A Life in Tax: The Retiree and the Revenue Officer. One quiet morning, a revenue officer approached me with a question that seemed simple on the surface but reflected a common issue in tax administration. He said, “Sir, what assessment should be done on a retiree who lives only on his pension but resides in our state?”
Questions like this remind me that taxation is not only about collecting revenue; it is also about understanding the law and applying it fairly.
I explained that under the Personal Income Tax Act (PITA) and the current tax framework in Nigeria, pension income received after retirement from an approved pension scheme is exempt from Personal Income Tax.
This means that where a retiree lives solely on his pension, that income should not be subjected to tax assessment. Pension represents the reward for years of service, and the law recognises that retirees deserve protection from further tax burdens on that income.
Therefore, if a retiree residing in a state earns only pension, a revenue officer should ordinarily not raise any PAYE or personal income tax assessment on that pension income.
However, taxation rarely exists in isolation. I also reminded him that the situation changes if the retiree has other sources of income.
For instance, if the retiree runs a business, provides consultancy services, earns rental income from property, receives investment income, or returns to employment after retirement, those additional earnings may become taxable under the Personal Income Tax regime in the state where the individual resides.
In such circumstances, the assessment would apply only to the additional taxable income, while the pension itself remains exempt.
Moments like this highlight an important lesson in my journey in tax practice: good tax administration requires not only knowledge of the law but also judgment, fairness, and clarity of interpretation. A revenue officer must know when to assess, and just as importantly, when not to assess.
Indeed, a life in tax constantly reminds us that the goal of taxation is not merely revenue collection, but the balanced application of the law in a way that respects both the taxpayer and the state.
Olatunji Abdulrazaq CNA,ACTI,ACIArb(UK)
Founder/CEO,Taxmobile.Online
