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Taxation is a mandatory levy imposed by the government on the incomes of taxpayers in a geographical territory to cover the costs of governance. This means that anybody who earns money is required to pay taxes. There are various sorts of taxation. Personal income tax, corporate income tax, petroleum profit tax, value added tax, and capital gains tax are all examples.

The subject of capital gains tax in Nigeria has recently come to the fore. The government is responsible for periodically examining the tax position as part of the existing fiscal strategy in order to fulfill specific objectives. However, each assessment provokes a range of opinions from stakeholders.

Governments around the world and throughout history have encountered similar issues when it comes to funding their objectives to build their country or state and provide a fair standard of living for their citizens.

We do not believe that governments in the past or in today’s developing world were any less reasonable or foresighted than those in the industrialized world. As a result, in most nations around the world, the major goal and purpose of taxation is to create income or collect funds for government expenditures on social welfare.

The significance of taxation stems primarily from its ability to stimulate capital formation for economic development and growth, as well as to aid in the management of consumption patterns, resulting in economic stabilization and successful income redistribution (ICAN, 2009).

If these are the primary goals of taxation, it is critical to have a strong and vigorous tax system in place, not just at the federal level, but also at the state and local government levels, to ensure that the goals of the tax system are met.

With the federal government on track to eliminate the fiscal deficit in the coming year, a discussion has begun on how to effectively focus future budget surpluses. Some have advocated for tax cuts, while others have stressed new spending.

The Capital Gains Tax Administration in Nigeria seeks and attempts to tax each company in the state more effectively. However, the level at which the capital gain tax administration in Nigeria tends to achieve its desired goals and objectives is largely dependent on the tax office and the companies that operate in each state.

Additionally, when an individual or company is taxed by the federal board of inland revenue (FBIR), such taxpayer is expected to provide accurate information about their gain or income, but some go to the extent of forgery in the provision of their documents, which gives an incorrect result.

A weak economy serves as the backdrop for these fiscal policy deliberations. Most analysts agree that Nigeria’s economy would continue to struggle with lower-than-“normal” or “historic” levels of economic growth. Low economic growth has far-reaching consequences, including slower increase in employment, income, and, eventually, living standards. This means that any discussion on how to spend future budgetary surpluses should center on policy initiatives that can boost economic growth in both the short and long term.

Capital gains taxation is one area of policy reform that could contribute to increased levels of economic activity. A plethora of data indicates that capital gains tax reform can increase the availability and lower the cost of capital available to new and expanding businesses, resulting in increased levels of entrepreneurship, economic growth, and job creation.

The major reason that capital gains tax reform can have such positive impacts is due to what economists refer to as the “lock-in effect.” Because capital gains are only taxed when they are realized, high capital gains tax rates can create an incentive for investors and asset holders to keep their current investments even if more profitable and productive possibilities exist.

The amount of the lock-in effect varies depending on a number of parameters, but empirical research has established a negative association between capital gains tax rates, asset sales, share prices, and other proxies for investor activity.

A capital gain (or loss) is the difference between the price of an asset when it is sold and its initial acquisition price. A capital gain occurs when the asset’s value at the time of sale exceeds the initial purchase price. If the asset’s worth at the time of selling is less than the acquisition price, a capital loss occurs.

Capital gains taxes, of course, raise revenue for the government, but at a significant economic cost. Capital gains taxes are costly to the economy because they lower investment returns and so skew individual and business decision making. This can have a significant impact on capital reallocation, available capital stock, and the level of entrepreneurship.

Capital gains are taxed based on when they are realized. This means that the tax is only levied when an investor chooses to exit from the market and realize the capital gain. One of the most significant economic implications is the incentive this creates for capital owners to keep their current assets even if more profitable and productive alternatives exist.

Capital gains taxation has been justified on the grounds that capital gains on assets boost a person’s taxable capacity by improving his or her ability to spend or save. Capital gains are not distributed among the various members of the taxpaying community in a fair proportion to their taxable incomes, but are concentrated in the hands of property owners, and it has been argued that their exclusion from the scope of taxation constitutes a serious discrimination in tax treatment in favor of a specific class of taxpayers.

Nonpayment of capital gains tax creates discrimination in favor of property owners, which leads to additional reinvestment of those earnings in assets, perpetuating increasingly severe income and wealth inequalities, as capital gains only accrue to people who own property.

Nonpayment of capital gains tax, particularly for individuals in the upper income group, places a bigger proportional burden on others who do not enjoy such profits (Ayua, 1999).

In emerging countries, capital gains tax is a valuable source of revenue for development. Furthermore, large opportunities for capital gains exist in (developing) countries such as Nigeria due to the tendency of rising prices that inevitably accompany a process of accelerated economic development; additionally, the process of economic development itself tends to generate capital gains due to increases in real income, company profits, and the value of shares.

However, when the proportion of wealth held in the form of equity shares of capital gain increases, owners of property such as land and real estate benefit. Thus, capital gains taxes is an important fiscal mechanism for reinvesting a portion of the increased benefits accruing to property holders as a result of a development process into public sector development funds.

Individual and business entities are frequently subject to a variety of taxes. Capital gain tax is levied on income generated by the sale of a capital asset. This article will look at the notion of taxes, the reasons for taxation, the characteristics of a good tax system, the nature of Capital Gains Tax, and recommendations for the efficacy of this type of taxation.


Whatever the grounds for or against capital gains tax, capital gains tax, like other types of taxes, has been criticized as having a form of lock-in impact on business by inhibiting the sale of capital assets that have risen in value (Brown, 1955).

It is also maintained that capital gains taxes hinder the flow of investment, particularly in emerging nations where more investor mobility is critical (Amatong, 1975). The negative impact on asset sale will be modest where capital gains are payable on the value of appreciation and the tax is not only paid through asset sale.

Second, there are certain issues with the CGT Act, one of which is that if the same transaction has tax effects in another jurisdiction, double taxation is likely. The resident entity appears to bear the tax implications and tax point requirement.

It is unclear how the resident entity intends to raise the funds to satisfy its tax obligations. The amendment makes no explanations in circumstances where the shares are regularly listed and traded on a stock market, potentially causing a change in control as a result of frequent trading.

Furthermore, unlike in other jurisdictions, no restriction has been imposed by the amendment on firms that hold land or natural resources that were/are the primary objective of taxation.

Third, while existing tax legislation in Nigeria provided for the taxation of direct share transfers, there was no explicit mechanism in place to compel the collection of the tax on the gain.

This has now altered as a result of changes made to the CGT Act’s total provision, which now requires a single installment tax payment on gains deriving from direct share transfers or interest generated from Nigerian corporations.

The relevant installment rate is 10% for resident stockholders and 20% for nonresident owners. It is worth noting that the specified installment will be available to the taxpayer as a tax credit for the provided year of income when the final tax payment is made.

Fourth, capital gains taxes lead to tax evasion. The extent to which real tax revenue received by a government differed from what would have been collected if every tax filer paid exactly what is required by law is referred to as the level of tax avoidance. Tax avoidance has significant consequences for tax efficiency since resources spent on avoidance could be put to better use.

Furthermore, there are numerous issues with the current management and administration of capital gains tax in Nigeria. According to Oserogho (2004), the main issue is a lack of data or record keeping in order for the tax authorities to be aware of when the capital gain is made and due to payment of this tax. This is especially true given Nigeria’s continued reliance on a cash-based economy rather than an electronic one.

If the prospective returns are severely taxed, the entrepreneur’s incentive suffers. As a result, high capital gains tax rates may steer inventive, would-be entrepreneurs away from entrepreneurship. The fall in entrepreneurial activity harms the economy not only because business and employment creation declines, but also because potential gains in living standards go untapped.

Finally, Nigeria is well endowed with oil and gas, among other mineral resources, but the country’s over-reliance on oil money for economic development has left much to be desired. The incapacity of the tax system to generate income has an impact on the government’s services.

The Nigerian tax system has failed to fulfill its projected purpose of revenue generation and income distribution regulation. This was due to structural and administrative flaws in the tax system. The apparatus and methods for executing tax systems are insufficient, leading in tax evasion and avoidance by most individuals and institutions, with the ensuing effect of low revenue yield for the country’s or state’s development.


The capital gains tax, unlike almost all other kinds of federal taxation, is a voluntary tax. Because the tax is only levied when an item is sold, taxpayers can lawfully avoid paying it by keeping their assets—a phenomenon known as the “lock-in effect.”

Today, an estimated $7.5 trillion in unrealized capital gains remain untaxed. Capital asset appreciation has outperformed realized capital gains 40-fold over the last 40 years. This implies that lowering capital gains taxes has the potential to “unlock” hundreds of billions of dollars of accumulated wealth.


The primary goal of this article is to assess and evaluate capital gains tax administration in the Nigerian tax system.

Other specific goals include:

Determine the relationship between the Capital Gains Tax and Nigeria’s economic progress in order to raise citizens’ living standards.

Examine Capital Gains Administration in order to implement a suitable tax administration policy.

Determine whether aggressive methods in the administration of Capital Gains Tax by FBIR staff and assess firm contributed to tax evasion.

Determine how the Capital Gains Tax contributes to Nigeria’s income generating.

Determine the amount to which the Capital Gains Tax has contributed to Nigeria’s consistent rise in GDP.

Identify the issues that are impeding the application of capital gains tax as a revenue generator in Nigerian tax administration.

Making recommendations to help enhance revenue production through Capital Gains Tax.


Based on this, the following three research questions are developed to drive the investigation.

The research:

Is there a link between Capital Gains Tax and Nigerian economic development?

Examine Capital Gains Administration in order to implement a competent tax administration policy?

Is there any aggressive practice in the administration of Capital Gain Tax between FBIR officials and evaluate company that has contributed to tax evasion?

How does the Capital Gains Tax help Nigeria generate revenue?

To what extent has the Capital Gains Tax contributed to Nigeria’s consistent increase in GDP?

Problems with the utilization of Capital Gain Tax as a revenue generator in Nigerian tax administration?


To carry out this research, two null hypotheses were developed.

The First Hypothesis

There is no significant association between capital gains tax and Nigeria’s economic development.

Hypothesis No. 2

H01: Capital Gains Tax has not made a major contribution to revenue creation in Nigeria.


According to the most current study (Speer& Palacios and Lugo&Vaillancourt, 2014), persons who declared capital gains income faced higher compliance expenses on average than those who did not record any such income. In particular, the direct compliance expenses for those reporting capital gains income were 13.8 percent greater on average. This illustrates the compliance expenses associated with capital gains taxation.

This research project would add to the current literature by focusing on Capital Gain tax changes and tax policy/law administration in Nigeria with the goal of identifying the significant challenges affecting the Nigerian tax system so that suitable actions might be implemented to address them.

This study will present a complete review of Capital Gain Tax and its legislation in Nigeria, as well as the ‘dark’ side of professional practice by investigating the involvement of FIRS Tax employees in assisting tax avoidance, evasion, and corruption in Nigeria.

The findings of this study will shed additional light on the issues surrounding capital gains tax administration in Ogun State, Nigeria. The focus on the federal Board of Internal Revenue (FBIR) will emphasize unusual issues and difficulties in implementing the Capital Gains Tax.

Finally, this study will be very important to schools and students since it will act as a reference point for future scholars who want to do more research on the subject.


The research paper focuses on the Administration of Capital Gain Tax in Nigeria, as well as its challenges and prospects, impact on the economy, and income generation in Nigeria, utilizing the Ogun State FBIR as a case study. The length of time covered by this study made it credible.

The Nigerian GDP for the period 2002-2011 was obtained in order to assess the extent to which taxation has contributed to the country’s consistent growth in GDP.


This research study is limited to a careful examination of (FBIR) and the applicable Act establishing it, with a focus on the overall administration of the act in Ogun State.

The collection of pertinent data for this study was a time-consuming process. It is also expected that there would be limitations, namely in the areas of questionnaire distribution, answering the questions honestly, and returning them (particularly by tax authorities) owing to fear of the unknown.

Furthermore, financial constraints serve as a deficiency for the research effort, and as a result of poor financial capabilities, it was insufficient to provide us with the expected findings.


Tax: A levy levied by the government on the income, profit, or wealth of individuals and business organizations.
Ogundele (1999) defines taxation as “the process or apparatus by which individuals, groups, or communities are forced to contribute in some agreed-upon quantum and way for the administration and general growth of the society to which they belong.”

Capital Gain/Loss: A capital gain (or loss) is the difference between the price of an asset when it is sold and its initial acquisition price. A capital gain occurs when the asset’s value at the time of sale exceeds the initial purchase price. If the asset’s worth at the time of selling is less than the acquisition price, a capital loss occurs.

Capital Asset Transfer: This is defined in connection to The sale, exchange, relinquishment, or compulsory purchase of a capital asset, as well as the extinguishment of any rights therein, are all examples of capital asset transfers.
Capital assets are described as any type of property, whether fixed, circulating, moveable, immovable, tangible, or intangible, and whether or not used for the purpose of his business or profession.

Cost of acquisition: The cost of acquisition of an asset is the price paid by the transferor for it. Expenses for finalizing title are included in the cost of acquisition.

7. Corporation Tax: Corporation Tax is applied to all other gains. Gains accruing to a non-resident corporation on the disposal of assets located in the State and used for the purpose of a commerce carried on by it in the State through a branch or agency are examples of these.

For the purposes of Capital Gains Tax, all types of property, regardless of location, are assets. Foreign land and buildings (for example, vacation homes and flats), incorporeal property (for example, goodwill or an option), and any stake in property are examples of assets (for example, a lease)

Asset Disposal: Any transfer of ownership of an asset by way of sale, exchange, gift, or settlement on trustees is considered asset disposal. A part disposal occurs when a portion of an asset is disposed of or a stake in an asset is transferred (for example, granting of a lease at a premium).

If a gain on the identical transaction would have been charged, a loss on the disposal is typically permitted. Allowable losses are offset against chargeable gains for the same year, and if the losses exceed the gains, the excess can be carried forward to future years’ gains.

Qualifying Asset: The individual’s chargeable business asset that he or she has owned for at least 10 years ending on the date of disposal (except from tangible moveable property) and that has been his or her chargeable business asset during that 10 year period.


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