Overview of Taxation and Nigerian Tax System Final

See discussions, stats, and author profiles for this publication at: https://www.researchgate.
net/publication/344891262
Overview of Taxation and Nigerian Tax System
Chapter · January 2020
CITATIONS READS
0 15,016
1 author:
Godwin Emmanuel Oyedokun

Lead City University Ibadan
146 PUBLICATIONS 225 CITATIONS
SEE PROFILE
Some of the authors of this publication are also working on these related projects:
Development Finance View project
COST CONTROL AND PROFITABILITY OF SELECTED MANUFACTURING COMPANIES IN NIGERIA View project
All content following this page was uploaded by Godwin Emmanuel Oyedokun on 26 October 2020.
The user has requested enhancement of the downloaded file.

TAX MANAGEMENT
AND
COMPLIANCE IN NIGERIA
EDITED BY
Muhammad Akaro Mainoma
Godwin Emmanuel Oyedokun
Kabiru Isa Dandago
Muhamad Taofeeq Abdulrazaq
Ishola Rufus Akintoye
Famous Izedonmi Prince
Rafiu Oyesola Salawu
TAX MANAGEMENT AND COMPLIANCE IN NIGERIA TAX MANAGEMENT AND COMPLIANCE IN NIGERIA
EDITORS ISBN: 978-978-978-734-0
Professor Muhammad Akaro Mainoma Nasarawa State University, Keffi, Copyright © 2020 – OGE Business School
Nigeria
Professor Godwin Emmanuel Oyedokun Lead City University, Ibadan, Nigeria All rights reserved. No part of this publication may be reproduced,
Professor Kabiru Isa Dandago Bayero University, Kano, Nigeria stored in a retrieval system, or transmitted in any form or by any means,
Professor Muhamad Taofeeq Abdulrazaq Lagos State University, Ojo Lagos, electronic, mechanical, photocopying, recording, or otherwise without
Nigeria the prior joint permission of the Author.
Professor Ishola Rufus Akintoye Babcock University, Ilishan-Remo,
Nigeria Published in Nigeria by:
Professor Famous Izedonmi Prince University of Benin, Benin City, OGE Business School
Nigeria 10, AbiodunSobanjo Street, Off BayoAjayi Street,
Professor Rafiu Oyesola Salawu Obafemi Awolowo University, Ile-Ife, Off Hakeem Balogun Street, Alausa
Nigeria Aigdingbi, Ikeja, Lagos. Nigeria
godwinoye@yahoo.com; info@ogecops.com
www.ogecops.com
Quality Reviewers
+2348033737184
Professor Taiwo Olufemi Asaolu Obafemi Awolowo University, Ile-Ife, +2348055863944
Nigeria
+2348095419026
Professor S.A.A. Aruwa Nasarawa State University, Keffi,
Printed in Nigeria by:
Nigeria
Diamond Prints & Design
No 8, Rufai Street, Off Sipeolu Street,
Shomolu, Lagos, Nigeria
peteromoyibo@gmail.com
08037271767
ii iii
DEDICATION
For more information about the book, and order, please contact:
This edited book is dedicated to all Tutors, Teachers, Lecturers,
OGE Business School Researchers, Professors and all lovers of education
10, AbiodunSobanjo Street, Off BayoAjayi Street,
Off Hakeem Balogun Street, Alausa
Aigdingbi, Ikeja, Lagos. Nigeria
godwinoye@yahoo.com; info@ogecops.com
www.ogecops.com
+2348033737184,
+2348055863944
+2348095419026
iv v
ABOUT THE BOOK PREFACE
This edited book titled Tax Management and Compliance in Nigeria is Tax Management and Compliance in Nigeria is a compendium of
the current write-up of about twenty-four erudite scholars with verse interesting discourse with an emphasis on various parts of tax
knowledge of Taxation, Accounting, Law, Finance, and Business management and tax compliance in Nigeria which has been an issue in this
among others. The twenty-nine chapter therein critically evaluates Tax era of the dwindling economy.
management, Tax compliance, Tax reforms, the Nigeria tax system, Over time, practitioners, administrators, academic, professionals in the
Taxation legal and regulatory framework, Alternative tax policy, Tax field of tax have been involved in rigorous searching of international
incentives, Transfer pricing, Tax planning, Tax assessment, Tax risk, journals, convention, international regulation, departmental instructions,
and Reviewed cases in taxation and not without taking readers through and guidelines to determine how best to tackle management and
their various effects of the economy of the Nigerian state in the past, compliance issue of tax, hence the diverse but collaborative contributions
present with some pictures and suggestions for the future. from erudite scholars and practitioners in taxation to address issues
through writing of this book.
Professor Muhammad Akaro Mainoma, Professor Godwin Emmanuel
Oyedokun, Professor Kabiru Isa Dandago, Professor Muhamad Tax Management and Compliance in Nigeria as an edited book has
Taofeeq Abdulrazaq, Professor Ishola Rufus Akintoye, Professor twenty-six article chapters with topics ranging from tax compliance,
management and challenges in Nigeria, relevance of culture in tax
Famous Izedonmi Prince, and ProfessorRafiuOyesolaSalawu were the
compliance, multiplicity of tax, tax risk management, bridging tax gaps in
seasoned academics of repute that painstakingly took time to edit this
Nigeria through tax planning and systemic approach to sustaining Nigeria
book and made it suitable for tutors, teachers, lecturers, researchers, tax system amongst others which are compiled and written and edited by
Professors and all lovers of education. The quality review was done by over forty professionals and academicians with the aim of enlightening
the duo of Professor Taiwo Olufemi Asaolu and Professor S.A.A. and educating practitioners, researchers, academicians and students of
Aruwato meet a desirable standard. various higher institutions both in Nigeria and abroad on the issues of tax
management and tax compliance.
This book will immensely benefit all lovers of education, taxpayers,
administrators, business owners, professionals, policymakers, The book is written in plain language and devoid of professional jargons
lecturers and students of higher learning (Universities, Polytechnics, and it is a product of careful studies, researches, and practices over time
Monotechnics, and Colleges of Education) across the country as well from well-meaning academic professionals in taxation. It is, therefore, a
as those writing various related professional examinations in taxation must-read for all professionals, tax administrators and students of various
and accounting. levels in Nigeria and abroad. However further criticism is welcome for
inclusion in the revised edition.
Prof. Muhammad A. Mainoma

Prof. Godwin E. Oyedokun
Lead Editors
vi vii
ACKNOWLEDGMENTS FOREWORD
To God be the glory. Tax management and compliance involve the implementation of
management decisions based on principles, procedures, and actions to
We appreciate the time and contributions among other resources of ensure the effectiveness of remittance by taxpayers. The study of tax
Professor Kabiru Isa Dandago, Professor of Accounting and Finance at management and compliance, therefore, emphasizes the thorough
Bayero University, Kano, Professor Muhamad Taofeeq Abdulrazaq, evaluation of the strength and weaknesses and ways of increasing the
Professor of Law and Taxation at the Lagos State University, Ojo, compliance level in Nigeria.
Professor Ishola Rufus Akintoye, Professor of Accounting and Finance
at Babcock University, Ilishan-Remo, Professor S.A.A. Aruwa, This edited book contains various topics related to tax management and
Professor of Accounting and Finance at Nasarawa State University, tax compliance in Nigeria and as it is no news that the country is
Keffi, Professor Famous Izedonmi Prince, Professor of Accounting at currently facing various issues in terms of the compliance level of
University of Benin, Benin City and Professor Rafiu Oyesola Salawu taxpayers and also ensures adequate management to address main
and Professor Taiwo Olufemi Asaolu, Professors of Accounting and economic issues facing the country.
Finance at Obafemi Awolowo University, Ile-Ife, Nigeria for their roles
in editing and writing forward for this book. This book has various contributions from academicians and
practitioners who are deeply rooted in tax practices as edited by
We noted the contribution of and the sleepless nights of Mr. Omoyibo Professor Muhammad Akaro Mainoma and Professor Godwin
Peter and his staff of Diamond Prints and Design in ensuring this book Emmanuel Oyedokun as the lead editors among others has sufficiently
is a success. covered key areas of tax management, tax planning and tax compliance
in the country with a detailed exposure relevant to readers at levels of
We also acknowledged the efforts of all technical staff at OGE Business both academics and professionalism.
School who all worked day and night in supporting the production of
this book such as; Joseph Oluwakayode Oyedokun, Taiwo Oyetope Having fully involved in the overall quality review and editing of this
Olakunle, Victor Oluwatobi Okunola, Khairat Oluwatoyin Ibrahim, compendium of writings, I, therefore, recommend this book on tax
Nasirat Oluwabukunmi Olaleken, SheuIsah, Amoo Tomiwa Samson, compliance and management to students, researchers, and
Olanrewaju Sulaimon Ganiyu, Adegoke Akinwunmi Opeyemi, practitioners of taxation who wish to widen their research knowledge/
Oyedokun Dolapo Micheal and Alimi Zainab Olayinka. scope on tax management and compliance level in Nigeria.
Prof. Muhammad A. Mainoma Professor Taiwo OlufemiAsaolu, FCA

Prof. Godwin E. Oyedokun Professor of Accounting and Finance
Lead Editors Obafemi Awolowo University, Ile-Ife, Nigeria
viii ix
TABLE OF CONTENTS ENHANCING TAXATION AS ALTERNATIVE
TO OIL
Somorin, Abiola Olateju.................................................... 119 - 143
COPYRIGHT.................................................................... iii - iv
DEDICATION................................................................... v MULTIPLICITY OF TAXES IN NIGERIA
Dada, Samuel Olajide ........................................................ 144 - 184
ABOUT THE BOOK ........................................................ vi
PREFACE ......................................................................... vii IMPACT OF VALUE ADDED TAX ON
ACKNOWLEDGMENTS................................................. viii ECONOMIC GROWTH IN NIGERIA
Muhibudeen, Latifat and Abdulkadir, Abba Hafiz.............. 185 - 208
FOREWORD .................................................................... ix
TABLE OF CONTENTS ................................................... x - xiii TAX REFORMS AND SUSTAINABILITY OF
SMALL AND MEDIUM SCALE ENTERPRISES
NOTES ON CONTRIBUTORS ........................................ xiv - xvii
IN NIGERIA
Hassan, T. A. and Adegboyega Adebayo ............................ 209 - 221
OVERVIEW TAXATION AND NIGERIAN
TAX SYSTEM ALTERNATIVE TAX POLICY CHOICES FOR
Oyedokun, Godwin Emmanuel ......................................... 1 - 53 BUSINESS SUSTAINABILITY: LESSONS AND
PRESCRIPTIONS
NEXUS BETWEEN TAXATION AND Dike, Mark Anthony C....................................................... 222 - 231
SUSTAINABLE BUSINESS DEVELOPMENT
Mainoma, M. Akaro .......................................................... 54 - 62 TAX INCENTIVES AND FINANCIAL
PERFORMANCE OFMULTINATIONAL FIRMS
TAX MANAGEMENT AND COMPLIANCE
IN NIGERIA
Adegbenro, Saheed Aderemi ............................................... 63 - 76
Lawal, Babatunde Akeem, and Ajayi-Owoeye,
Ayooluwa Olotu................................................................. 232 - 256
TAX COMPLIANCE AND ITS CHALLENGES IN
NIGERIA: THE PRACTICAL PERSPECTIVE
TRANSFER PRICING TECHNIQUES AND TAXES
Ogbonna, Udochukwu ...................................................... 77 - 83
OF ASSOCIATED COMPANIES IN NIGERIA
Dada, Samuel Olajide; Abiodun, Nurudeen O.;
RELEVANCE OF CULTURE IN ENSURING
Benjamin, Rebecca D.; and Adekunle, Isoken J.................. 257 - 279
SUSTAINABLE TAX COMPLIANCE AMONG
NIGERIANS TAX RISK MANAGEMENT
Agbetunde, LateefAyodele................................................ 84 - 118 Ademola, Olanrewaju ........................................................ 280 - 306
x xi
IMPERATIVE OF TAX INCENTIVES IN NIGERIA LIVING TRUST AS AN INSTRUMENT OF
Oyedokun, Godwin Emmanuel, Babalola Wasiu, WEALTH PLANNING
and Awosika Mayowa ........................................................ 307 - 342 Uwanna, Ikechukwu ......................................................... 484 - 490
TAX ASSESSMENT AND THE STATUTE OF TAXATION CASE REVIEW

LIMITATION: AN APPRAISAL Abdulrazaq, M. Taofeeq .................................................... 491 - 501
Joseph, Eimunjeze; Jawando, Mojisola and
Okolie, Chisom ................................................................. 343 - 374 BRIDGING TAX GAPS IN NIGERIA THROUGH
PLANNING
TAXATION PLANNING AND COMPLIANCE: Akintoye Ishola Rufus........................................................ 502 - 523
A NORMATIVE APPROACH
EDUCATION FOR NATIONAL DEVELOPMENT ADOPTION OF POPULATION CENSUS AND
Ikotun, SabicIdowu; Shonubi, Akeem Olalekan, STRUCTURE: A FRAMEWORK OF TAX
and Ajala, Olufunmilayo Adekemi..................................... 375 - 385 PLANNING AND COMPLIANCE IN NIGERIA
Ikotun, Sabic Idowu; Kayode George and Ajayi,
SYNOPSIS OF COMPANIES INCOME TAX ACT Olorunshola ....................................................................... 524 - 537
(CITA) CAP C 21 LAWS OF FEDERATION
OF NIGERIA (LFN), 2004 (AS AMENDED) ETHICAL ISSUES IN TAX PLANNING:
Somorin, Abiola Olateju..................................................... 386 - 429 SETTING UP OF A SUCCESSFUL TAX PRACTICE
Omonayajo Benjamin A..................................................... 538 - 565
ETHICAL ISSUES IN TAX PLANNING
Ademola, Olanrewaju ....................................................... 430 - 448 TAXATION IN A DIGITALIZED ECONOMY:
HOW PREPARED IS NIGERIA?
VOLUNTARY ASSET AND INCOME Oyetunji, Oluwayomi Taiwo and Lawal,
DECLARATION SCHEME (VAIDS): AN Busayo Olawumi................................................................ 566 - 587
APPRAISAL OF THE INTENT AND OBJECTIVE
Fowokan, TitilayoEni-Itan ................................................ 449 - 461 SYSTEMIC APPROACH TO SUSTAINING THE
NIGERIAN TAX SYSTEM
UTILIZING APPROVED TAXES AND LEVIES
Akintoye Ishola Rufus ....................................................... 588 - 608
COLLECTION ACT 2004 FOR EFFECTIVE
REVENUE GENERATION AT STATES LEVEL:
THE ROLES OF CHARTERED ACCOUNTANTS
Dandago, Kabiru Isa ......................................................... 462 - 484
xii xiii
NOTES OF CONTRIBUTORS Ajayi-Owoeye, Ayooluwa Olotu is of the Department of Accounting,
Babcock University Ilishan Ogun State, Nigeria.
Abdulkadir Abba Hafiz is of the Department of Accounting, Yusuf
Maitama Sule University Kano, Nigeria. Awosika Babalola Wasiu is a Postgraduate Lecturer at Lead City
University, Ibadan.
Abdulrazaq, M. Taofeeq is a Professor of Taxation, Faculty of Law,
Lagos State University and former Registrar/Chief Executive of Benjamin, Rebecca D. is of the department of Accounting, School of
Chartered Institute of Taxation of Nigeria. Management Sciences Babcock University Ilishan-Remo Ogun State,
Nigeria
Abiodun Nurudeen O. is of the department of Accounting, School of
Management Sciences Babcock University Ilishan-Remo Ogun State, Dada Samuel Olajide is of the Babcock University Ilishan Remo
Nigeria Ogun State, Nigeria.
Adegbenro, Saheed Aderemi is a lecturer at Lead City University, Dandago Kabiru Isa is a Professor of Accounting at the Department
Ibadan. of Accounting, Bayero University, Kano and a Professor of Taxation at
Kaduna State University.
Adegboyega Adebayo is of the Department of Business Education, Tai
Solarin University of Education Ijagun Ogun State. Dike Mark Anthony C. is a Managing Partner of Patmos
Professionals and Past President of Chartered Institute of Taxation of
Adekunle, Isoken J. is of the department of Accounting. College of Nigeria
Arts, Social and Management Sciences, Crescent University,
Abeokuta. Eimunjeze, Joseph is a Partner in the Firm's Tax, Banking and Finance
and Corporate Advisory Teams UdoUdoma and Belo Osagie, Lagos
Ademola Olanrewaju is a Partner at Ascension Consulting Services.
Fowokan Eni-Itan Titilayo is the Group Head Tax, Dangote
Agbetunde Lateef Ayodele is a Researcher/Chief Lecturer and former Industries Ltd and a Council Member of the Chartered Institute of
Head of the Department of Accountancy, Yaba College of Technology Taxation of Nigeria (CITN)
Yaba Lagos, Nigeria
Hassan, T. A. is of the Department of Business Education, Tai Solarin
Ajala Olufunmilayo Adekemi is of the Department of Banking and University of Education IjagunOgun State.
Finance, the Polytechnic of Ibadan, Oyo State, Nigeria.
Ikotun, Sabic Idowu is a Senior Research Fellow of Centre for
Ajayi Olorunshola is a lecturer with Caleb Business School, Caleb Environment and Management, Lagos and Adjunct Lecturer in the
University, Magodo, Lagos. Department of Business Administration, McPherson University, Seriki
xiv xv
Sotayo, Ogun State, and Caleb Business School, Caleb University, Okolie Chisom is an Associate in the Firm's Tax, Banking and Finance
Imota, Lagos. and Capital Market, Udo Udoma and Belo Osagie, Law Firm, Lagos
Ikotun, Sabic Idowu is of the Department of Business Administration, Onyekwelu, UcheLucy-Anne is a Senior Lecturer in the Department
McPherson University Seriki-Sotayo Abeokuta Ogun State, Nigeria of Accountancy, Enugu State University of Science and Technology,
Enugu
Ishola Rufus Akintoye is a Professor of Accounting and Finance at
Babcock University, Ogun State and he is also a Professorial Chair of Oyedokun Godwin Emmanuel is a Lecturer in the Faculty of
Chartered Institute of Taxation of Nigeria at the same University. Administration, Department of Accounting, Nasarawa State
University, Keffi and a Council Member of the Chartered Institute of
Jawando Mojisola is a Senior Associate in the Firm's Tax, Power and Taxation of Nigeria (CITN)
Corporate Advisory Teams, UdoUdoma and Belo Osagie, Law Firm,
Lagos Oyetunji Oluwayomi Taiwo, is a Lecturer at McPherson University,
Seriki – Sotayo, Ogun State
Kayode George is a lecturer in the Department of Criminology,
Security, Peace and Conflict Studies, Caleb University, Imota, Lagos Uwanna, Ikechukwu is of Tsedaqah Attorneys, Lekki, Lagos, Nigeria
State, and Deputy Dean, Caleb Business School, Caleb University,
Imota, Lagos.
Lawal Babatunde Akeem is a Senior Lecturer and Head of the

Department of Accounting and Finance, McPherson University,
Seriki-SotayoOgun State, Nigeria
Lawal Busayo Olawumi is an Accountant at Extension Publications

Limited, Ososami, Ibadan, Oyo State.
Mainoma M. Akaro is a Professor of Accounting & Finance and

Immediate Past ViceChancellor at Nasarawa State University, Keffi,
and the President of Association of National Accountants of Nigeria
Muhibudeen Latifat is of the Department of Accounting, Yusuf

Maitama Sule University Kano, Nigeria.
Ogbonna, Udochukwu Godfrey is a Lecturer at Rhema University,

Aba, Nigeria
xvi xvii
Tax Management and Compliance in Nigeria ISBN: 978-978-978-734-0
Overview of Taxation and Nigerian Tax System January, 2020, PP 1-53
CHAPTER ONE
OVERVIEW OF TAXATION AND NIGERIAN TAX SYSTEM
OYEDOKUN Godwin Emmanuel

godwinoye@yahoo.com; +2348033737184
INTRODUCTION TO TAX AND TAX ADMINISTRATION

Tax has been defined by many scholars in the past, it is a compulsory levy imposed by the
government on the income of individuals and cooperation to generate revenue for running the
activities of the government.
Taxation is described it as a compulsory contribution by the government and he concluded that

even though taxpayers may receive nothing identifiable in return for their contribution, they
nevertheless have the benefit of living in a relatively educated, healthy and safe society.
However, the government ought to use this contribution to provide for a relatively safe and
secure environment for the citizens Nightingale, (1997). In other words, he defined taxation as
a levy imposed by the government on the income profit of the individual, partnership and
corporate organization.
Taxation is defined as an enforceable contribution of money enacted pursuant to legislative

authority. If there is no valid status by which it is imposed. A CHARGE IS NOT TAX. Taxation
is targeted towards alleviation and social welfare.
Purposes/ Objectives of Taxation

From the definition above, taxes are paid to the government for different purposes; some of
these are highlighted as follows:
1. Revenue Generation: the primary objective of tax is the generation of revenue to help
the government to run the administration and provide basic facilities for the citizens of
the country that is finance ever-increasing public-sector expenditure.
2. Provision of Merit goods: Merit goods include health and education. This must not be
left entirely private hands though private participation should be encouraged.
307
3. Control the level of inflation: this is function is performed in situation where people
are taxed heavily, their disposable income will be reduced, and they will have less
purchasing power, therefore reducing the level of inflation
4. Redistribution of income: Tax system is a means of ensuring the redistribution of
income and wealth in order to reduce poverty and promote social welfare. This can be
achieved whereby people earning more will pay higher tax than those earning less.
5. To solve Balance of payments problems: Where the import is more than the export,
the government can raise taxes to take care of the deficit that arises as such.
6. To discourage businesses and consumption of “harmful Goods: Taxes can be used
to discourage businesses that are harmful to the growth of the economy of the country
and also consumption of harmful goods such as cigarette and alcohol, by imposing
heavy taxes on them.
Principles of Taxation
Adam Smith in 1776 sets out the canon or principle of taxation in his work “The Wealth of
Nations”. These are principles otherwise called characteristics imperative for every
government to put in place to ensure an efficient, effective, just and equitable tax system. These
are:
1. Canon of Equity: this principle sates that those in the same income bracket should pay
the same tax. This can be horizontal equity or vertical equity. Horizontal equity refers
to people in the same income group to pay the same/ equal amount of tax while vertical
equity refers to people with different income to pay different tax.
2. Canon of certainty: this principle states that the scope of the tax must be clear and
ascertainable that is actual tax to be paid, how it was computed, when and where to pay
it.
3. Canon of convenience: this states that the timing and modality of tax payment must be
convenient to the taxpayer.
4. Canon of neutrality: it states that the tax system must be neutral as not to affect work,
savings and investments negatively.
5. Canon of Economy: it states that the administrative costs of collecting tax should be
reasonable enough as to contribute meaningfully to the revenue pool of the government.
6. Canon of flexibility: this principle states that the tax system must not be static but
should be subject to change, so as to suit what obtains at any moment of time.
308
7. Canon of simplicity: This states that tax should not be too complex where tax laws are
implied ones and subject to different interpretation. Also its computation must be
simple to understand by the tax payer and others.
Structure/ Classification of Tax System
CLASSIFICATION OF TAXATION
TAX BASE TAX SUBJECT
TAX BURDEN
1. Income
2. Consumption 1. Tax Progression 1. Direct Tax
3. Capital 2. Proportional Tax 2. Indirect Tax
3. Regressive Tax System
Taxes can be classified in any of the following:

A. Classification by Method/Tax Burden: This class is subdivided to three forms of tax.
These are:
- Proportion Tax: -it has a fixed rate that is applied to a tax payer’s assessable income
to obtain the tax liability. The tax payable is proportional to the taxpayers’ income.
- Progressive Tax: This applies higher tax rates as income increases. Its sole objective
is to redistribute income in the economy. It is also called “Pay as you earn”.
- Regressive Tax: Formerly used in Britain, the concept is the higher you earn, the lower
the tax you pay.
B. Classification by Incidence/ Tax Subject: this is further divided into two. These are:
- Direct Tax: this is assessable directly on the taxpayer who is required to pay tax on his
property, income or profit. Direct taxes include: Personal income tax, Companies
Income Tax, Capital Gains Tax, Petroleum Profit Tax, Education Tax.
- Indirect tax: indirect taxes are imposed on commodities before they reach the
consumer, and are paid by those upon whom they ultimately fall. They are paid as part
of the selling price of the commodity. Examples are: Customs and excise duties, Value
Added Tax, Stamp Duties, Import and Export duties.
C. Classification by Perspective of Tax Base: Taxes can also be classified according to
what is being taxed. In Nigeria, the following bases are in use:
309
- Capital base - This include Capital Gains Tax. This is on the sale of capital goods (non-
current asset).
- Income base-This include: Personal Income Tax, petroleum income tax and Company
Income Tax as the name implies the income of the government is being taxed upon.
- Consumption base - The examples of the case of consumption are value added tax,
stamp duties and excise duties.
Tax Laws
The Nigeria tax system is a tree tier system made up of the Federal, State and Local
Government. Section 4 & 150 item D of part II of the second schedule of the Nigerian 1999
Constitution, gives the government the right to levy taxes on individuals and organizations. For
tax to be effective, it must be backed by the law passed by the legislator or the parliament (A.G
of Ogun State v. Aberuagba, 1985).
Decree No.21 of 1998 Law of the Federation of Nigeria (LFN), contains the Federal
Government approved the list of Taxes and Levies that could be collected by the three tiers of
the Government. The purpose of which was to avoid duplication of taxes or conflict among
the three tiers of Government (Agbonika, Agbonike, & Mohammed, 2018). The approved list
was further harmonized/amended in year 2015 via the schedule to the Taxes and Levies
(Approved List for Collection) (Act amendment) Order, 2015.
Tax Laws in Nigeria

There exist various tax laws in Nigeria, these tax laws govern tax administration in the country.
The legislative power for taxes in the country is vested on the Federal Government but
administered by the three tiers of the government (i.e. Federal, State and Local Government).
List of Tax Laws in Nigeria

Below is the list of the various tax laws in Nigeria, short notes on the laws and some of the
vital sections and subsections addressed by the various Acts follows these list:
(i) Company Income Tax Act, Cap. 21 Volume 3, LFN 2004 (as amended)
(ii) Education Tax Act; CAP. E 4 Volume 17 LFN 2004 (Repalced with Tertiary
Education Trust Fund (Establishment, etc) Act, 2011.
(iii) Petroleum Profit Tax Act; Cap. P13 Volume 13 LFN 2004 (as amended)
(iv) Personal Income Tax Act; Cap. P8, Volume 13 LFN 2004 (as amended)
310
(v) Value Added Tax Act; Cap. V1 Volume 15 LFN 2004 ( as amended)
(vi) Stamp Duty Act; CAP. S8 LFN 2004 (as amended)
(vii) Capital Gains Tax Act; Cap C1 Volume 2 LFN 2004 (as amended)
(viii) National Information Technology Agency Act; CAP N156 LFN 2004 (as
amended)
(ix) Custom and Exise Management Act; Cap 45 LFN, 2004 (as amended)
(x) Casino Taxation Act; CAP. C3 LFN 2004
(xi) Income Tax (Authorised Communications) Act; CAP. 14 LFN 2004
(xii) Industrial Development (Income Tax Relief) Act; (IDA) CAP. 17 Volume 7
LFN 2004
(xiii) Federal Inland Revenue Service (Establishment Act) CAP.F 36 2007
(xiv) Taxes and Levies (Approved List for Collection) Act; CAP T2 LFN 2004 (as
amended)
(xv) Nigerian Export Processing Zones Authority Act; 1992 Decree No. 63 (contains
tax laws applicable to Export Processing Zone in Nigeria)
(xvi) Finance Act 2019 (Amending 7 Tax Laws)
Company Income Tax Act (CITA)

The Company Income Tax Act; Cap C 21 Volume 3 Law of the Federation (LFN) 2004 (as
amended), provides legal backing to the imposition of Income tax on companies in Nigeria.
Section 9(1) of the act provide that Company Income Tax (CIT) is an annual tax, and for each
year of assessment the tax shall be payable at the rate contained under Section 40 of the Act
upon the profits of company accruing in, derived from, brought into, or received in, Nigeria.
Tax rate
The rate for Companies Income Tax as provided under section 40(1) of CITA is thirty Kobo
for every naira (i.e. 30%) of a company’s assessible profit. Section 29 of the Act provides the
basis of computing assesseble profit of a company.
Companies that have been in operation for at least 4 calender years are subjected to the
minmum tax rule, except those specifcally exempted by the law. Section 33(1) of Act provides
that the Minmum tax rule comes into play when: (i) a company has made a tax loss; (ii) total
profits result in no tax payable; or (iii) tax payable is less than the minimum tax.
In line with Section 33(2) of the Act, minimum tax that shall be computed/payable as follows:
311
a) If the turnover of the company is NGN500,000 or below and the company has been
in business for at least 4 calender years
i) 0.5% of gross profit
ii) 05.% of net assets
iii) 0.25% of paid up capital
iv) 0.25% of turnover (not exceeding NGN 500,000)
b) Where the turnover exceeds NGN 500,000 the minimum tax is the sum of the
highest of a above plus 0.125% of turnover in exess of NGN 500,000
Residency
Profits of a Nigerian company as provided under Section 13(1) of the Act shall be viewed as
been made in Nigeria irrespective of where the profit might have arose and wether such profit
have been brought into or received in Nigeria or not.
Section 13 (2) of the act addresses the issue of residency of a non-Nigerian company as regards
its exposure to CIT in Nigeria. A non-Nigerian company is a company or corporation that
is not registered or incorporated in Nigeria, but which derives income or profits from
Nigeria. It could also be referred to as a foreign company and it means any company
established under any law in force in a territory or country outside Nigeria (Sec tion 105
CITA 2004).
Profits of a non-Nigerian Company as captured under Section 13(2)(a)-(d) of the Act shall be
deemed to be derived from Nigeria for purpose of tax if.
i) The company has a fixed base in Nigeria to the extent that the profit is
attributable to the fixed base.
ii) ii) The company does not have a fixed base in Nigeria but habitually operate a
trade or business through a person or some other company authorized to act on
its behalf.
iii) That trade or business or activities involve a single contract for surveys,
deliveries, installations or construction; or
iv) Where the trade or business or activities is between the company and another
person controlled by it or which has a controlling interest in it to the extent that
artificial or fictitious.
312
Assessable Profit
Section 24 & 28 of CITA covers expenses and incomes that shall not be included in the
computation of assessable profit for the purpose of tax, they include: Loss Relief; Capital
allowance, Balancing Allowance and Balancing Charges. Section 24 of CITA allows for
expenses which are “wholly, exclusively, necessarily and reasonably” incurred of running the
company, such expenses are to be deducted or set-off while computing the assessable profit of
companies. Section 25 covers deductible donations while section 26 covers deduction for
research and development. Section 27 of CITA on the other hand covers those deduction that
are disallowed from profit.
Section 31 of CITA covers the ascertainment/calculation of total profit. The total profits of any
company shall be the amount of its total assessable profits from all sources for the year together
with any addition made or allowed in accordance with the provision of section 31, 32 and the
schedule to CITA.
Tax Returns
Section 55 to 60 of CITA covers the submission of returns to the tax authority. A newly
incorporated companies is to file its CIT within 18 months from date of incorporation or not
later than 6 months after end of its accounting period, whichever is earlier. Existing companies
are required to file their CIT returns within 6 months from the end of their accounting year.
Education Tax Act (EDTA)

Education Tax Act; CAP. E 4 Volume 17 LFN, 2004 and Education Tax Fund (Amedment)
Act No.17, 2003, is now governed by the Tertiary Education Trust Fund (TETFUND)
(Established, Etc) Act 2011. Funds realised from the Education Tax are applied to the
rehabilition, restoration and consolidation of tertiary education in Nigeria by TETFUND. The
funds are distributed between Universities, Polytecnics and Colleges of Education in the ratio
of 2:1:1 respectively.
Tax Rate
The act requires every company incoporated in Nigeria to pay 2% of its assessible profit as
Education Tax (EDT). The law is applicable under the Company Income Tax Act (CITA) as
well as the Petroleum Profit Tax Act (PITA). EDT is a deductable tax for the purpose of
313
determing the assessible profis of companies engaged in petroleum operation (upstream) as

provided under Section 1(3) of the Act.
Tax Returns
The due date of filing Education Tax Returns is same as that of CIT and PPT. As provided by
Section 11 of the TETFund (Establishment, ETC) Act, first offence against the Act is liable
upon conviction to a fine of N1,0000,000 or a term of 6 months improsonment or both. Second
and subsequent offences attract a fine of NGN 2,000,000 or a term of 12 months or both.
Petroleum Profit Tax Act (PPT)

The Petroleum Profit Tax Act; Cap P13 Volume 13 LFN 2004 (as amended) governs the
taxation of companies enguaged in the core activities of exploration and production of oil and
gas under the ground or sea bed (i.e. upstream operations) in Nigeria.
Tax Rate
Section 21(1) of the Act imposes 85% tax rate on the chargeable profit of an upstream company
that had been in operation for more than five (5) years. For those in operation for less than 5
years, their tax rate shall be 65.75% as contained under Section 21(2) of the Act. Section 22(2)
also puts the tax rate for Companies under production sharing contract at 50% of their
chargeable profit for the contract period. Companies dealing in downstream petroleum sector
are however charged 30% on their profits. Aside the above taxes, as provided under section 1
of the Education Tax Act 2004 (as amended), all such companies are as well to pay 2% EDT
on their chargeable profit. The EDT is however a deductable expense in computing the
assessable profits of upstream petroleum companies.
Tax Retruns
Estimated tax returns for each accounting period are to be submitted not later than two months
after the commencement of the accounting period. Final returns for each accounting period
shall be filed within five months after the expiration of the accounting period.
As provided under section 51 of the Act, penalty for late submission of a return is N10,000 and
further sum of N2,000 for each and every day the failure continues. Any instalment of tax not
paid on the due date shall attract a penalty of 10% and interest at prevailing minimum
314
rediscount rate of CBN and if payment is not made whithin one month, enforcement shall take
place.
Personal Income Tax Act (PITA)

The personal Income Tax Act; Cap P8 Volume 13 LFN 2004 provides the legal backing for
the collection of Personal Income Tax (PIT) in Nigeria. The act was amended by the Personal
Income Tax (Amendment) Act, 2011. Section 3 of PITA provides that every tax payer in
Nigeria is liable to pay tax on the totality of his income whether derived from whithin or outside
Nigeria. The salaries, wages, fees, allowances, and other gains or benefits, given or granted to
an employee are chargeable to tax. An employer under the Act is expected to register with the
relevant tax authority for the purpose of deducting income tax from his employees salaries with
or without formal notification or direction by the relevant tax authority (Section 80(6)).
Section 1 and 2 of the Act provides that PIT shall be collected on income of individuals, a
Corporate sole or body of individuals, Communiteis, Families and Trustees or Executors of
any settlemen. PIT is a direct tax payable by the tax payers in the state in which they reside.
Taxes from the following persons are however excluded from state collectible taxes: (i)
employees of the Nigerian forces (Army, Navy, Air force or Police) exept those employed in
civilian capacity; (ii) Officers of the Nigerian foreign service; (iii) Residence of the Federal
Capital Territory, Abuja; and (iv) Persons residing outside Nigeria but who derives income or
profit from Nigeria. Taxes from these categories of persons are colleted by the Federal Inland
Revenue Service (Section 2(1)(a)(b) PITA).
Tax Rate
As contained under paragraph 3 of the Sixth schedule of the Personal Income Tax
(Amendment) Act, 2011, the PIT rate graduates from 7% to 24%., with a minimum tax level
set at 1% of gross income less than N300,000 per annum.
Paragraph 1 and 2 of the Schedule contains relief allowances and other deductions allowed to
be made from the gross income before arriving at the taxable income. In line with these
paragraphs, the tax payer is entitled to a consolidated relief allowance of N200,000 or 1% of
gross income, which ever is higher plus 20% of his gross income, as well as tax exempt
deduction for contrbutions made towards: (a) National Housing Fund Contribution; (b)
315
National Health Insurance Scheme; (c) Life Assurance Scheme; (d) National pension Scheme
and (e) Gratuities.
Tax Returns
The due date of filling returns for PIT is 31st March of every year. The due date of remmittance
of PAYE is the 10th day of every succeeding month. An employer is espected to file file the
return of emoluments and tax dedcued from employees in the preceeding year not later than
31st of January of every year (FIRS, n.d.).
An individual who fails to file a return shall be liable on conviction to a fine of N5,000 and
further sum of N100 for every day during which the failure continues or imprisonment of 6
months or both. Any employer who fails to file a return shall be liable on conviction to a
penalty of N500,000 for a corporate body and N50,000 in the case of an individual employer.
Value Added Tax Act

The Value Added Tax Act; Cap. VI Volume 15 LFN 2004 (as amended) provides the legal
backing to the imposition of Value Added Tax (VAT) in Nigeria. VAT is a consumption Tax
paid when goods are purchased, and services rendered; it is a form of indirect tax borne by the
final consumer as part of price paid for the goods or services.
Tax Rate
Section 4 of the Act provides the rate of VAT to be 5% on the value of all goods and services
as determined under sections 5 and 6 of the Act, except those goods or services exempted or
classified as zero rate under the First Schedule of the Act. However, with the Finance Act 2020,
this rate is now 7. % from February 1, 2020.
Registration
As provided under Section 8 of the Act, Companies are required to register with the Federal
Inland Revenue Service within six months of the commencement of business. Failure to
register shall attract a penalty of N10,000 payable for the first month in which the failure occurs
and a further N5,000 for each subsequent month in which the failure continues.
Tax returns
316
Section 15 of the Act provides that all taxable persons are required to file VAT returns every
month - not later than 21st day following the month of transaction. Government Ministries,
Departments & Agencies, Oil and Gas Companies play a dual role as taxpayers and agents of
VAT collection, they are as well required to file their monthly returns as contained in Section
15 of VATA. By virtue of the VAT (Amendment) Act, 2007, both Government agencies and
Oil and gas companies are empowered to withhold VAT at source and remit same to the FIRS
accordingly.
Section 25 to 37 of the Act covers the various offences and respective penalties. Such offences
include furnishing of false documents; Evasion of tax; failure to notify change of address;
failure to issue tax invoice; resisting, etc., an authorized officer; failure to register; failure to
collect tax; failure to remit tax etc.
Stamp Duties Act (SDA)

The Stamp duty Act, CAP S8, LFN 2004 (as amended) provides legal backing to the imposition
of Stamp Duties tax in Nigeria. Stamp duty is a tax that is levied on documents. Historically,
this included the majority of legal documents such as cheques, receipts, military commissions,
marriage licences and land transactions.
The administration of Stamp Duty is jointly carried out by the State and Federal authorities
depending on the nature of the document. Duties on documents executed between a company
and an individual, group or body of individuals are assessed and collected by the Federal Inland
Revenue Service (FIRS). Duties on documents executed between persons or individuals are
assessed and collected by the States Internal Revenue Service (IRS).
There are two forms of Stamp Duty: Fixed duties and Ad-Valorem. Fixed duties charges remain
same irrespective of consideration; Duties payable on Ad-Valorem varies with consideration
involved. Amount of duty payable is determined by the Commissioner of Stamps. The duties
must be paid before execution of document.
Capital Gains Tax Act (CGTA)

Capital Gains Tax Act; Cap. C1 Volume 3 LFN 2004 (as amended) governs the imposition of
Capital Gains Tax (CGT) in Nigeria. CGT is a tax passed on the gains made on the disposal of
317
an asset being the difference between the original purchase price of the assets and the sales
price.
Tax Rate
Section 2(1) of the Act put the rate of capital gains tax in Nigeria at 10% on accrued gains on
the disposed capital asset. Section 3 provides that chargeable assets include all forms of
property whether situated in Nigeria or not, including options, debts and incorporeal generally,
any currency other than Nigerian currency, any property created by the person disposing of it,
or otherwise coming to be owned without being acquired.
As provided under section 13 of the Act, allowable expenditure for the computation of CGT
includes the incidental costs which are wholly, exclusively and necessarily incurred for the
purposes of the disposal, such as fees, commission or remuneration paid for the professional
services of any surveyor or valuer, or auctioneer, or accountant, or agent, or legal adviser and
costs of transfer or conveyance. Section 26 to Section 42 of the act covers Organizations,
Statutory Bodies etc. excluded from CGT as well as various exempted gains.
Tax returns: Filing of Returns for CGT is same as in Company Income Tax
National Information Technology Development Agency Act (NITDA)

National Information Technology Development Levy (NITDL) is governed by the National
Information Technology Development Agency Act; CAP N156 LFN 2004 (as amended).
Section 16 of the Act assigns the collection of NITDL to the Federal Inland Revenue Service
(FIRS).
Tax Rate
Section 12(2)(a) of the Act puts the rate at 1% of profit before tax of companies and enterprises
with an annual turnover of N100,000,000. Section 17(2) of the Act provides that where the
levy is not paid within 60 days, a demand-note for the unpaid amount plus 2% of the levy shall
be due.
Liable Companies
The companies liable to this tax as captured under the third schedule of the Act are: (i) GSM
Service Providers and all Telecommunications companies; (ii) Cyber Companies and Internet
318
Provider; (iii) Pensions Managers and pension related companies; (iv) Banks and other
Financial Institution; and (v) Insurance Companies. This tax is payable by these companies in
addition to the payment of the regular CIT.
Custom & Excise Taxes Management Act

The Customs and Excise Management Act, Cap 45 LFN, 2004 (as amended) governs the
imposition of Customs and Excise or duties charged at the Nigeria’s ports (of entry or exit).
Duties are charged on both imports and Exports into or out of the country as contained under
Section 37(1) and Section 59(1) respectively, except permitted otherwise under the customs
laws.
Section 45 of the Act covers the valuation of imported goods for the purpose of ad valorem
duties. Subsection (1) provides that where duty is chargeable on imported goods by reference
to their value, their value shall be taken to be laid down in the First Schedule to the Act and
duty shall be paid on the value. The importer may also be required to provide necessary
information required for the valuation (Section 45(2)).
Witholding Tax (WHT)

WHT does not have a separate act, rather it is captured in the bodies of variuos tax legislations
such as CIT Act, PIT Act and PPT act. Witholding is an advance tax payment, representing
payment on account of final tax liability of the individual tax payer or company. It does not
represent a seprate or final tax and does not exempt the tax payer from filing of annual returns.
The person or organization making the deduction is expected to remit same to the relevant tax
authority.
319
Tax Rate
The WHT deduction rate is transaction type dependant ranging from 5% - 10% as shown
below:
Transactions Companies Individuals
Dividend, interest & rent 10% 10%
Royalties 10% 5%
Hire of equipment, motor vehicles, plants, and machinery 10% 10%
Commission, consultancy, technical and management fees,

10% 5%
legal fees, audit fees, and other professional fees
Construction 5% 5%
All types of contracts and agency arrangements, other than

5% 5%
sales in the ordinary course of business
Directors' fees N/A 10%
Tax Returns
The due date for filling WHT returns is 21st day of every succeeding month. Penalty for late
filling of retuns is N25,000 for the first month it occurs and N5,000 for each subsequent month
the failure continues.
Casino Taxation Act

The taxation of Casinos in Nigeria is governed by the Casino Taxation Act; CAP. C3 LFN
2004. The act contains 26 Sections and provides in part that; every licenced Casino is liable to
pay a tax (Casino revenue tax) on the net gaming revenue accruing to it. Licences shall only be
granted to a company having casino operations as its main object and duly incorpotaed in
Nigeria under the Companies and Allied Matters Act.
Tax Rate
The tax rate as provided under subsection (2) of the Act is 12.5%.
320
Income Tax (Authorised Communication) Act

The Income Tax (Autorised Communication) Act is backed by the Income Tax (Authorised
Communication) Act CAP. 14 LFN 2004. The act makes provision for authorised
communication on Tax matters in Nigeria, for the purpose of any investigation or enquiry
authorised in any manner whatsover by the Federal Government.
Industrial Development (Income Tax Relief) Act (IDA)

Industrial Development (Income Tax Relief) Act (IDA) CAP. 17 Volume 7 LFN 2004 (as
amended) is an act to repael and re-enect with major changes in the Industrial Development
(Income Tax Relief) Act and to make provision for tax releif for certain industries that may be
issued with pioneer certificates by the Minister and other matters ancillary thereto. The Pioneer
Status Incentive was established by the Industrial Development (Income Tax Relief) Act, No
22 of 1971 and is a tax holiday which grants qualifying industries and products relief from
payment of corporate income tax for an initial period of three years, extendable for one or two
additional years (NIPC, n.d.)
Federal Inland Revenue Service (Establishment Act) 2007 CAP.F 36

The Act provides for the establishment of the Federal Inland Revenue Service (FIRS). The
object of the Federal Inland Revenue Service (FIRS) as provided under Section 2 of the Act is
the control and administration of different taxes and laws specified in the first schedule or other
laws made or to be made from time to time, by the National Assembly or other regulations
there under the Government of the Federation and to account for all taxes collected.
Taxes and Levies (Approved List for Collection) Act; CAP T2 LFN 2004 (as amended)
Decree No.21 of 1998 LFN, contains the Federal Government approved the list of Taxes and
Levies that could be collected by the three tiers of the Government. The approved list was
further “harmonized” in year 2015 via; The schedule to the Taxes and Levies (Approved List
for Collection) (Act amendment) Order, 2015.
Thus, the government approved list of taxes that could be collected in Nigeria by the respective
three tiers of the government are as follows:
Taxes and Levies to be collected by the Federal Government

1. Company Income Tax;
321
2. Withholding Tax - on Companies, residents of the Federal Capital Territory,

Abuja and non-resident individuals;
3. Petroleum Profits Tax;
4. Value Added Tax;
5. Education tax;
6. Capital gains tax – on residents if the Federal Capital territory, Abuja, bodies
corporate and non-resident individuals.
7. Stamp Duties on bodies corporate and residents of the Federal Capital territory,
Abuja.
8. Personal Income Tax in respect of (a) members of the armed forces of the
Federation; (b) Members of the Nigeria Police Force, (c) residence of the
Federal Capital Territory, Abuja; and, (d) staff of the Ministry of Foreign
Affairs and non-resident individuals.
9. National Information Technology Development Levy
Taxes and Levies to be collected by the State Government

1. Personal income tax in respect of – (a) Pay-as-You-Earn (PAYE); and (b) Direct
taxation (Self-assessment)
2. Withholding tax (individuals only)
3. Capital gains tax (individuals only)
4. Stamp duties on instruments executed by individuals
5. Pools betting and lotteries, gaming and casino taxes
6. Road taxes
7. Business premises registration fees in respect of urban and rural areas which
includes registration fees and per annum renewals as fixed by each state.
8. Development levy (individuals only)
9. Naming of street registration fees in the state Capital
10. Right of occupancy on lands owned by the state Government in urban area of
the State.
11. Market taxes and levies where State finance is involved.
12. Land Use Charge where applicable
13. Hotel, Restaurant or Event Center Consumption Tax, where applicable
14. Entertainment tax where applicable
15. Environmental fee or levy
322
16. Mining, Milling and quarrying fee, where applicable

17. Animal Trade Tax, where applicable
18. Produce Sales Tax
19. Slaughter or Abattoir fees, where state finance is involved
20. Infrastructure Maintenance Charge or Levy, where applicable
21. Fire Service Charge
22. Property Tax where applicable
23. Economic Development Levy, where applicable
24. Social Service Contribution Levy, where applicable
25. Signages and Mobile Advertisement, jointly collected by States and local
governments.
Taxes and levies to be collected by Local Government
1. Shops and kiosks rates.

2. Tenement rates.
3. On and Off Liquor Licence fees.
4. Slaughter slab fees.
5. Marriage, birth and death registration fees.
6. Naming of street registration fee, excluding any street in the State Capital.
7. Right of Occupancy fees on lands in rural areas, excluding those collectables by
the Federal and State Governments.
8. Market taxes and levies excluding any market where State finance is involved.
9. Motor Park levies.
10. Domestic animal licence fees.
11. Bicycle, truck. Canoe, wheelbarrow and cart fees, other than a mechanically
propelled truck.
12. Cattle tax payable by cattle farmers only.
13. Merriment and road closure levy.
14. Radio and television licence fees (other than radio and television transmitter).
15. Vehicle radio licence fees (to be imposed by the Local Government of the State
in which the car is registered).
16. Wrong parking charges.
17. Public convenience, sewage and refuse disposal fees.
323
18. Customary burial ground permit fees.

19. Religious places establishment permit fees.
20. Signboard and Advertisement permit fees.
21. Wharf Landing Charge, where applicable
Federal Government taxes are administered by the Federal Inland Revenue Service (FIRS),
while those to payable to the State Government and Local Government are administered by the
various State Boards of Internal Revenue (SBIRS), and the various local government councils
respectively. (Strachan Partners 2018, “Administration of Taxes in Nigeria”, para 1).
According to Agbonika, Agbonike, & Mohammed (2018), the above list was to avoid tax
replication and disputes among the three tiers of Government.
Several writers and tax practitioners are of the opinion that the taxes and levies listed under the
Decree are not conclusive of the powers of inherent in the government to impose taxes. For tax
to be effective, it must be backed by the law passed by the legislator or the parliament (A.G of
Ogun State v. Aberuagba, 1985).
Nigeria Export Processing Zone Authority Act 1992 Decree No. 63

Section 2(1) of the Act establishes the Nigeria Export Zone Authority (NEPZA). Section 4
defines the functions of the Authority (NEPZA) which include under Section 4(a) the
administration and management of all Export Processing Zones in the Country. Section 1(2)
provides for the operation and management of an Export Processing Zone by a public, private
or combination of both public and private entity under the supervision of and the approval of
NEPZA.
The Act provides legal backing to the tax system under the Nigerian Export processing Zones/
Nigeria Free Trade Zones as follows:
i. In line with Section 11(2) and 12(9) of the Act – purchases made by an
Approved Enterprise from Companies operating in the Customs Territory shall
attract no VAT or WHT.
ii. In line with Section 11(1) & 12(7) of the Act – Sales made by Approved
Enterprises to Companies operating in the Customs Territory shall attract VAT
payable by the purchaser but shall not attract WHT.
324
iii. In line with Section 8 and 18(1) of the Act, tax exemption did not cover
Unapproved Enterprises operating within the Zones, as such – Purchase or sales
made from Customs Territory by Unapproved Enterprises operating within the
Zones shall attract both VAT and WHT as applicable.
iv. In line with the provisions of Section 12(1) and 18 of the Act – Imported good
conveyed through other ports outside the Zones but consigned to the Zones shall
attract No VAT or WHT provided the goods are escorted from the port of entry
to the free Zone by the Nigeria Customs Service.
Tax Laws outside the NEPZA Act which shall be complied to, by Approved Enterprises
in a Zone are:
i. Submittion of Tax Returns – to be done through the Free Zone Authority to
FIRS.
ii. All relevant Tax Laws are applicable in dealings between an Approved
Enterprise and its Head Office or Branch offices located in the Customs
Territory, except as related to purchases and sales covered above.
iii. Also, in line with Section 51A of the PPTA, Sections 8 and 63 of the CITA
dealing with derivation of Income – VAT and WHT shall be applicable where
Approved Enterprises have contract of supplies or design with Companies in
the Customs Territory.
List of incentives provided under Section 18(1) of the Act with tax implications which
Approved Enterprises shall be entitled to are as follows:
a. legislative provisions pertaining to taxes, levies, duties and foreign exchange regulations
shall not apply within the Zones;
b. repatriation of foreign capital investment in the Zones at any time with capital appreciation
of the investment;
c. remittance of profits and dividends earned by foreign investor in the Zones;
d. no import or export licences shall be required
e. up to 25% of production may be sold into the customs territory against a valid permit, and
on payment of appropriate duties;
325
Sources of Nigeria Tax Laws

The following are the sources of Nigerian tax laws:
a. The various income tax laws. In Nigeria, we have the States and Federal laws
including the Federal Government Acts and the State Government Laws.
b. Opinion of income tax experts and authors insofar as the courts take judicial notice of
them.
c. Court judgments until overruled
d. Departmental and official circulars
e. Accepted recommendations of commissions of inquiry
f. Constitution
g. Practices of the Revenue Department
Administrations of Taxes in Nigeria

There are bodies designated for the administration of taxes. They involve practical
interpretations and application of the tax laws. The bodies charged with the administration of
tax in Nigeria are the Federal, the State, and Local Governments. The tax authorities of these
tiers of government derive their formation from the federal laws which include:
1. Federal Inland Revenue Service Board, Section 1, 2 and 3 of the Companies Income
Tax Act (CITA) Cap C21 LFN 2004. It handles company income tax, value added tax,
Education tax, capital gain tax (corporate), Petroleum Profit Tax.
2. The State Board of Internal Revenue (SBIRS), Section 85A, B and C of Personal
Income Tax Act as amended. The state government is in charge of personal income tax
of individuals such as employees, sole traders, and partnership. They also collect capital
gains tax (individuals)
3. The Local Government revenue committee, sections 85D and E of Personal Income
Tax Act as amended. Local governments collect taxes on market stalls, cattle fees,
naming of streets.
However, some category of people such as personnel of the armed forces, Navy, Police etc
and residents of FCT, Abuja; pay their taxes to the Federal Inland Revenue Service (FIRS)
because they do not have a principal place of residence. This also applies to the offices of
foreign affairs.
326
The FIRS is the body that has the responsibility of assessing all revenue accrued to the
federal government. Any tax that has to do with the corporate bodies is collected by FIRS.
The Organs of Tax Administration

A. State Board of Internal Revenue
The Finance (Miscellaneous Taxation Provisions) Amendment Decree No.3 of 1993 made
provision for the establishment of an operational arm known as the State Internal Revenue
Service. It must be noted that section 87 of PITA establishes the State Board of Internal
Revenue.
Composition
The State Board consists of:
(a) The Executive Head of the State Internal Revenue Service as Chairman. He is often
appointed by the Governor;
(b) The Directors and Heads of Departments within the Internal Revenue Services;
(c) Three other persons nominated by the Commissioner for Finance in the State on their
personal merits;
(d) A Director from the State Ministry of Finance;
(e) A Legal Adviser from the State Ministry of Justice; and
(f) The Secretary of the State Internal Revenue Service, who shall be an ex-officio member.
Notice that any five members of the State Board, of whom one must be the chairman or a
Director, shall constitute a quorum.
Duties
The duties of the State Board of Internal Revenue include:
(a) Ensuring the effectiveness and optimum collection of all taxes and penalties due to the
Government under the relevant tax laws;
(b) Doing all such things as may be deemed necessary and expedient for the assessment and
collection of the tax, accounting for all amounts so collected in a manner to be prescribed by
the Commissioner;
327
(c) Issuing instructions or directives on technical aspects of assessment including interpretation

of Income Tax Act to their various officers;
(d) Advising the government, through the Commissioner for Finance, on tax matters which
include amendments to tax laws; and
(e) Appointing, promoting, transferring and imposing disciplinary measures on employees of
the State Service.
Technical Committee
Composition
The composition of the Committee consists of the following:
(i) Chairman of the State Board of Internal Revenue as chairman
(ii) The Directors within the State Service.
(iii) The Legal Adviser to the State Service; and
(iv) The Secretary of the State Service.
The functions are as follows:

i. It has power to deploy additional staff from within the State service for the purpose of
discharging its duties;
ii. It advises the State Board in all its powers and duties;
iii. It considers all matters that require professional and technical expertise and makes
recommendations to the State Board; and
iv. It attends to other matters referred to it by the Board from time to time.
B. Local Government Revenue Committee
Composition
i) The Supervisor for Finance as chairman.
ii) Three Local Government Councilors as members.
iii) Two other persons experienced in revenue matters to be nominated by the Chairman of the
Local Government on their personal merits.
Functions
i. It shall be responsible for the assessment and collection of all taxes, fines and rates under its
jurisdiction and account for such in a manner to be prescribed by the chairman of the Local
Government.
328
ii. It shall be autonomous of the Local Government Treasury and shall be responsible for the
day to day administration of the Department, which forms its operational arm.
C. Federal Inland Revenue Service Board
The Board was first established under Section 3 of the repealed Income Tax Administration
Ordinance 1958 and amended by subsequent Acts and Decrees. The Finance (Miscellaneous
taxation provisions) (Amendment) Decree No.3 of 1993 provided for an operational arm to be
known as the Federal Inland Revenue Service. The administration of taxation on the profits of
incorporated companies is vested in the Federal Inland Revenue Service (FIRS) whose
management board is known as Federal Inland Revenue Service Board (FIRSB) (Section1-3).
FIRS (Establishment) Act, 2007.
Composition
i. An Executive Chairman who shall be a person within the service experienced in taxation to
be appointed by the President.
ii. The Directors and Heads of Departments of the service.
iii. The Officer from time to time holding or acting in the post of Director with responsibility
for planning, research and statistics matters in the Federal Ministry of Finance.
iv. A member of the Board of the National Revenue Mobilization, Allocation and Fiscal
Commission.
v. A member from the Nigeria National Petroleum Corporation, not lower in rank than an
Executive Director.
vi. A Director from the National Planning Commission.
vii. A Director from the Department of Customs and Excise.
viii. The Registrar-General of the Corporate Affairs Commission (CAC).
ix. The Legal Adviser who shall be an ex-officio member of the Board.
Duties
i. Advising the Federal Government through the Minister of Finance on tax matters which
include any amendment to the existing law.
ii. Assessment and collection of Companies Income tax.
iii. Issuing instructions on the financial aspects of assessment including interpretation on
income tax Acts.
329
iv. Reviewing and approving the strategic plans of the service.

v. Employ and determine the terms and conditions of service including disciplinary measures
of the employees of the service.
vi. Do such other things, which in its opinion are necessary to ensure the efficient performance
of the functions of the service under the Act.
D. Joint Tax Board (JTB)
The Joint Tax Board was established under Section 85(1) of the Personal Income Tax Decree
1993 as amended
Composition
It consists of the following:
i. Chairman of the Federal Board of Inland Revenue who is also the chairman;
ii. One member from each state, being a person experienced in income tax matters nominated
by the Commissioner for Finance of the State;
iii. Secretary who is not a member but only in attendance for purpose of maintaining records
of the Board’s proceedings. He is appointed by the Federal Public Service Commission; and
iv. Legal Officer – who is not a member but attends meetings in advisory capacity.
Note that at any meeting any seven members shall constitute a quorum.
Duties
i. To settle disputes between the States as regards tax matters especially disputes as to residence
and remittance.
ii. To promote uniformity both in the application and incidence of the provisions of tax laws
on individuals throughout the country.
iii. To advise the government on request in respect of double taxation arrangements, rates of
capital allowances and other tax matters.
iv. To impose its decisions on matters of procedure and interpretation of the Act, on any state,
for purposes of conforming with agreed procedure or interpretations.
330
E. Joint State Revenue Committee
The Joint State Revenue Committee was established by section 92 of the Personal Income Tax
Act 1993 (as amended) for each State of the federation.
Composition The Committee consists of the following:

i. Chairman of the State Internal Revenue Service as the Chairman;
ii. The chairman of each of the Local Government Revenue Committees.
iii. A representative of the Revenue Mobilization Allocation and Fiscal Commission as an
observer;
v. A representative of the Bureau on Local Government Affairs not below the rank of a
Director;
vi. The State Sector commander of the Federal Road Safety Commission, as an observer;
vii. The Legal Adviser of the State Internal Revenue Service; and
viii. The Secretary of the Committee who shall be a staff of the State Internal Revenue Service.
Duties
The duties of the Joint State Revenue Committee consist of the following:
i. advise the Joint Tax Board and the State and Local Government on revenue matters;
ii. implement the decisions of the Joint Tax Board;
iii. harmonise tax administration in the state;
iv. enlighten members of the public generally on State and Local Government revenue matters;
and
v. carry out such other functions as may be prescribed from time to time by the Joint Tax Board.
Tax Assessment and filing of returns

Assessment
The tax authority will assess the tax payer on the amount of tax due while the tax payer is
duty bound to pay the tax liability within the specific time limit or exercise the right of
objection.
Assessment simply means computation or determination. For tax purposes it means

determining the tax liability. It is the duties of the tax authority to assess the tax payer to tax
and it is the duty of the tax payer to pay the tax liability.
331
Assessment is the process of determining the tax liability of the tax payer. There are different
forms of assessment in place:
i. Original assessment
ii. Revised/ Amended assessment
iii. Additional assessment
Types of Assessment
Original Assessment: This is the first assessment raised by the tax authority on the tax payer
in the particular year of assessment. This is the initial assessment given in the form of
provisional assessment. It may be amended after the determination of tax payable and this is
due to appeal. Provisional assessment is the amount paid in the immediate preceding tax year.
It is usually payable where the current year assessment is difficult to ascertain. Provisional
Assessment may be amended after the taxable income of the payer has being determined. It is
usually called interim assessment.
The original assessment further leads to what is called base of judgment assessment which is
given by the tax authority to the tax payer when the tax payer refuses to file his returns i.e.
declare the amount of money during the year. Best of assessment (BOJ) is subject to objection
and appeal procedure.
If a tax payer disagrees with the assessment given to minimize by the tax authority he shall
within the 30 days from the date of the notice of assessment put in writing a letter of objection
stating precisely the grounds of objection (reasons of objection). The tax authority in accepting
the notice of objection will consider the grounds of objection if valid, the tax authority will
issue revised assessment (will be discussed later) if found otherwise that is if the grounds of
objection are se not to be valid, the tax authority will issue a notice of refusal.
An aggrieved tax payer upon receipt of notice of refusal may issue a notice of appeal to the ax
appeal tribunal within 30 days after the receipt of notice of refusal
The notice of appeal must be in writing and must contain the following:
1. The name and the address of the applicant
2. Precise grounds of appeal
3. Official number and date of the relevant notice of amendments
332
4. Address for service of any notice or other documents to be given to the applicant
5. Amount of the assessment, chargeable income and tax charged as shown by the
notice and year assessment
6. The date the application was served notice of refusal
The tax authority may either accept the notice of appeal and issue revised assessment or reject
the appeal and issue notice of refusal. Many of the cases above one thing is certain, the tax
payer must pay a certain amount. The agreed amount in either the revised assessment or the
original assessment. Best of assessment must be paid within two2 months.
If the tax payer refuses to pay within the two months, a sum of 10% of the ax shall be added
and a demand notice will be served on the tax payer through a demand notice. If the payment
is not made within one month from the date of the service of the demand notice the tax authority
may proceed to enforce payment
Revised or Amended Assessment: This arises where a tax payer has objected to an original
or additional assessment for which an amendment has been made to the initial assessment
raised. This assessment is issued by the tax authority when taxpayers’ notice of objection has
been certified valid and an amendment has been made to the initial assessment.
Additional Assessment: Additional assessment arises where a tax audit has been carried out
or where additional information is received by tax authority which will result in an additional
assessment being raised. An additional assessment may be the subject of a notice of objection.
Generally, an additional assessment will arise after the tax liability of the respective years has
in fact been settled.
Forms of Assessment
Best of Judgment (BOJ) Assessment: - This arises where a tax payer refuses to file his returns
or neglects completely to register with a tax authority or an inspector of taxes is of the opinion
that the records submitted are not reliable, then the tax authority may use the best if its judgment
to determine the tax liability of such a tax payer. BOJ is subject to the objection and appeal
procedure.
333
Self-Assessment: - This form of assessment allows the tax payer to voluntarily provide
information on his tax position and hence compute his own tax liability. The typical self-
assessment form should be completed containing all information expected to be found on a
normal notice of assessment. At the end of every tax year a tax payer is obliged to fill the self-
assessment form. This form is a technique where the tax payer computes the tax payable for
the year of assessment and files the appropriate returns. There are some benefits associated
with the use of self-assessment:
1. The tax payer is allowed to pay the tax payable in six months installment (the first
installment in form of a cheque is submitted along with the self-assessment form).
2. Where all installments are paid at when de, the tax payer is allowed a one percentage
deduction from his 6th installment.
Advantages of Self-Assessment
1. Taxes payers are granted the opportunity to pay taxes in six equal installments over
six months.
2. Where all installments are paid on due date, 1% bonus is deductible from the sixth
installment.
3. Its reduces cost of collection of taxes
4. It gives the tax payer a sense of belonging as such tax invasion is reduced
Limitations of self-assessment
1. Due to high level of illiteracy, there may be a reduced level of compliance by the tax
payer
2. Due to a low level of tax morals in Nigeria that is people generally are not motivated
to pay tax. There will be a high level of understatement of income leading to tax
invasion
3. The cost incurred by the tax authority on tax and it is higher.
Filling of Returns
For each year of assessment, a taxable person shall file a return of income in the prescribed
form and containing the prescribed information with the tax authority of the State within 90
days from the commencement of every year of assessment. This is not applicable to any person
whose only source of income is employment in which he earns ₦30,000 per annum or less
from, that source.
334
A taxpayer is expected to file returns every year stating all sources of income as well as the
computation of taxable income and tax payable.
The documents to be supplied by the tax payer when filling annual returns include:
i. Audited financial statement
ii. Schedule of capital allowances computed
iii. The taxable income
iv. The tax payable
Where a taxable person has delivered a return, the relevant tax authority may either accept the
return and make an assessment accordingly or refuse to accept the return, and to the best of its
judgment, determine the amount of the assessable, total or chargeable income and make an
assessment accordingly. There may be additional assessment, if the tax authority later discovers
that the taxable person has been assessed at a lower amount, within the year of assessment or
within six years after the expiration thereof. The tax authority should send to the taxable person
the notice of assessment which should state the amount of any assessable, total or chargeable
income, tax charged, place at which payment should be made and rights of objection (if any)
of the taxable person. On the determination of an objection or appeal (if applicable) the tax
shall be payable within one (1) month of the date of service of the notice on the taxable person.
In case of companies, every company whose turnover is ₦1 million and above shall file self-
assessment return within six months of its accounting period. The company is expected to
forward with the tax return, evidence of direct payment of the whole or part of tax due into a
bank designated for the payment of tax. Every company including a company granted
exemption from incorporation shall at least once a year without notice or demand there from,
file a return with the Board in a prescribed form and containing prescribed information together
with the audited financial statements, capital allowances computation and a true and correct
statement in writing containing the amount of its profits from each and every source computed,
and declaration on the truth and fairness of computed amounts and signed by a director or
secretary of the company.
Any company which fails to file returns shall be liable to pay as penalty an amount of ₦25,000
in the first month in which the failure occurs and ₦5,000 for each subsequent month in which
the failure continues.
335
In Nigeria, if a person disputes an assessment he may apply to the relevant tax authority by
putting up a letter of objection stating precisely the grounds of objection to the assessment.
This letter of objection shall be made within thirty (30) days from the date of service of the
notice of the assessment. An aggrieved taxable person, having failed to agree with relevant tax
authority may appeal against the assessment on giving notice within thirty (30) days after the
date of service of notice of the refused of the relevant tax authority to amend the assessment as
desired.
The notice of appeal, which must be in writing, must contain the following:
a) The name and address of the applicant;
b) The official number and the date of the relevant notice of assessment;
c) The amount of the assessment, total or chargeable income and of the tax charged as shown
by that notice and the year of assessment concerned;
d) The precise grounds of appeal;
e) Address for service of any notice or other document to be given to the applicant; and
f) The date on which the applicant was served with notice of refusal by the relevant tax
authority to amend the assessment as desired.
When an Assessment is Final and Conclusive

An assessment is conclusive and final where:
i. No valid objection or appeal has been lodged within the statutory time limit.
ii. No further notice has been given of a further appeal against a decision of the appeal
commissioner or a Judge.
iii. The amount of total income or profit has been determined on objection or on appeal,
the assessment as made, agreed to, revised or determined on appeal.
Tax Clearance Certificate

Tax clearance certificate is issued whenever the Board feels that the tax assessed on profits or
income of a taxable person has been fully paid or that no tax is due on such profits or income.
This certificate should be issued by the Board to the person within two weeks of the demand,
if not; they give reasons for the denial.
336
The tax clearance usually contains the following;

i. Chargeable income
ii. Tax payable
iii. Tax card
iv. Statement to certify that no tax is due
The uses of tax clearance certificate include:

i. To acquire a certificate of occupancy.
ii. To acquire a Visa
iii. To obtain license of firearms
iv. When contesting for an election.
v. To acquire a building license/plan
vi. To bid for a contract with the government.
There are several situations that the tax clearance certificate is required in Nigeria such
situations are:
i. Application for government loan
ii. Registration for fire arms
iii. Application for plot of land
iv. Application to be elected for public office
v. Application for pool license
OFFENCES AND PENALTIES

If a tax payer contravenes any provisions of Federal Inland Revenue Service Act 2007,for
which no penalty is specifically prescribed, he shall be liable on conviction to a fine not
exceeding N50,000 or imprisonment for a term not exceeding six months or to both fine and
imprisonment
Where offence is committed by a corporate organization, or firm or other association of

individuals:
i. every director, manager, secretary or other similar officer of the body corporate
ii. every partner or officer of the firm
iii. every person concerned in the management of the affairs of the association; or
iv. every person who was purposing to act in any capacity, commits an offence
337
Shall be liable to be proceeded against and punished for the offence in like manner as if he
had himself committed the offence, unless he proves that the act or omission constituting the
offence took place without his knowledge, consent or connivance.
Examples of Offences and Penalties under Federal Inland Revenue Act 2007
[1] Failure to complete and deliver to the FIRS any return required or failure to produce books,
documents etc, for examination at the place and time stated in the notice, or failure to appear
personally before an officer of FIRS for examination or failure to give orally or in writing
further information required.
Penalty: Liable on conviction in respect of each offence to a fine of 100% of the amount of the
tax liability.
[2] Failure of a bank to furnish, upon demand by the FIRS, quarterly returns on the names and
addresses of all customers of the bank connected with all transactions involving N5million and
above in the case of an individual or N10,000,000 and above in the case of a body corporate or
failure to submit returns on the names and addresses of new customers of the or any other
additional information about its customers required by the FIRS.
Penalty: Liable on conviction to a fine not exceeding N500, 000 on corporate customers and
not exceeding N50,000 in the case of an individual customer.
[3] Failure to pay tax within the period prescribed.
Penalty: Penalty of 10% of the amount of tax payable

Other offences and penalties are as stated in Federal Inland Revenue Act 2007.
TAX POLICY
Tax policy is the choice by a government as to what taxes to levy, in what amounts, and on
whom. It has both microeconomic and macroeconomic aspects. The macroeconomic aspects
concern the overall quantity of taxes to collect, which can inversely affect the level of economic
activity; this is one component of fiscal policy. The microeconomic aspects concern issues of
fairness (whom to tax) and allocative efficiency (i.e., which taxes will have how much of a
distorting effect on the amounts of various types of economic activity).
338
Policymakers debate the nature of the tax structure they plan to implement (i.e., how
progressive or regressive) and how they might affect individuals and businesses (i.e., tax
incidence).
The implementation of tax policy has always been a tricky business. For example, in pre-
revolutionary colonial America, the argument "No taxation without representation" resulted
from the tax policy of the British Crown, which taxed the settlers but offered no say in their
government. A more recent American example is President George H. W. Bush's famous tax
policy quote, "Read my lips: no new taxes."
NATIONAL TAX POLICY (NTP) 2017

According to the National Tax Policy for Nigeria, the Nigerian tax system is expected to
contribute to the well-being of all Nigerians and the taxes which are collected by government
should directly impact on the lives of the citizens. This can be accomplished through proper
and judicious utilization of the revenues collected by the government.
The Nigerian National Tax policy provided the following guiding principles of Nigeria tax
system
All existing and future taxes are expected to align with the following fundamental features:
(a) Equity and fairness: Nigeria tax system should be fair and equitable devoid of
discrimination. Taxpayers should be required to pay according to their ability.
(b) Simplicity, certainty and clarity: Tax laws and administrative processes should be simple,
clear and easy to understand.
(c) Convenience: The time and manner for the fulfillment of tax obligations shall take into
account the convenience of taxpayers and avoid undue difficulties.
(d) Low compliance cost: The financial and economic cost of compliance to the taxpayer
should be kept to the barest minimum.
(e) Low cost of administration: Tax administration in Nigeria should be efficient and cost-
effective in line with international best practices.
339
(f) Flexibility: Taxation should be flexible and dynamic to a manner that does not retard
economic activities.
(g) Sustainability: The tax system should promote sustainable revenue, economic growth and
development. There should be a synergy between tax policies and other economic policies of
government.
Efficiency of administration
The following are important in ensuring an efficient tax administration:
(a) Payment processing and collection
Collection system shall leverage on modern technology towards advancing ease of payment
and prevention of revenue losses.
(b) Record keeping

Tax authorities shall partner with the relevant agencies to set up automated systems and
adequately train tax officials in the use and maintenance of such systems. Electronic systems
of record keeping in line with global best practices should be entrenched to enhance the tax
administration process.
(c) Exchange of information

Tax authorities shall develop an efficient framework for cooperation and sharing of information
with other tax authorities and relevant local and international agencies. This will mitigate tax
evasion and revenue losses.
(d) Enforcement of tax laws

Tax authorities shall ensure the enforcement of civil and criminal sanctions as provided under
the various tax laws.
(e) Funding of tax authorities

Government shall provide adequate funding for tax authorities. Accordingly, government
should ensure that an adequate percentage of revenue collected should be provided to the
authority for its operations.
340
(f) Funding for tax refunds

Government shall provide adequate funding to meet refund obligations. Tax authorities shall
ensure timely and efficient payment of refunds.
(g) Ease of paying taxes

Tax authorities shall ensure that payment procedures and documentation are convenient and
cost effective. Tax authorities shall work towards ensuring accelerated improvement on the
global index of ease of paying taxes.
(h) Revenue autonomy
Governments shall ensure a reasonable level of financial and administrative autonomy for their
respective tax authorities to facilitate effective discharge of their duties.
Objective of NTP
There are certain objectives which the tax system is expected to achieve.
These objectives include:
Promoting fiscal responsibility and accountability

One of the primary objectives of the National Tax Policy is to create a tax system which ensures
that the government transparently and judiciously accounts for the revenue it generates through
taxes by investing in the provision of infrastructures, public goods and services. Where this is
in place, Nigerians would have a tax system that they can fully relate to and which is a tool for
national development.
Facilitating economic growth and development:

The overriding objective of the Nigerian tax system should be to achieve economic growth and
development. As such, the system should allow for stimulation of the economy and not stifle
growth, as it is only through sustained economic growth that the potential ability to offer
improvements in the well-being of Nigerians will arise. The tax system should therefore not
discourage investment and the propensity to save. Taxes should not be a burden, but should be
applied proactively with other policy measures to stimulate economic growth and development.
341
To provide the government with stable resources for the provision of public goods and
services:
For Nigeria to pursue an active development agenda and carry out the basic functions of
government, its tax system should generate sufficient resources for government to provide
basic public goods and services (e.g. education, healthcare, infrastructure, security etc.). It is
therefore a primary objective of taxation to provide the government with resources that it shall
invest in judicious expenditure that will ultimately improve the well-being of all Nigerians.
To address inequalities in income distribution:

Nigeria’s tax system should take cognizance of our peculiar economic circumstances and seek
to narrow the gap between the highest and lowest income groups. Those with the highest
incomes should pay the highest percentage of tax and tax revenue should be utilized to provide
Nigerians with affordable social amenities, basic infrastructure and other utilities.
To provide economic stabilization:

Nigeria should use its tax system to minimize the negative impacts of volatile booms and
recessions in the economy and also to help complement the efforts of monetary policy in order
to achieve economic stability.
To pursue fairness and equity

Nigeria’s Tax system must be fair and shall institutionalize horizontal and vertical equity.
Horizontal equity ensures equal treatment of equal individuals. The Nigerian tax system should
therefore seek to avoid discrimination against economically similar entities. Vertical equity on
the other hand addresses the issue of fairness among different income categories. In this regard,
the Nigerian tax system shall recognize the ability-to-pay principle, in that individuals should
be taxed according to their ability to bear the tax burden. Individuals and entities that earn high
incomes should pay a corresponding high percentage of tax. The overall tax system shall
therefore be fair, so that similar cases are treated similarly. In addition, any ambiguity or
conflicting provisions in the law shall be resolved in a manner as to ensure fairness to the
taxpayers and the tax authorities.
To correct market failures or imperfections:

One of the objectives of the Nigerian tax system is the ability to correct market failures in cases
where it is the most efficient device to employ. In this regard, taxes may be reviewed upwards
342
or downwards as may be necessary to achieve government’s intentions. Market failures which

the Nigerian tax system may address are those that are as a result of externalities and those
arising from natural monopolies.
The National Tax Policy (NTP) establishes fundamental principles to guide an orderly
development of the Nigeria tax system and reinforces the need for tax laws and
administrative practices to promote economic development.
The Policy should address key challenges confronting the Nigeria tax system including:
1. low tax to GDP ratio

2. fragmented database of taxpayers and weak structure for exchange of information
3. multiplicity of taxes and revenue agencies
4. poor accountability for tax revenue
5. use of aggressive and unorthodox methods for tax collection
6. failure by tax authorities to honour refund obligations to taxpayers
7. the non-regular review of tax legislation, which has led to obsolete laws, that do not
reflect
8. current economic realities
Some of the key recommendations include to address the challenges include:
1. ensuring that there is only one revenue agency per level of government
2. establishment of a tax court as an independent body to adjudicate in tax matters
3. lower tax rate and VAT compliance threshold for SMEs
4. establishment of an Office of Tax Simplification for continuous improvement to tax
legislation and administration and develop Key Performance Indices for Nigeria to
attain a top 50 position on the global index of ease of paying taxes by 2020 and
consistently improve on the ranking
5. administrative framework for amnesty and whistle blowing as part of the strategies for
curbing evasion and widening the tax net
6. INEC to mandate political parties to articulate, prepare, provide and make public their
tax agenda before and during election campaigns
343
The approved Policy also contains and appendix of changes required to existing laws, repeals
and new enactments.
Tax Policy and Investment Opportunities

A country’s tax regime is a key policy instrument that may negatively or positively influence
investment. Tax Policy relates to the formulation of a tax strategy which is supportive to
investment. It covers the advantages and disadvantages of alternative tax policy choices in
meeting the twin goals of offering a tax system attractive to investment, while at the same time
raising revenues to support the key pillars of a business-enabling environment, such as
infrastructure.
A poorly designed tax system, where the rules and their application are non-transparent, overly
complex or unpredictable, may discourage investment adding to project costs and uncertainty.
Systems that leave excessive administrative discretion in the hands of tax officials tend to invite
corruption and undermine good governance objectives fundamental to securing an attractive
investment environment. Policy makers are therefore encouraged to ensure that their tax system
imposes an acceptable tax burden that can be accurately determined, and which keeps tax
compliance and tax administration costs in check.
Below are the identified nine most important questions relevant for judging the effectiveness
of a country’s tax policies:
i. the consistency of a country’s tax burden with its broader development objectives;
ii. an evaluation of the actual tax burden on domestic profits;
iii. a comparison of the actual versus the target tax burden;
iv. understanding the potential tax effects on investment;
v. an evaluation of tax distortions to investment;
vi. the determination of taxable income;
vii. accounting for unintended tax incentive effects;
viii. tax expenditure reporting;
ix. international tax co-operation.
344
Challenges of Tax Administration and Collection in Nigeria

According to Eze (2012), in discussing an efficient and effective system of tax administration,
there must always be consideration of the challenges which militate against the creation and
maintenance of such a system. In Nigeria, there are issues which are faced across the three tiers
of government. Accordingly, these issues will be discussed without references to which tiers
are affected or otherwise.
The major challenges faced in tax administration in Nigeria include:

a. Lack of an overall understanding of the role of taxation in National development.
b. Dependence on oil revenue leading to a neglect of taxation as a source of revenue.
c. Lack of sufficient political support for the tax administration
d. Level of business activity in the economy.
e. Large informal sector outside the tax net
f. Poor attitude to taxation, lack of tax culture low awareness amongst tax payers.
g. Low level of voluntary compliance.
h. Deliberate evasion and non-compliance.
i. Multiple taxation
j. Corruption, leakage and diversion of tax revenue by tax officials before and during
collection by government officials after distribution.
k. Lack of accountability for tax revenue.
l. Lack of inter-governmental collaboration, co-operation and co-ordination between
tiers and agencies of government.
m. Lack of sufficient government impact on citizens.
Issue within the tax administration set up which include capacity issues, quality and quantity
of human resources, technology issues, manual system of tax operatives, lack of records, law
level of tax payer education and finding challenges
CONCLUSION
A country’s tax regime is a key policy instrument that may negatively or positively influence
investment. Tax Policy relates to the formulation of a tax strategy which is supportive to
investment. It covers the advantages and disadvantages of alternative tax policy choices in
meeting the twin goals of offering a tax system attractive to investment, while at the same time
345
raising revenues to support the key pillars of a business-enabling environment, such as

infrastructure. A poorly designed tax system, where the rules and their application are non-
transparent, overly complex or unpredictable, may discourage investment adding to project
costs and uncertainty.
Nigeria Tax System is a system that is characterized with tax policies, tax laws and as well as
tax administration. These coupled of policies and laws are expected to work together in
concord with one another in order to achieve the overall objective for economic growth of the
country. However, with reference to the presidential committee set on National tax policy in
(2008), the overall focus and primary objectives of Nigeria tax system is to provide and
contribute to the social and economic wellbeing of Nigerian. This is to be done either directly
by improving existing and formulating new tax policies, and indirectly to appropriately
make optimum utilization of tax generated from revenue for the benefit and development
of the citizen. In order to achieve these objectives through the revenue generated, therefore,
the tax system was expected to minimize the economy distortion in the country.
Nigeria has one of the best tax system in world, this is structured in line with the level of
government with autonomous power for each level of government. Like any system, Tax
system in Nigeria have it fair share of Nigeria problems as a sub-system in Nigerian System.
Efforts had been made to now focus on taxation as a source of veritable revenue. I thereby
submit that the entire tax system in Nigeria (Tax Law, Tax Policy and Tax Administration) is
still a work in progress. Embracing tax justice will go a long way to promote good tax culture
in Nigeria.
REFERENCES
Afuberoh, D & Okoye, M. (2014). The impact of taxation in revenue generation in Nigeria: A
study of federal capital territory and selected states. Journal of Public Administration
and Management Research, 2(2), 22-47.
Asaolu, T, Olabisi, J, Akinbode, S. O. & Alebiosu, O. N. (2018). Tax revenue and economic
growth in Nigeria. Scholedge International Journal of Management and Development,
5(7), 72-85.
Capital Gains Tax Act; Cap C1 Volume 2 LFN 2004 (as amended)
Casino Taxation Act; CAP. C3 LFN 2004
Company Income Tax Act, Cap. 21 Volume 3, LFN 2004 (as amended)
Compendium of investment incentives in Nigeria, (2017). 1st edition
346
Cornelius, M. O., Ogar, A. & Oka, F. A. (2016). The impact of tax revenue on economic
growth: Evidence from Nigeria. IOSR Journal of Economics and Finance, 7(1), 32-38.
Custom and Exise Management Act; Cap 45 LFN, 2004 (as amended)
Education Tax Act; CAP. E 4 Volume 17 LFN 2004 (Repalced with Tertiary Education Trust
Fund (Establishment, etc) Act, 2011.
Federal Inland Revenue Service (Establishment Act) CAP.F 36 2007
Finance Act 2019 (Amending 7 Tax Laws)
Fowokan, T. E. & Oyedokun, G. E. (2019). International taxation: Nigerian perspectives.
Lagos, Nigeria. Aaron & Hur Publishing.
George, T. P. & Bariyima, D. K. (2015). Tax incentives and foreign direct investment in
Nigeria. IOSR Journal of Economics and Finance, 6(5), 10-20.
Income Tax (Authorised Communications) Act; CAP. 14 LFN 2004
Industrial Development (Income Tax Relief) Act; (IDA) CAP. 17 Volume 7 LFN 2004
Kiabel, B. D. (2001). Tax Incentives as a tool of Economic Developments, Paper presented at
the Mandatory Continuous Professional Education (MCPE) programme of the Institute
of Certified Public Accountants of Nigeria (ICPAN), Port Harcourt.
Mainoma, M.A., Oyedokun, G.E. et al, (2020). Tax Management and Compliance in Nigeria.
Lagos. Nigeria (Eds). OGE Business School.
National Information Technology Agency Act; CAP N156 LFN 2004 (as amended)
Nigerian Export Processing Zones Authority Act; 1992 Decree No. 63 (contains tax laws
applicable to Export Processing Zone in Nigeria)
Oriakhi, D. E. & Osemwengie, P. K. (2013). Tax incentives and revenue productivity of the
Nigerian tax system. International Journal of Development and Economic
Sustainability, 1(1), 31-44.
Oyedokun, G. E. (2019). Imperatives of tax audit & investigation. Lagos, Nigeria. Aaron &
Hur Publishing.
Oyedokun, G. E. (2019). Trite in Taxation Innovation: Following Organised World Order
Knowledge and Nobility. Aaron & Hur Publishing.
Oyedokun, G. E. (2020). Current Trends in Taxation: CITN 2020 MPTP Series (Eds). 224-
265, CITN. Lagos. Nigeria.
Personal Income Tax Act; Cap. P8, Volume 13 LFN 2004 (as amended)
Petroleum Profit Tax Act; Cap. P13 Volume 13 LFN 2004 (as amended)
Philips O.A. (1969), The Significance of Nigerian’s Income tax relief Incentives, The Nigerian
Journals, of economic and Social studies, 11(2), 1-11. Proceeding of 8th annual London
business research conference imperial college, London, UK, .8-9 July, 2013.
Siyanbola, T., Adedeji, B., Adegbite, F. F. & Rahman, M. M. (2017). Tax incentives and
industrial/economic growth of sub-Saharan African states. Journal of Advanced
Research in Business and Management Studies, 7(2), 78-90.
Stamp Duty Act; CAP. S8 LFN 2004 (as amended)
Taxes and Levies (Approved List for Collection) Act; CAP T2 LFN 2004 (as amended)
Uwaoma, I. & Ordu, P. A. (2016). The impact of tax incentives on economic development in
Nigeria. International Journal of Economics, Commerce and Management, 5(3),
United Kingdom.
Uzoka, P. U. & Christian, O. (2018). Effect of tax revenue on economic growth in Nigeria.
International Journal of Social Sciences and Management Research, 4(7).
Value Added Tax Act; Cap. V1 Volume 15 LFN 2004 (as amended)
347
View publication stats

Overview of Taxation and Nigerian Tax System Final

Uploaded by

Copyright:

Available Formats

Overview of Taxation and Nigerian Tax System Final

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Overview of Taxation and Nigerian Tax System Final

Uploaded by

Copyright:

Available Formats

See discussions, stats, and author profiles for this publication at: https://www.researchgate.

Overview of Taxation and Nigerian Tax System

Chapter · January 2020

Godwin Emmanuel Oyedokun

Development Finance View project

The user has requested enhancement of the downloaded file.

EDITORS ISBN: 978-978-978-734-0

Prof. Muhammad A. Mainoma

Prof. Muhammad A. Mainoma Professor Taiwo OlufemiAsaolu, FCA

TAX ASSESSMENT AND THE STATUTE OF TAXATION CASE REVIEW

Lawal Babatunde Akeem is a Senior Lecturer and Head of the

Lawal Busayo Olawumi is an Accountant at Extension Publications

Mainoma M. Akaro is a Professor of Accounting & Finance and

Muhibudeen Latifat is of the Department of Accounting, Yusuf

Ogbonna, Udochukwu Godfrey is a Lecturer at Rhema University,

OVERVIEW OF TAXATION AND NIGERIAN TAX SYSTEM

OYEDOKUN Godwin Emmanuel

INTRODUCTION TO TAX AND TAX ADMINISTRATION

Taxation is described it as a compulsory contribution by the government and he concluded that

Taxation is defined as an enforceable contribution of money enacted pursuant to legislative

Purposes/ Objectives of Taxation

Structure/ Classification of Tax System

3. Regressive Tax System

Taxes can be classified in any of the following:

Tax Laws in Nigeria

List of Tax Laws in Nigeria

Company Income Tax Act (CITA)

Education Tax Act (EDTA)

determing the assessible profis of companies engaged in petroleum operation (upstream) as

Petroleum Profit Tax Act (PPT)

Personal Income Tax Act (PITA)

Value Added Tax Act

Stamp Duties Act (SDA)

Capital Gains Tax Act (CGTA)

National Information Technology Development Agency Act (NITDA)

Custom & Excise Taxes Management Act

Witholding Tax (WHT)

Transactions Companies Individuals

Dividend, interest & rent 10% 10%

Hire of equipment, motor vehicles, plants, and machinery 10% 10%

Commission, consultancy, technical and management fees,

All types of contracts and agency arrangements, other than

Directors' fees N/A 10%

Casino Taxation Act

Income Tax (Authorised Communication) Act

Industrial Development (Income Tax Relief) Act (IDA)

Federal Inland Revenue Service (Establishment Act) 2007 CAP.F 36

Taxes and Levies to be collected by the Federal Government

2. Withholding Tax - on Companies, residents of the Federal Capital Territory,

Taxes and Levies to be collected by the State Government

16. Mining, Milling and quarrying fee, where applicable

Taxes and levies to be collected by Local Government

1. Shops and kiosks rates.

18. Customary burial ground permit fees.

Nigeria Export Processing Zone Authority Act 1992 Decree No. 63

Sources of Nigeria Tax Laws

Administrations of Taxes in Nigeria

The Organs of Tax Administration

(c) Issuing instructions or directives on technical aspects of assessment including interpretation

The functions are as follows: