. I will be looking at it (plus the whole show) from the tax administrator’s perspective with a street like flavour. This is not federal/state revenue’s position.
Firstly, the most common, broaden and familiar tax, the Value Added Tax (VAT) is not applicable to the price won. This is because it is neither a sale nor supply of good and services. I think most people agree with this and I am yet to see Federal Revenue Authority putting nose. “Awon owo epo”.
This is not saying VAT are not paid/applicable to goods and services purchased to run the whole show. From items used, interior decoration, sound and camera, Deloitte professional services, artist performance, DJ services, sponsorship, advert, SMS and data for voting, concept and brand development e.t.c. Surprisingly, Big Brother himself and Ebuka services must include VAT and remit to FIRS accordingly.
To our main guy “of lay lay” omo Agbeloleshebioba, no VAT is expected from or to be charged on him. He should however note that he has earned a proven and well-publicized income and should join our class of taxpayers. His income like others is taxable under provisions of Personal Income Tax Act 2011 (as amended) Section 2 & 3. The tax authority to deal with is the State Internal Revenue of the state he resides.
There is also a possibility of “Back Duty Assessment” by the state revenue authority. This is because there are pointers to the fact that he is an established artist before the house. Reminisce AKA Baba Oja is a witness. He must have been earning income before now. The State revenue will likely send “Demand Notice” to trigger this. He will have to produce a tax clearance for the past 3 years, pay or dispute the sum demanded and/or compute the correct tax payable and remit. Awon temi go still charge penalty and interest.
Another area to look at is the composition of his and other guys’ earnings from the show. Cash prices can be easily categorized as taxable income while other benefits may become problematic in taxability and/or valuation. A trip to Dubai (with or without expense paid) for example must have a predetermined value attached to it. A brand ambassadorship may have value but the period might span more than a year.
Also, ambassadorship brings the issue of service provision which require VAT (the tax we earlier agreed that is not applicable). Cars and apartment can be valued market prices and added as part of his income. This is where the tax game plan is. You play you die, you no play you will also die. Best bet is to play and chose your own death.
The next is to look at how Withholding Tax (WHT) may/will come in. Technically, WHT is not a tax on its own but a mechanism or way to ensure that the income tax payable is not lost due to time or ‘’rapalaism’’ of the taxpayer. In short, WHT is an advance payment of income tax. LAYCON won’t be responsible for this. It is the duty of Multichoice or Handlers of the BBN show. They have the duty to deduct the applicable rate from Cash Price at the point of payment.
Depending on the objective and their antecedence with regards to tax culture and compliance, they may want to have their way around this. There are plenty of legal ways explore actually. They should be ready for a seasoned Taxman cum auditor with a big hammer who has already sighted what to nail.
So how does he pay tax and what is the effect of the WHT (if deducted)? It is obvious he won’t be under a contract of employment but likely under the contract of an engagement or something close. He will be required to file and pay his tax under self-assessment. The returns should be due by 31/03/2020. E still tey ba. That is why the taxman will want to get his WHT “lowo kan” “as e dey hot”.
Regardless of WHT deduction, he must compute and file his tax payable on before the due date. If WHT is deducted, he will have to collect the WHT credit note to offset part or whole of the tax payable. BTW, owo ti de, se bi olowo omo mi, get a tax consultant ara giveaway and empowerment na niyen.
Lastly to you Lokoso, otigun oke agba, owo ori di dandan. It won’t kill you, it won’t make you poor or bring you down. You can now enter tax office to obtain your TCC with swag and take selfies with members of ICON tax office chapters. They will process it with speed and ease. You go drop something o but Yankee, London, Paris, Malay ti dirorun.
Lest I forget, mi o eighteen, mo forty. Gbogbo Elites thanks for the Gofundme. You get levels sha, all in Dollars but be reminded that tax is payable in the currency of the transaction. Tax authority go like Dollar o, opoor. Tell Erica not to form omo London o, non- resident rule wa ni le.
You can all me Alhaji Bumen, your unsolicited tax and financial gbogbolowo
Alhaji Bumen, the Unsolicited tax and financial Gbogbolowo