TAX REFORMS AND REVENUE GENERATION IN NIGERIA: A LONGITUDINAL ANALYSIS

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND OF THE STUDY

The tax system in Nigeria is made up of the tax policy, the tax laws and the tax administration. All of these are expected to work together in order to achieve the economic goal of the nation. According to the Presidential Committee on National tax policy (2008), the central objective of the Nigerian tax system is to contribute to the well being of all Nigerians directly through improved policy formulation and indirectly though appropriate utilization of tax revenue generated for the benefit of the people. In generating revenue to achieve this goal, the tax system is expected to minimize distortion in the economy. Other expectations of the Nigerian tax system according to the Presidential Committee on National tax policy (2008) include; encourage economic growth and development, generate stable revenue or resources needed by government to accomplish loadable projects and or investment for the benefit of the people, provide economic stabilization, to pursue fairness and distributive equity and correction of market failure and imperfection. In an attempt to fulfill the above expectation, the national tax policy is expected to be in compliance with the principle of taxation, the lubricant to effective tax system. The Nigerian tax system has been flawed by what is termed multiplicity of tax and collecting entities at the three tiers of government levels – Federal, State and Local government (Ahunwan, 2009).

According to the report of the presidential committee on National Tax policy (2008), “The National tax policy provides a set of rules, modus operandi and guidance to which all stakeholders in the tax system must subscribe”. Tax policy formulation in Nigeria is the responsibility of the Federal inland Revenue Services (FIRS), Customs, Nigerian National Petroleum Corporation (NNPC), National Population Commission (NPC), and other agencies but under the guidance of the National Assembly i.e. the law making body in Nigeria (Presidential committee on National tax policy, 2008). Suffice it to say that if there must be any effective implementation of the Nigerian tax system or attainment of its goal, the use of the national tax policy document remains absolutely essential. According to the Presidential Committee on tax policy (2008), “Nigeria needs a tax policy which does not only describe the set of guiding rules and principles, but also provide a stable point of reference for all the stakeholders in the country and upon which they can be held accountable. James and Nobes (2008) decried the inability of tax policy to meet up with efficiency and equity criteria against which it is being judged. It was further noted that tax policy is continually subjected to pressure and changes which most time does not guarantee outcome that are in line with the overall goal (James and Nobes 2008).

Unfortunately, most policy changes in Nigeria are without adequate consideration of the taxpayers, administrative arrangement and cost plus the existing taxes. This has in no small measure hindered the effective implementation and goal congruence of the nation’s tax system. Citing (Bird and Oldman 1990), James and Nobes (2008) stated as follows “the best approach to reforming taxes is one that takes into account taxation theory, empirical evidence and political and administrative realities and blend them with good dose of local knowledge and a sound appraisal of the current macroeconomics and international situation to produce a feasible set of proposals sufficiently attractive to be implemented and sufficiently robust to withstand changing times, with reason and still produce beneficial results”. The research seek to investigate the nature of tax reforms and its impact on revenue generation.

    1.2      STATEMENT OF THE PROBLEM

The problem confronting this research is to determine the nature of tax reforms and its impact on revenue generation in Nigeria, applying a longitudinal analysis.

1.3   RESEARCH    QUESTION

What constitute tax reforms in Nigeria?

What is the effectiveness of tax reform towards revenue generation in Nigeria?

1.4   OBJECTIVES OF THE STUDY

1. To determine the nature of tax reform in Nigeria.
2. To determine the effectiveness of tax reform policy towards revenue generation to government

1.5   SIGNIFICANCE OF THE STUDY

The study shall analyze tax reform policy and determine its effectiveness towards revenue generation to government.   It shall also serve as a source of information on issues of tax reforms in Nigeria.

1.6   STATEMENT OF HYPOTHESES

Hypothesis I

Ho: Tax revenue generation in Nigeria   is high.

Hi: Tax   revenue generation in Nigeria is low.

Hypothesis II

Ho: Challenges to tax revenue generation in Nigeria is low.

Hi: Challenges to tax revenue generation in Nigeria is high.

Hypothesis III

Ho: The impact of tax reform on revenue generation is low

Hi: The impact of tax reform on revenue generation is high

  1.7   SCOPE OF THE STUDY

The study focuses on the appraisal of tax reforms and its impact on revenue generation using a longitudinal analysis

  1.8   DEFINITION OF TERMS

Tax Policy Reform: According to the report of the presidential committee on National Tax policy (2008), “The National tax policy provides a set of rules, modus operandi and guidance to which all stakeholders in the tax system must subscribe”. Tax policy formulation in Nigeria is the responsibility of the Federal inland Revenue Services (FIRS), Customs, Nigerian National Petroleum Corporation (NNPC), National Population Commission (NPC), and other agencies but under the guidance of the National Assembly i.e. the law making body in Nigeria (Presidential committee on National tax policy, 2008). Suffice it to say that if there must be any effective implementation of the Nigerian tax system or attainment of its goal, the use of the national tax policy document remains absolutely essential. According to the Presidential Committee on tax policy (2008), “Nigeria needs a tax policy which does not only describe the set of guiding rules and principles, but also provide a stable point of reference for all the stakeholders in the country and upon which they can be held accountable.

Tax  Taxation has been defined as a general concept for devices used by government to extract money or other valuables from members of the community and organization by use of law. It is a levy charged by government either central, state or local government on income, property, commodities and services.

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