Tax Policy in Nigeria
INTRODUCTION
A tax policies represent key resource allocator between the public and private sectors in a country. It is usually imposed on individuals and entity that make up a country. The funds provided by tax are used by the states to support certain state obligations such as education systems, health care systems, pensions for the elderly, unemployment benefits, and public transportation. A nation’s tax system is often a reflection of its communal values or the values of those in power. To create a system of taxation, a nation must make choices regarding the distribution of the tax burden-who will pay taxes and how much they will pay-and how the taxes collected will be spent.
In Nigeria, the taxation system dates back to 1904 when the personal income tax was introduced in northern Nigeria before the unification of the country by the colonial masters. It was later implemented through the Native Revenue Ordinances to the western and eastern regions in 1917 and 1928, respectively. Among other amendments in the 1930s, it was later incorporated into Direct Taxation Ordinance No. 4 of 1940. Since then different governments have continued to try to improve on Nigeria’s taxation system. The general opinion among scholars is that Nigeria’s fiscal regime is characterized by unnecessary complex, distortionary and largely inequitable taxation laws that have limited application in the formal sector that dominates the economy.
Given the foregoing, it is important that Nigeria adopt a taxation policy that would enhance national development. I am aware of the draft national tax policy that has been submitted for enactment by the National Assembly of Nigeria. My intention is to examine the Draft National Tax Policy with a view to correcting perceived flaws inherent in the document. To enhance the understanding of this paper, I begin with making a review Nigeria’s tax system and the current Draft National Tax Policy. I will attempt to identify the challenges inherent
A tax policies represent key resource allocator between the public and private sectors in a country. It is usually imposed on individuals and entity that make up a country. The funds provided by tax are used by the states to support certain state obligations such as education systems, health care systems, pensions for the elderly, unemployment benefits, and public transportation. A nation’s tax system is often a reflection of its communal values or the values of those in power. To create a system of taxation, a nation must make choices regarding the distribution of the tax burden-who will pay taxes and how much they will pay-and how the taxes collected will be spent.
In Nigeria, the taxation system dates back to 1904 when the personal income tax was introduced in northern Nigeria before the unification of the country by the colonial masters. It was later implemented through the Native Revenue Ordinances to the western and eastern regions in 1917 and 1928, respectively. Among other amendments in the 1930s, it was later incorporated into Direct Taxation Ordinance No. 4 of 1940. Since then different governments have continued to try to improve on Nigeria’s taxation system. The general opinion among scholars is that Nigeria’s fiscal regime is characterized by unnecessary complex, distortionary and largely inequitable taxation laws that have limited application in the formal sector that dominates the economy.
Given the foregoing, it is important that Nigeria adopt a taxation policy that would enhance national development. I am aware of the draft national tax policy that has been submitted for enactment by the National Assembly of Nigeria. My intention is to examine the Draft National Tax Policy with a view to correcting perceived flaws inherent in the document. To enhance the understanding of this paper, I begin with making a review Nigeria’s tax system and the current Draft National Tax Policy. I will attempt to identify the challenges inherent