Tax: What law says about Ilebaye’s BBNaija’s N120m prize

THE winner of the All Stars edition of Big Brother Naija reality TV show (Season 8), Ilebaye Precious Odiniya, is liable to pay a personal income tax (PIT) to the coffers of the Lagos State Government from her N120 million prize money The ICIR reports.

Ilebaye, known as GenZ Baddie, was announced as the winner of this year’s edition of the show, which started on July 23 and ended on October 1.

She was presented with the prize money at the award ceremony in Lagos on Tuesday, October 3, by the executive head of content and West Africa Channels at MultiChoice Nigeria, Busola Tejumola and the marketing director at Moniepoint Nigeria, Chinedu Oparaku, on behalf of the organisers.

Like other past BBNaija winners, Ilebaye is expected to pay PIT from the N120 million cash prize to the Lagos State government.

The 22-year-old and the show’s youngest winner announced on Saturday, October 7, that she would pay tithe from the prize.

Lagos govt cheekily demands tax from BBNaija winners

On September 28, 2020, while congratulating the winner of the BBNaija Season 5 reality show, Olamilekan Agbeleshe, popularly known as Laycon, the Lagos State Internal Revenue Service (LIRS) said it expected to receive Laycon’s tax in 2021 from the N85 million worth of prizes.

On October 4, 2022, the LIRS reminded the BBNaija Level Up star winner, Ijeoma Josephina Otabor, fondly called Phyna, to pay her tax from the N100 million she clinched from the show.

With the trend, the current BBNaija winner, Ilebaye, is expected to pay her PIT from the N120 million cash price to the LIRS.

Why Ilebaye is liable to pay tax from the prize money

According to the LIRS, PIT is imposed on individuals in employment or running small businesses under a business name or partnership.

It is generally collected by state governments from residents, regardless of whether they are federal, state, local government, or private sector workers, with the exemption of highly mobile federal workers (expatriate, police, military, etc) and residents of the Federal Capital Territory which the Federal Inland Revenue Service collects.

The current law guiding the taxation of personal incomes is the Personal Income Tax Act (Cap P8 LFN 2004).

Under the law, federal and state tax boards are empowered to identify persons living in or earning income from Nigeria who must pay tax, assess revenues, and tax their gains using specified guidelines and rules.

The law also guides tax officials in identifying the residence of potential taxpayers and the sources and origins of their incomes.

Under the LIRS structure, PIT includes pay-as-you-earn (PAYE), taxes from employment and taxes from self-employed persons (Direct Assessment).

Since it is legally binding for individuals to pay tax, any income or jackpot earned from competitions and gambling activities (games, lottery, casino) is subject to general income tax laws.

The formula for tax rate progresses from seven per cent when an individual’s annual income starts from N300,000 to 24 per cent when over N3,200,000, according to PwC, a tax firm.

Tax payment runs from January 1 to December 31 in a fiscal year, and tax returns are to be filed with the relevant tax authority within 90 days of the end of the fiscal year.

“All taxable persons (whether in salaried employment or self-employed) within the state are required to file their statutory annual income tax returns via the e-Tax platform,” a notification, signed by the LIRS executive chairman, Ayodele Subair, clearly stated.

Individual – Sample personal income tax calculation

Based on the formula provided, it is assumed that the only relief allowances are consolidated relief allowance (CRA) and pension contribution.

Section 33(2) of the Personal Income Tax Act (PITA) has been amended as follows; “For the purposes of this Section, “gross income” means income from all sources less all non-taxable income, income on which no further tax is payable, tax-exempt items listed in paragraph (2) of the sixth schedule and all allowable business expenses and capital allowances.”

In line with the Act, CRA is the higher of N200,000 or 1% of Gross Income plus 20% of Gross Income, while pension contribution is 8 per cent of gross income. It, therefore, means that the taxable income is N87.12 million while PAYE is N848,000. 

Please see the table below for a rough calculation using the abovementioned formula.

On Monday, June 5, 2023, the Lagos government filed a 12-count charge against the managing director of an interior firm and a social media celebrity, Ehizogie Ogbebor, over alleged failure to file tax returns.






     

     

    According to the report, Ehizogie allegedly refused to pay PIT to the LIRS within the time stipulated by law since 2014 till date.

    The report further revealed that a famous Nollywood actress, Iyabo Ojo, was dragged to court over payment of N18,640,092.00 as PIT.

    On March 3, 2019, the state High Court in Igbosere issued a bench warrant for the arrest of the actress and producer, Coker, over a tax evasion charge.

    Legal experts submit to the extant laws that tax is a civic duty for citizens to pay and not to be caught in the web of evading or avoiding taxes.

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