The recent global crisis in the world has brought to the fore the need to note that this over-dependence on oil creates unnecessary shocks and thus, the need for diversification of the nation’s resource base and long term growth path. The oil is an exhaustible and dwindling resource, while taxation is the only non-exhaustible veritable source of resource and revenue generation to the government both at the tiers of government.(Oloyede, 2010:1). Nigeria is a monolithic economy with strong dependence on the oil sector; this over-dependence makes the economy to be more vulnerable to external manipulation and adversely affects the planning horizons in the country.

Taxation has rightly been identified as a major tool in the strengthening of domestic resource mobilization and consequently, the search for ways and means of expanding the tax base and also strengthening tax administration has been intensified. Taxation is considered a veritable source of revenue for financing developmental as well as people oriented programs in virtually all countries, irrespective of whether they are classified as developed or developing economies. That taxation has been one of the most important weapon available to government for marshalling financial resources is undisputable (Atta-Mills, 2002: Teidi, 2003 and Oloyede, 2010). Nigeria is governed by a federal system; hence its fiscal operations also adhere to the same principle. This has serious implications on how the tax system is managed in the country. In Nigeria, the government’s fiscal power is based on three – tiered tax structure divided between the federal, state and local governments, each of which has different taxes jurisdiction. As of 2014, all three levels of government share about 50 different taxes and levies. It is needless to emphasize that the existence of well defined tax laws alone cannot guarantee the success of tax collection effort.

There must always exist an efficient and effective tax administration as a sine qua non to successful domestic resource mobilization. In some developing countries, Governments impose many types of taxes, individuals pay income taxes when they earn money, consumption taxes when they spend it, property taxes when they own a home or land, and in some cases estate taxes when they die. In the United States, federal, state, and local governments all collect taxes. Taxes on people’s income play critical roles in the revenue systems of all developed countries. Taxation as a major non-oil revenue has been the mainstay of most developed countries, in contrast to developing countries that still depend on primary products. Also, indirect taxes appear to be in vogue in developed countries, due to higher return, lower administration cost and higher compliance rate, however, most developing countries still rely on direct taxes with lower compliance rate (Oloyele, 2010: 3). it is increasingly apparent, however, that tax administration must receive far greater attention if the goals of tax reforms and policies are to be achieved in the face of ever growing economy.

Much of tax policy is being directed to obtaining increased revenues to enable governments and their agencies or parastatals to carry out their economic planning. Yet it is true in Nigeria that effective administration of some of the existing taxes would provide a considerable and reasonable part of the needed revenue. The Nigerian tax system has undergone several reforms geared towards enhancing tax collection and administration with minimal enforcement cost. The recent reforms include: the introduction of TIN (Tax Payers Identification Number), which became effective since February, 2008. Automated Tax System (ATS) that facilitates tracking of tax positions and issues by individual tax payer, E-Payment System (EPS) which enhances smooth payment procedure and reduces the incidence of tax touts, Enforcement scheme (special purpose tax officers), all these have led to an improvement in the tax administration in the country.

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