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Taxation as an Aid to Economic Development

The Impact of Taxation as an Aid to Economic Development in Anambra State (A Case Study Of Nnewi North Local Government Area, Anambra State, Nigeria).




There are several literatures by different authors, scholars and researchers on taxation as source of government revenue and its impact on the Anambra state economy, many of them have covered all its ramifications while some have effectively appraised the problem of tax administration in Nigeria. Despite these appreciable and commendable efforts, it should be note that much still needs to be really quantify the contributions of taxes to the growth and development in Anaambra state.


Tax is a fee charged (“|levied”) by a government on a product, income, or activity. According to O. Teriba (1976) defined tax as a compulsory payment made by individuals and firms to the government. Ola (19812) define taxation as a compulsory financial contribution to government by individuals and corporate bodies.

On the hand, Udeh Okey (2005) define tax as a compulsory levy imposed on an economic unit (individuals, group, firms, institutions etc) by a public authority (the government), without any corresponding entitlement to receive definite and direct equivalence from the government. With all these definitions one can say that it is a levies compulsorily paid by every citizens of a country. It is a form of withdrawal by government for a particular economic purpose. The national Accountant, defined taxation as a levy by public authorities on citizen within their tax jurisdictions, for the purpose of obtaining compulsory payments to met financial, social and economic goals of the authorities. One of the most important uses of taxes is to finance public goods and services, such as street lighting & street cleaning. Since public goods and services to not allow a non-payer to be excluded, or allow exclusion by a consumer, there cannot be a market in the good o service, and so they need to be provided by the government or a quasi- government agency, which tend to finance themselves largely through taxes.

Agyei (1983:73), tax can be basically divided into direct and indirect taxes.


David Begg (1984:284) defined direct rtax as taxees levied on individual income on earnings form labour, rents, dividends and interest. A common features of this type of tax is that is levied according to the ability to pay, that is “pay as you Earn” (PAYS). A direct tax is borne entirely by the entity that pays it, and cannot be passed on to another entity. Examples include corporation tax, income tax and social security contributions. Direction taxes are based on the ability to pay principle but they sometimes work as a disincentive to work harder and earn more because that would mean paying mor3 tax. Examples of direct tax according to Udeh Oky (2005:70) includes the following:

  1. Personal Income Tax:

This is a tax levied on the income of a person and is usually deducted at source, from the payer’s income. It is normally charged progressively. They are tax charged on earnings from wages, salaries, rent, interest, premium etc.

b       Company Profit Tax:

David Begg (1984:284) assets that companies pay corporation tax calculated on their taxable profits after allowance for interest payments and depreciation. Company tax is charged progressively (ie the higher the profit, the greater the tax). Companies are taxed under the provision of the companies income Tax Act (1961) and its various amendments.

c        Poll Tax:

A poll tax is imposed at a flat rate per head of population or among a group of people. This type of taxation is employed where enough data do not exist to determine the actual income of he tax payer. It is a regressive tax because no matter what the size of a person’s income everyone has to pay the amount.

d       Capitals Tax:

O Teriba (1976:180) states that “capital taxes are imposed on capital assts and property. For instance, when a person dies, his assets are subjected to capital tax, in this case, the term death duty or estate duty is used. In some economics it is commonly known as wealth tax.

e        Capital Gains Tax

This tax is charged on gains in value (profit) accruing to any company or individual on the disposal of assets e.g land. This system of tax was introduced in Nigeria in 1967 under the capital gains tax decree 44 of 1967 as amended.


David Begg (1984) defined indirect tax as taxes levied on expenditure on goods and services on the other hand, Agyer (1983) that indirect tax is a tax imposed indirectly on tax payer’s income. Amaechina P.U. (2009) defined indirect tax as taxed imposed on person but paid partly or wholly by another. Examples of indirect taxes are as follows:

a        Excise Duties

These are taxes levied on domestic companied and firms for producing good and services. Excise duties are levied primarily to raise revenue, they are also consumption of certain goods and services especially those considered harmful and injurious to health.

b       Export Duties

This tax is levied on exports of goods and services. Export duties are meant to raise revenue of the federal government but in a developing country like ours, they an discourage production for export as they tend ot increase the price of expertise thereby making them unattractive by way of higher price.

c        Import Duties:

They are levied on imported goods and services. Import duties increase the prices of imports vis-à-vis their domestic substitutes, thereby leading to preference for domestic goods and services.

d       Sales Tax:

This is a type of tax levied on the sale of a commodity, usually at the wholesale point but spread down the retail points.

e        Value Added Tax (VAT)

This is effectively a retail sales tax and is an indirect form of taxation based on the consumption of certain goods and services. “VAT” is collected at different stages of production process and on the added value at each stages of consumption. It came into operation in Nigeria, courtesy of VAT decree of 1993. The introduction of VAT replaced the sales Tax Decree 1986.

According to Professor Aluko, “VAT” is a consumption tax. It is equitable because the more you consume, the more you pay services exempted from VAT are the ones that touches directly and they include pharmaceuticals & medical products, basic food items, commercial vehicle & their spare parts, book and educational materials etc. from the above, taxation could be said to mean a compulsory payment to the government by every taxable individual and co-corporate bodies.

Therefore, taxation can only make the desired impact on the economic development of Nigeria given its major source of government revenue. The following Acts were enacted to regulate its operations:

–        The income Tax management Act (ITMA) 1976

–        The Joint Tax Board (JIB)

–        Company Income Tax act (CITA) 1979

–        Value Added Tax Act (VAT) 1993

–        Petroleum Profit Tax Act (PPTA) 1959

–        Capital Transfer Tax Act (CITA) 1979

  1. Income Tax Management Act (ITMA) 1976. This act regulates personal income tax throughout the federation. It lays down the procedures to determine the assessable income of an individual. It comes into operation in 1961.
  2. Joint Tax Board (JTB)

This is constituted under section 27 of ITMA, (1961) and 78 of the CITA (1979). Their duty is to promote uniformity both in the application of ITMA, (1961) and to the incidence of income tax on individuals throughout the country. It also advises the federal government on matters relating to amendments of Tax Act, double tax relief arrangement and rates of capital allowances.

c        Company Income Tax Act (CITA) 1979

This act regulate the assessment and collection procedures for all corporate bodies. For instance the assessment of company is based on Actual year Basis (AYB) or on preceding year Basis (PYB). The original act has seventy-nine (79) section, arranged in thirteen (13) parts and five (5) schedules section one is titled establishment and constitution of the board while section 79 is captioned short title application and commencement.

d       Value Added Tax (VAT) 1993

Value added tax is known as tax on consumption that come into effect from the first of January, 1994. it is regulated by the VAT Decree of 1993. VAT is an indirect form of taxation based on the general consumption behaviour of the people. It is a tax on spending expected to be borne by the final consumer of goods and services. It covers manufactured goods, imports as well as professional and banking services. It is a good tax make to be relatively easy to administer and difficult to evade.

e        Petroleum Profit Tax Act (PPTA) 1959

The petroleum profit tax is regulated by the petroleum profit tax act 1959 subsequently amended by petroleum profit tax 1979 decree. The federal Board of Inland Revenue (FBIR) sis the authority entrust with the power to assess and collect, petroleum profit tax is made on any company engaging in petroleum operations. Partnerships and individuals are forbidden by law from engaging in such operation.

This act specified how profit from petroleum will be taxed, those engaged in the production of crude oil and transportation of oil those to be charged and those not to be charged.

f        Capital Transfer Tax Act (CITA) 1979

This act regulates the assessing and collection of capital transfer tax provided for those capital assets exempted from capital transfer tax and provision for quick. Succession relief rate on a deceased property. Under this, there are:

–        Capital Transfer Inter Vivas: Which provides that the capital transfer tax shall be payable on the transfer of any property in excess of N100,000 made by any person in his life time. The Decree however, excluded any genuine outright sale of property or transfer not intended or made to confer gratuitous benefits. On the transferee and the transfer was made in a transaction at arm’s length between unconnected persons.

–        Capital Transfer on death: Is the decree which provides that capital transfer tax shall be chargeable on all property passing on the death of the individual. These would include:

  1. Property of which the deceased was competent to dispose of at the time of death.

2        Any property regarded as a donation mortis causa ie any donation regarded as made as a result of the deceased.

  1. Capital Gains Tax Act (CGTA) 1967

Capital gains Tax in Nigeria is regulated by the capital gains Tax Decree 44 of 1967 amended by 1972 and other decrees. The tax applied to individuals, partnerships and limited companies and chargeable on all capital gains arising on disposal of assets. It makes provision for the assessment of capital gains tax with regard to “Allowable expenses form net proceeds of sale” and treatment of loss accruing form the disposal of an assets and lists of chargeable assets.


The 1998 budget of the federal Republic of Nigeria provided the following tax relief:

  1. Personal Allowance: N5,000 + 20% of earned income. As of the year 2000 amendment was made but not yet effective.
  2. Children Allowance N2,500 per child up ot maximum of four children.
  3. Dependent Relative Allowance: N2,000 per dependent up to maximum number of two
  4. Disabled Allowance: N2,000 or 2% of total income which ever is lesser.
  5. Life Assurance Policy Allowance: Total premium paid per year based on preceding year Basis (PYB) . Allowances are given in respect of premiums paid by the tax payer on policies taken out of the life of the tax payer or the spouse. To be allowed, the policy must be on the life of the taxpayer or th spouse and no one else.

Tax Rate

With effect from 1998

1st 20,000             –        5%

Next 20,000                   –        10%

Next 40,000                   –        15%

Next 40,000                   –        20%

Over 120,000       –        25%

As of the year 2000, amendments was made but has not come ot effect. Below is the amendment:

1st 30,000             –        5%

Next 30,000                   –        10%

Next 50,000                   –        15%

Next 50,000                   –        20%

Over 160,000       –        25%

Nigerian companies taxation 2nd Edition

*        Sales Tax: This is tax imposed on the sale of a commodity collected only at the point of final sale to the customer. The rate of tax varies according to the commodity sold. Examples include petrol an Agricultural export produce.

O Teriba (1976:180) VAT has replaced this.

*        Withholding Tax: This is tax charged on investment income namely rents, interest, royalties and dividends, presently it is charged at the off set.

*        Import Taxes: Import taxes are paid on goods brought to a country. Import duties are charged for the following person to yield.

*        Excise Taxes: Excise taxes are considered and indirect form of taxation because the government does not directly apply the tax. Excise duties are taxes on some goods manufactured with a country. Goods on which duties are usually paid are Beer, petrol, cigarette, etc. In Nigeria excise duties were first levied on cigarettes in 1939, on Beer in 1949 and on many more goods from 1960.


“By incidence of taxation we mean the ultimatae bearing of taxation. This burden, or incidence, of a tax refers to to the change in real incomes that results from the imposition of a change in a tax. The incidence of a tax according to “David Begg” measures the final tax burden on different people and who ultimately pays the tax.

“O Teriba” refers tax incidency as the effect and whre he burden of it final rest. He differentiated between formal and effective incidence of a tax. According to him, formal incidence tells us about the initial effects of a tax on the tax objects (income goods) etc. while the effective incidence of a tax tells us how the ultimate (final) burden of a tax was met.

Types of Tax Incidence

*        The statutory incidence of tax refers to the payment of money to individuals in the form of salary or profit only on the terms that the amount is remitted to the government in the form of a tax. For example, statutory incidence means the income tax which is levied equally to employees and the employers by the government.

*        The Economic incidence of tax refers to the economic impact of taxation by government on the real income of the individuals. Economic incidence refers to the person or a group who actually bear the tax.

*        Progressive Taxes: A tax is progressive if its rate increases as the size of income or stock of wealth which is being taxed increases. Here, the burden of a progressive income tax falls on those who earn higher income.

Regressive Taxes: A regressive tax takes a smaller part of incomes as income increases that is, as income increases the tax decreases. For instance individual A and b earn N100 and N400 respectively, if A pays N10 as tax, his tax rate is 10%. If B pays N20 as tax, his tax rate is 2.5%. A pays higher percentage of his income (5%) than B (2.5%), such a tax system is said to be regressive.

Proportional Taxes: A tax is proportional when the rich pay more than the poor in absolute terms in actual amounts. But all tax payer, rich and poor are made to surrender the same percentage of their income in tax payments.


Kind of Tax Rate of Tax in % Mr. A N of Tax N1000 net of income Rate of Tax in % Mr. B.N. of Tax N1000 net of income
Progressive (rate of tax rises as income rises) 10% 100 900 20% 800 3,200
Regressive (rate higher for lower incomes) 10% 100 900 5% 200 3,800
Proportional (rate the same for all income) 10% 100 90 10% 400 3,600

Sources: Certificate economics for West Africa by O’ Teriba


According ot Adam Smith “the wealth of nations” 1976, he defined principles of taxation as rules, reasons, qualities and conditions that lie behind a particular tax on tax system. he sets out four rules of taxation.

For Mnemonic purposes this is ECCE (Latin behold)

a        Equality: This does not mean that each tax payer must pay the same amount. It means that two men earning N50,000 a year and having the same responsibilities (

children) should pay he same income tax equitably thus means that people should pay taxes according to their “ability to pay” progressive taxation satisfied this principles

b       Certainty: This means that the tax payer must be certain of the amount of tax to pay. The tax law must be such that a tax payer can ascertain with the minimum of difficulty what is due from him to the state. The law must be clear and simple. As far as possible, technicalities should be avoided and the liability fixed without ambiguity.

c        Convenience: This means the tax so assessed by the Assessment Authority must be convenient to the tax payer. The manner of making payment and the time must be such as to cost the least convenience. It accords with this principles to so arrange time for the collection that if falls within the period when most tax payers are in funds and also to receive the tax due by installments as in P.A.Y.E.

d       Economy: A good tax is the one which is economical to collect. Compare with the total tax revenue from a particular tax, the cost of collecting it should be smaller than the amount collected. Therefore, a high cost of collection is uneconomic. The strict possible economy -must be exercised in the process of assessment and collection.


  1. Rising of Revenue to finance government expenditures programme.

Tax plays an important role in Nigeria society. It is a strong force for economic development in the country form the pre-colonial, colonial and post-colonial eras. It is by far the most significant source of modern government hence call for increase in taxation.

Role as used in this study as it relates to tax according to Oxford Dictionary is a part played or the contribution of taxation. Revenue generated form tax can be used by the government to carry out its expenditure programme which includes defence, social and infrastructural services, general administration etc. For government to effectively carry out these obligations, a lot of revenue will be required. Revenue generated from oil and non oil source cannot be enough to execute these enormous tasks, hence tax revenue, which is believed to be the most significant source of revenue to the government.

Rabul (1981:2) strongly agree with this in his statement, “A great majority of federal and state government strongly agree with this in his statement revenue to finance government expenditure”. This proves why government in its annual budgets limits the level of expenditure to commensurate with the projected revenue which tax plays a significant role. In essence what taxes mean to the government is exactly what capital and gains are to individuals & business organization.

  1. Acting as instrument of fiscal policy:

O’ Teriba (1976:187) traced he origin of fiscal policy to “the treasury of Ancient Rome which was called “FISC” from it we get the world “fiscal” which means something concerning public revenue. By definition, fiscal policy is that part of government policy which is concerned with raising revenue through taxation and other means and deciding on the level and pattern of expenditure.

  1. Fiscal policy as an instrument of increasing Economic Activity:

O Teriba continued by saying assuming that total demand for goods and services is low as well as the level of employment and production, in this situation, the government may plan for a budget deficit, it can do this through reducing taxes. This is because if people and firms pay excess tax, there will be more money available to spend and total demand will go up.

4        Fiscal policy as an instrument of reducing Economic activity:

He further asserts that if total spending is much higher than the supply of goods and services prices will tend to raise (inflation). The government may try to reduce total demand and thereby economic activity by increasing taxes. This because it is generally easier for the government to make tax changes than to reduce its expenditure, especially when it involves long term investments and socially desirable public services.

5        Equitable Distribution of Income / wealth

Taxes often to redistribute income: A progressive income tax, which takes more from those with higher income thereby reducing the unequal income among people, satisfied these roles of takes. The government therefore spreads tax revenue on services that includes health, education, social welfare etc which often benefit low income groups more than those with higher incomes. Tax system is thus a very powerful and effective device for ensuring a more equal distribution of income. On the other hand, equitable distribution of wealth is very essential in order to maintain a desire level of economic stability. This is achieved through redistribution of wealth concentration of high income earners.

6        Favourable Balance of Payment

Taxes on import and export affect the balance of payment and may affect production at home. High taxes on imports reduce or prevent the import of a particular manufactured, goods so the industries (infant industries) can become properly established. Conversely, government encourages export by giving tax subsides / relief to producers especially in the area of agriculture and industries. Being able to produce its basic needs and not relying on foreign goods / supplies makes a country self-reliant. This in turn raises enough revenue to the government.


The following are the areas in which most of this West African Governments spend annually huge sums of money generated from tax.

a        Education: This tax is a very large portion of the yearly government expenditure budget. A times it claims as high as 45% of the total budget. Each government now struggles to provide education to its citizen not only in he elementary school level but also in he secondary and University levels.

b       Transport: Transportation is another item which claims a very large portion of the budget. transporter includes: Roads, Railways, water ways and Airways. The building and maintenance of roads is now a very costly affair.

c        Health: Under health, we have hospitals, maternity homes and dressing stations. It is the aim of modern governments to bring these facilities as clost to the people as possible.

d       Administration: Cost of administration consist of money spent on maintenance of government building, furniture and payment of salaries to all grades of public servants.

e        Defence: The refers to Army, Navy and Air force

f        Police: The police force is incharge of maintenance of law and order.

g        Others: There are numerous other services such as water supply, electricity supply, telephone which are provided at government expense.


It is good to note that no tax system can succeed without the tax payers co-operation. In Nigeria, just like every other country, the issue of taxation is offer regarded by the tax payers as a means whereby government raises revenue on herself at the expense of their sweat.

No wonder Ukale B.O. (1966) states that “the first factor is that an average Nigerian is ignorant of what the money paid (at tax) is used for and therefore, takes to him are just one of the evils of imperialism.


The due administration of the Nigeria tax system is under the care and management of the federal Board of Inland Revenue Services (FBIRS) who may do all such things at it deemed necessary and expedient to assess to tax the profile of any company accruing in, derived from, brought into or received in Nigeria. We shall examine this under the following headings. The structure, and composition of the Board, Board meeting, duties and functions of the Boards, the objectives of tax administration and legal backing ot tax administration.

  1. Structure and Composition of the Board

According to Mr. Wilson Ani, the federal Board of Inland revenue Service is constituted under section (1) of the company’s Income Tax act 1979 (CITA) as amended and retained as cap 60 in he laws of the federation, 1990 section 1 and 2 provides that he members of the Board shall consists of:

  1. a) The chairman, who shall be the director of the federal Inland Revenue department.
  2. b) Four deputy directors of the federal Inland Revenue department.
  3. c) The most senior of those officers holding or acting in the post legal adviser and in the federal Inland Revenue Department who is available from time to time on duty in Lagos.
  4. d) The officer from time to time holding of acting in the office of principal, assistant secretary with responsibility for revenue matters in the federal ministry of finance and Economic Development.
  5. e) A representative of the department of customers and exercise.
  6. f) A representative of the Nigeria National Petroleum Corporation (NNPC).

a        Any five members of the board of whom one shall be the director o a deputy shall constitute a quorum.

b        Wherever necessary, the board shall nominate an officer of the federal Inland Revenue Department to be secretary to the Board.

c        Notwithstanding that the legal adviser to the board is at anytime a member of the board, he may appear to represent the board in his professional capacity in any proceedings in which the board is a party, and the legal advise shall not in scuh circumstances give evidence on behalf of he board.

d        The secretary shall summon a meeting of the board wherever the business requiring its attention so warrant, or upon any request of a member and a majority decision of the members shall be treataed in all respects as though it were a decision of the board in actual meeting unless any member has requested the submission of that matter to such meetings.


a        To assess, collect and account for tax of companies throughout Nigeria.

b        To deal with claims, objectives and appeals of tax payers

c        To impose penalties of defaulters of company income tax law.

D       Administration of the company income Tax Act.

  1. Negotiating and concluding double taxation agreement

f        Responsible for initiating amendment to tax law.

g        Responsible for the assessment and collection of value Added tax

h        Assess the officers of the armed forces, of the Nigeria foreign service, reciplents of persons overseas, shareholders of Nigerian companies but resident outside Nigeria.

THE Organs of Tax Administration

Tax Administration in Nigeria spans the three tiers of government. It comprises of the local government, the state government and the federal government.

Local Government Level

The Local government edict of 1977 sections 82 indicates the various sources of Revenue accruable to a local government. These include fees, levy and rates such as

  1. Marriage, Birth and Death Registration fees
  2. Liquor Licence fees
  3. Naming street fees
  4. Meriment and Road closure fees
  5. adio and Television Licence fees
  6. Slaughter slab fees
  7. Right of occupany
  8. Market stall fees
  9. Motor park fees
  10. Cattle Tax
  11. Tenant fees
  12. Vehicle Radio License Fees
  13. Domestic Animal fees etc.

The edict states that all monies document be collected and paid to the finance department or to the local government or to the local government revenue collector. Each finance department of which is responsible for the assessment and collection of the various revenue of the local government collection who is an employee of the local government authorized to collect and receive monies on behalf of the local government, his responsibilities include:

a        Ensuring that all the revenue accruable to the local government are promptly collected when due and paid into the local government account.

b        He is required to keep the necessary accounting records and ensure that all receipts books, licence etc are kept under strict control.

c        Where subordinate revenue collectors are delegated, he must check their records and ensure strict compliance to regulations.

State government Level

There are source of income accruable to the state government: These would include:

  1. Personal Income Tax-both under PAYE
  2. Income arising form withholding tax
  3. Capital gain tax
  4. Road Tax for vehicle
  5. Market fees where state finance is involved
  6. Tax form lotteries
  7. Tax form pools betting
  8. Tax from gain and casino
  9. Business registration fees
  10. Development levies

The state Board of Internal Revenue

The administration of the state tax matters is the responsibility of the state Board of Internal Revenue


The state Board is comprised of:

1        The executive of the state serviced as the chairman he shall be person experienced in taxation and appointed from within the state services.

2        Three other members to be nominated on their personal merit by the finance commission of the state.

3        Three other members to be nominated on their personal merit by the finance commission.

4        The director and the head of departments within the state service.

5        A director from the state ministry of finance

6        A legal adviser who shall be appointed from the state ministry of justice.


The duties of the state shall include:

  1. Ensuring the effectiveness and optimum collection of all taxes and penalties due to the state government under the relevant laws.
  2. Making accommodations while appropriate to the joint Tax Board on Tax policy, Tax Reform, tax legislation, tax treaties and exemptions as may be required form time to time.

3        Appoint, promote, transfer and discipline of employees of the state services.

4        General control of the management of the service on matters of policy, subject to the provision of the law setting up the service.

Teaching committee of the Board

The law also provides a technical committee of the Board which shall be made up of the followings:

  • The chairman of the Board as chairman
  • The director within the state service
  • The legal adviser to the Board
  • The secretary to the board.


The technical committee shall have powers to do the followings:

  1. Consider all matters that require professional and technical expertise and make recommendation to the state board.

2        Advise the state boards and all its power & duties

3        Attend to such other matters as may from time to time be referred to it by the board.

Federal government Level

The federal Board of Inland Revenue (FBIR) is responsible for the federal Tax Matters. The federal Board of Inland Revenue’s operational arm is known as the federal inland Revenue services.


The board is made up of:

  1. An executive chairman who shall be a person within the service experienced in taxation, to be appointed by the president.

2        The directors and heas of departments of the services.

3        The officer of the federal ministry of finance, who shall be a director with responsibility for planning, research and statistical matters.

4        A member of the Board of th National Revenue mobilization allocation and fiscal commission.

5        A member of Nigeria National Petroleum Corporation, not lower in rank than an executive director.

6        A director from National Planning Commission

7        A director from Nigeria custom service.

8        The Registrar-general of the corporate Affairs, commission

9        The legal adviser to the service.

Any seven members of the Board of whom one shall be the chairman or director of a department within the service, shall constitute a quorum. The secretary (who shall be an official member of the Board) shall be nominated by the Board from within the service.

Powers of the Board

The Board is vested with wide powers for the efficient performance of its statutory duties. These include the power to:

  1. Acquire hold and dispose of any property taken as security for or in satisfaction of any tax or penalty or of judgement due in respect of such tax or penalty.

2        To sue or be sued tax or penalty

3        Specify the form of returns, claim, statement and motive under each of the Acts or Decree.

4        Give notice in writing to any company to finish fuller or further information.

5        Act wise in the form and the manner in which an assignment is to be made.

6        Grant relief in respect of error or mistakes

7        Compound any offence or stay or compound any proceedings.

8        Grant the right of installments payment to a tax payer

9        Extended, as its discretion, the time within which to pay taxes under CITA.

10      Sanction any prosecution in respect of certain offences under each of the Acts or Decree. etc.

Joint Tax Board

The Board initially created under section 27 1961 as amended is now deemed established under section 85 (1) of decree 104 of 1993 (PITA


The board consists of:

a        The chairman of the federal board of Inland Revenue who double as the chairman of the board.

b        One member from each state, being person experienced in income tax matters nominated either by name or by office, from time to time by the commissioner for finance of the state.

The federal public service commission is empowered to appoint on officer experienced on income tax matters to act as the security to the board. It is necessary to point out that the secretary is not a member of the board, but the officer in-charge of the board’s secretariat. The legal adviser of he federal boards of Inland Revenue is always in attendance at meetings of the board in the capacity of an adviser to the board.

Duties of the Tax Board

The duties of the joint tax board are:

a        To arbitrate on tax disputes between one state tax authority and another and between any state tax and federal board of inland revenue.

b        To consider and approve pension schemes. Any payment made to any pension scheme not approved by board is not tax deductible.

c        To endeavour to promote uniformity both in the application of the provision of the law and the incidence of tax on individual.

d        To exercise powers or duties arising under the Act or Decre which may be agreed by the government of each territory to be exercised by the board.

e        To advise the government of the federation in respect of:

i         Double tax agreements under consideration or concluded with any other country.

ii        Rate of capital allowance and other taxation matters having effect throughout Nigeria.

iii       Any proposal amendment to tax laws.

iv       Any other taxation matters of general / application throughout the federation.

Duties of the secretary of the Joint Tax Board

The duties of the secretary include:

i         Summoning meetings of the Board

ii        Maintaining the records of the Board’s proceeding and responsibility for signifying all decisions.

iii       Controlling and managing the office of the Board any staff engaged on its behalf.

iv       preparing or summarizing papers on technical matters on consideration by the board.

v        Giving written notice of any such determination to each individual and tax authority concerned.

vi       Calling for any further information which may be required to enable a determination to be made.

vii      Arranging for the board all facts relating to any particular objective or dispute concerning residence which may arise between an individual and a tax authority or between it and other tax authorities.

viii     Obtaining majority decisions y correspondence in view of an actual meeting of the board.

Assessment Appeals

A tax payer makes an objection to an assessment made on him. A revision of the assessment as a result of an objection may be effected aat the discretion of the board. The board may raise assessment notice. Where, however, a compromise cannot be reached between the board and the tax payer, who has no atternative than to appeal. It is the right of any tax payer, individual or company who disagrees with the assessment made on him or it to object and file an appeal against such as assessment. There are certain procedures to be followed for such an appeal. These are:

  1. The appal must be made within thirty (30) days from the date of service of the assessment notice.

2        The appeal must state the reasons of disagreement with the assessment.

3        The appeal must be in writing, oral appeals are not valid.

4        the transit period of seven (7) days is allowed over and above the statutory thirty (30) days period to enable the appeal reach the tax authorities.

Any appeal received after the above stated period of time is regard as late. The board of internal Revenue however, may consider a late appeal at this discretion.

Objectives of Tax Administration in Nigeria

  1. a) Prvention of tax evastion as much as possible
  2. b) To ensure strict accountability and efficiency in revenue allocation
  3. c) Equitable treatment of tax payer
  4. d) Advising the government from time to time on matter relating to tax.
  5. e) Education and enlightenment of tax payer


The due administration of Nigeria Tax law is under the care and management of the federal Board of Inland Revenue Service under section 1 of the companies income Tax Act 1979 (CITA) as amended and retained as CAP 60 in the laws of the federation (1990) section 1 and 2. The Board is thus empowered to delegate any person to act on its behalf in carrying out its duties, Ochiogu Tabans: (1997)

2.8     Problems of Taxation

Two major problems area discussed: Ax evastion and tax Avoidance. Tax evasion and tax payer can achieve the same goal of reducing this tax liability while tax evasion is considered illegal, by natur3 all taxes exert an income in that they compulsory withdraw revenue from the private sector. Also as indirect taxes are levied on goods, people tend to shift form the purchase of one gods to another, this is the substitution effect to a tax.

A good tax system is one which does not result in either income effect or substitution effect. However, this is not attainable in the real world, hence the application of this rule is to achieve the highest possible neutrality from the imposition of tax system.

–        Tax Avoidance; This is defined as tax payer effort to avoid paying tax by finding a legal 100phole in a tax. It is a deliberate legal act and one of the ways of doing it, is by taking more life assurance policies. According to Udeh Okey S. (2005) is the act of streamlining one’s financial affairs within the law so as to minimize the tax liabilities and this becomes a problem of taxation.

–        Tax Evasion: This is an illegal attempt by tax payer not to pay tax. One of the methods is by not declaring all of one’s earnings and under estimation of earnings.

Functions of Taxation

  1. a) To Raise Revenue: This is one of the most important reason why government levies taxes to raise the money to run its services. The bulk of government revenue comes from taxation.
  2. b) To Protect infant Industries: Import duties are often used to prevent foreign industries from competing with the young domestic ones.

C       To check inflation: Inflation is often as a result of too much money being in the hand of the public. Heavy income tax can reduce such money and thereby check inflation

d        To curtail consumption of harmful commodities: Commodities like cigarette and alcoholic drinks are considered harmful to the human body. In order to reduce their consumption government often imposes heavy exercise and import duties on them

e        To redistribute wealth: Heavy progressive taxes can be used to narrow the gap between the rich and the poor.

Tax: According to Adam Smith canons of taxation is the most important source of public revenue. According to Hugh Dalton, a tax is a compulsory contribution imposed by a public authority, irrespective of the exact amount of service rendered to the tax payer in return, and not imposed as penalty for any legal offence.

Anyanwu (1997) defined taxation as the compulsory transfer or payment (or occasionally of goods and services) from private individuals, institutions or groups to the government. (Bhartia, 2009, in Ogbonna and Appah 2012) tax is a compulsory levy imposed on a subject or upon his property by the government to provide security, social amenities and create conditions for the economic well being of the society. Nzotta (2007) cited in Ogbonna and Appah (2012) noted that taxes generally have allocations, distributional and stabilization functions.

Akintoye and Tashie (2013) pointed out the importance of taxation in the activities of any government cannot be over emphasized. Okoyeuzu, (2013) stated that the most important role of a tax system is its revenue-raising function.


Justifies the imposition of taxes for financing state activities and also providing a asis ofr apportioning the tax burden between members of the society. This reasoning yield the benefit received theory and cost of service theory. There is also the faculty theory of taxation.

Socio political theory: This theory of taxation states that social and political objectives should be the major factors in selecting taxes. The theory advocated that a tax system should not be designed to serve individuals, but should be used ot cure the ills of society as a whole.

Expediency theory:” This theory asserts tht every tax proposal must pass the test of practicality. It must be the only consideration weighing with the authorities in choosing a tax proposal. Economkc and social objectives of the state as also the effects of a tax ssyem should be treated irrelevant (Bhartia 2009).

Benefit received theory: This theory proceeds on the assumption that there is basically an exchange relationship between tax payers and the state. The state provides certain goods and services to the members of the society and hey contribute to the cost of these supplies in proportion to the benefits received (Bhartia, 2009).

Anyanfo (1996) argues that taxes should be allocated on the basis of benefits received from government expenditure. Faculty theory: According to Anyanfo (1996), this theory states that one should e taxed according to he ability to pay. It is simply an attempt ot maximize an explicit value judgement about the distributive effects of taxes. Bhartia (2009) argue that a citizen is to pay taxes just because he can, and his relative share in the total tax burden is to be determined by his relative paying capacity.


According to Azubike (2009), tax is a major player in every society of the world. He tax system is a opportunity for government to collect additional revenue needed in discharging its pressing obligations. A tax system offers itself as one of the most effective, means of mobilizing a nations internal resources and it lends itself to creating an environment conducive to the promotion of economic growth. Nzotta (2007) presented four key issues to be understood for taxation to play its functions in the society. First, tax is a compulsory contribution made by the citizens to the government and for the general common use. Secondary, a tax imposes a general obligation on the tax payers. Thirdly, there is a presumption that the contribution to the public revenue made by the tax payer may not be equivalent to the benefits received. Finally, a tax is not imposed on a citizen by the government because it has rendered specific services to hijm or his family. Thus it is evident that a good tax structur3e plays a multiple role in the process of economic development of any nation which Nigeria is not in exception (Appah, 2010).

Musgrave and Musgrave (216) note that these roles includes the level of taxation affects the level of public savings and thus the volume of resources available for capital formation; both the level and he structure of taxation affect the level private savings.

Nwezeaku (2005) argues that the scope of these functions depends, inter alia, on the political and economic orientation of the people, their needs and aspirations as well as their willingness to pay tax.

In a study carried out by Torgler (2011), examining the impact of tax morale on tax compliance, he states that over the last several decades, there has been a growing interest in theoretical, empirical, and experimental work on all aspect of tax compliance and tax evasion. A common theme in much of these works is that the traditional economics – of-crime approach to compliance, while containing many insights, is simply inadequate as a framework for more fully understanding why people pay taxes.

Rather, the basic model of individual choice must be expanded by introducing some aspects of behaviour or motivation considered explicitly by other social sciences.


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