Project Materials

TAX POLICY ON THE PERFORMANCE OF REVENUE PROFILE OF NIGERIA.

1.1 background of the study

The Nigerian Tax System has experienced substantial adjustments in recent times. Tax laws are being examined with the help of numerous studies and research conducted by tax specialists in order to eliminate outdated provisions and simplify the key ones.

Under contemporary Nigerian law, taxation is imposed by three levels of government: federal, state, and local, with each having a clearly defined realm in the Taxes and Levies.

In his book, Adam Smith (1976) stated that “tax is an ability imposed on the essence by a public authority to pay a specified amount within a specified period.”

The definition points to one attribute of a tax: it is a required contribution imposed by the government on the people under her control.

Because this is a compulsory payment, anyone who refuses to pay a tax is subject to penalties. Second, it is a mandatory payment imposed by the government agent on those who are able to pay.

Third, a tax is a payment made by the payer that the government uses to benefit its citizens. Fourth, no tax is levied in exchange for any unique service provided by the government to taxpayers. As a result, taxpayers do not receive any particular benefits from the government.

Tax policy strives to offer a collection of standards, rules, and operating procedures that would manage the Nigerian tax system and serve as the foundation for tax legislation and administration in Nigeria.

Tax administration, which also refers to the implementation of tax policy, including tax payer compliance with tax rules, is the list of monetary charges imposed by the government on individuals, businesses, transactions, or properties in order to generate revenue.

However, mobilising tax money as a means of supporting developmental initiatives in less developed economies has proven problematic, owing to a variety of kinds of resistance, including evasion and corrupt practices.

These efforts are viewed as economic sabotage and are frequently cited as reasons for the country’s delayed or non-existent growth. The government collects taxes in order to provide non-revenue services such as infrastructure, education, health, communications systems, and so on, as well as employment opportunities and essential public services (such as maintaining law and order), regardless of a country’s ideology or political system.

In Nigeria, the contribution of tax income has not been encouraging, so expectations of government are being cut short. Corruption, evasion, avoidance, and tax haven indicators are significantly linked to low revenue (Attila, Chambas, and Combes, 2008), and corruption acts similarly to a tax.

According to Adegbie and Fakile (2011), the more citizens lack knowledge or education about taxation in the country, the greater the desire and opportunities for tax evasion, avoidance and non-compliance with relevant tax laws.

In this regard, the country has suffered more as a result of individuals and businesses’ lack of tax conscience, as well as the tax administration’s failure to recognise the need of communication and conversation between the government and residents on taxes issues.

In the face of limited resources for financing long-term development, Nigeria has heavily relied on foreign money, such as loans and aid, as the principal way of achieving quick economic growth.

As a result, the country has amassed massive external debt in comparison to its GDP, as well as substantial debt servicing issues in terms of foreign cash flow, and the bulk of the population is impoverished.

The government has voiced worry about these issues and has promised to increase tax income in order to satisfy its goal. According to Kiabel and Nwokah (2009), the rising cost of running government, combined with falling revenue, has forced all levels of government in Nigeria to develop revenue-generating techniques.

According to Ndekwu (1991), there is a greater requirement than ever for the optimisation of revenue from diverse tax sources in Nigeria today.

This most likely affected the decision of the Federal Government of Nigeria (FGN), which established a research group in 1991 to review the Nigerian tax system and administration. This review resulted in the formulation of the Comprehensive Tax Policy.

1.2 Statement of The Problem

The reasons for reform and the decision to develop a National Tax Policy could thus be traced back to the structure of the existing tax system and some of its inherent problems, such as: the increased demand to grow internally generated revenue, which has led to the exercise of the powers of taxation to the detriment of taxpayers, who suffer multiple taxation and bear a higher tax burden than anticipated; insufficient information available to taxpayers on tax comp

However, Elimination of multiple taxation is therefore of major concern at all levels of Government; lack of accountability for tax revenue and its expenditure; lack of accountability for tax revenue and its expenditure; lack of clarity on taxation power of each level of Government/encroachment on the powers of one level/state by another;

lack of skilled manpower and inadequate funding, which led to the delegation of powers of revenue officials to third parties, thereby creating uncertainty in the tax system and increasing the cost of tax compliance; use of aggressive and unorthodox methods for tax collection;

the non refund of excess taxes to tax payer, due to the lack of an efficient system arid funds; the non-review of tax legislation, which had led to obsolete laws, that do not reflect Nigeria’s current realities;

and the lack of a specific policy direction for tax matters in Nigeria and the absence of laid down procedural guidelines for the operation of the various tax authorities.

Furthermore, other problems ailing Nigeria’s tax system have not been fully resolved for many years. One of the causes for this was Government’s strong reliance on revenues produced from oil, as a result of which little or no attention had been given to revenue from other sources, such as taxation.