TAX 2.3 EDUCATION TAX
The Longe commission was set up to identify a solution to the problem of finance in the Education sector. The commission suggested an imposition of 2 percent Education tax on the gross profit of companies which shall be paid into the Education Fund (Managed by the Board of Trustees) which should be used to fund Tertiary Institutions… Consequently, the Education Tax Decree of 1993 was established (Now the Education Tax Act Cap 34 LFN 2004).
The Act imposes a tax of 2 percent on the assessable profits (not gross profit) of all companies registered in Nigeria. The proceeds shall be paid into the Education Fund established under the act. To be used for the funding all levels of the education sector.
The FIRS shall administer the Education Tax by assessing companies to education tax while assessing them to CITA. The companies are to pay within 60 days from the date they are served assessment notice else late payment penalty of 5 percent interest rate. The distribution was 50:30:20 for higher/tertiary education, secondary education and primary education respectively. The 50 percent given to higher education was shared in the ratio 2:2:1 for universities, polytechnics and colleges of education respectively.
The Education Tax Act has been repealed by the Tertiary Education Fund Establishment Act 2011 (the repeal is stated in its preamble).
Comparison of the TEFEA and EA.
Liability still the same 2 percent on the same tax base (i.e. assessable profit of companies).
- Name differs.
- Education tax funded all levels of education (under Section 7) while the TETFund Act funds only Tertiary Education in the ratio 2:2:1? To universities, polytechnics and colleges of education respectively. It has been argued that universities of agriculture and private universities were not included.
- Punishment for non-payment after notice has been changed from additional 5 percent on the payable rate to one million naira or six months imprisonment in the TEFEA. Note that the court can lift the veil-Salomon V
- The qualification of the board of trustees has been revised.
- The composition of the Board has been revised “six other members” has been changed to “8 other members” and representatives from various universities.