In this post we look at the Problems and Prospects of Taxation in Nigeria. This information is useful for policy makers, implementation and for research purposes.
Taxation, the world over, has been viewed as a method of mobilizing and sustaining a nation’s financial resources. In view of this, nations have been proactive in ensuring that the tax administrative is effectively and efficiently operated hence, many reforms within the tax system.
However, the recorded improvement so far in the Nigerian tax system has demonstrated the government resolves to maximize its functions as defined by the Nigerian constitution through internally generated revenue.
The improvement is very significant as the tax laws are consistently reviewed to give room for amendment, and as well do away with those provisions that are not tenable, and simplify those ones that are in tune with the current socio-economic reality of the Nigerian state.
The laws and levies enforced by the three tiers of government, that is, the federal, state and local government are also spelt out in the tax law.
Read Also: The role of Taxation in the Nigerian economy
Those reforms within the Nigerian tax system, has indeed enhanced the smooth operation of the tax system, where the previous challenges encountered by the system is minimize. A glance at the recent reform has revealed that some innovation and development has been taken place in the system. The reform, which has given the tax authority the autonomy to collect tax from the members of the public has thus, engendered an improved tax administration in Nigeria.
Let’s start with the problems.
Problems of Taxation in Nigeria
1. Lack of appropriate authorities to administer several taxes
There has been a challenge of assigning appropriate tax authorities to administer the different taxes and levies enforced by the three tiers of government, for instance, the federal, state and local government.
This practice has been worrisome, as it introduces double and multiple taxation with its negative attendant of imposing welfare cost on the taxpayers.
2. Scarcity of database
Again, the issue of scarcity of database has contributed to tax evasion and avoidance, a situation, where the details of the members of the public or taxpayers are not kept, as they exhibited sense of apathy, when it comes to paying of tax.
The issue of corruption has been a perennial problem, even within the Nigerian tax system. Corruption has eaten deep into the fabric of this nation. And you wonder why there is apathy amongst Nigerians, when the issue of paying of tax comes up.
If there is corruption in the system, what then is the trust and the confidence of the taxpayers in discharging their civic obligation of paying of their taxes? This is an unfortunate situation!
4. Infrastructure decay
One may ask whether the infrastructures are in good condition. If not, is there any effort to develop them? And if I may tell you, the infrastructures are nothing to write home about.
Sustainable infrastructure is crucial for effective tax administration in this country. But what is the case today? Almost all the infrastructure facilities are in deplorable condition.
How then will taxpayer not avoid paying of tax, when they wonder on what the tax collected from them are used for. One can see the tendency that encouraged evasion and avoidance of tax payment among Nigerians.
Accordingly, no society succeeds without information, not even an organization. The idea of government agencies denying other government parastatals information for any selfish reason is a grave issue in tax administration. Disclosure and sharing of information is very crucial and important in any establishment, be it public or private.
Therefore, for tax administration in Nigeria to succeed, there should be mutual understanding and cooperation amongst the agencies involved in tax administration. The collaboration is expected to enhance exchange of information, reduce fraudulent tax practices and the incident of tax evasion as the case may be. I will like to draw the attention of Nigerians particularly, the tax administration authorities to the issue of welfare and benefit of Nigerians.
The welfare of Nigerians should be of paramount, in the cause of administering taxation. Let me at this point say that, the issue of patriotism and positive taxation culture, for example, in most developed world take into consideration the moral and civic obligation, which makes the citizens frowned upon tax avoidance, because they believe that paying of tax is in their interest and that their interest is protected.
How do they achieve this compliance? They achieve it by encouraging positive taxation culture, possibly through the rebranding effort of those authorities over which, tax administration responsibility is assigned. This development elicits voluntary compliance to tax payment, as government is responsive to the welfare of the citizens.
By copying this innovation from advanced culture, Nigeria will be better off in generating more revenue, when the citizens have confident and trust in the system. In other words, it implies that Nigerian leaders should demonstrate patriotism through leadership that is worthy of emulation in providing those amenities that will improve the living standard of the citizens.
For want of time, let me say that improvement in the tax revenue can be attained through regular updating of comprehensive database. The record and the database must be so improved that it will help tracked all potential taxpayers.
Prospects of Taxation in Nigeria
1. Promotion of nation’s socioeconomic status:
Taxation, as a means of generating revenue internally has helped boost the socio- economic of the Nigerian state, as well as the political stability of the nation, even at this moment of economic crisis, due to the fall in crude oil price.
2. Provision of public welfare:
There has been provision of public good, as the monies generating by the government are used to provide basic necessities of life for the Nigerian citizenry.
3. Income redistribution within the system:
It has helped in expanding the revenue base of a nation hence, redistribution of income
4. Political stability:
The nation has experienced political stability, as there is some funds to share within the tiers of government for the execution of their constitution’s obligation, inspite of the fall in oil price.
5. Economic regulation
It has helps regulates the nation’s economic activities.
Recent reforms in Nigerian Tax System and their impacts
1. Introduction of Automated Tax System,
The automated tax system has succeeded in facilitating and tracking taxpayers’ position and other issues that have to do with taxpayers in Nigeria.
2. E-payment system.
The procedure of tax administration in Nigeria has been a smooth operation hence, reduces the incidents of illegal tax enforcement touts, occasioned by the introduction of a new e-payment method.
3. Unique ‘Taxpayer Identification Number’
The new system has introduced the taxpayers’ identification number, which has allowed the authority to determine the position of every taxpayers and the detail about each taxpayer.
4. Special Enforcement Scheme,
Special enforcement scheme has been launched in order to give autonomy to tax administrative authority to access, collect and record every tax received from the taxpayers.
These tax officers are licensed in the business of tax collection, as they worked in collaboration with some security agents. The purpose of the collaboration is to ensure strict compliance from the taxpayers.
Inspite of the numerous reforms and improvement recorded within the Nigerian tax system, there are yet, some contentious issues begging for urgent attention, some of the challenges are listed below:
Conclusion and Suggestion
Since taxation is a tool of generating revenue for government expenditure, there is need therefore, to encourage a sense of patriotism in tax payment among the Nigerian citizens. For instance, Nigerians are religious people hence, they adhere faithfully to their religious obligation; and any ritual that aligns with their religion will automatically elicit response.
Thus, there is need for tax education amongst these religious faithful. Tax education should be encouraged as part of religious education. This could help reduce tax evasion and avoidance too.
Furthermore, civic education should serve a greater priority in the schools’ curriculum. This will help improve civic responsibility, and as well infuse a sense of patriotism. There should be awareness creation and a vigorous enlightenment on the important of tax payment and the effect of such compliance to the economy. I am made to understand that civic education was part of the education curriculum as at early 60s.
However, this practice has to stop in the mid 80s for whatsoever reason, and my belief is that the re-introduction of this into the school curriculum will inspires citizens to take to their civic responsibilities.
Much more important also is the issue of harmonizing the different taxes that are being levied by the different tiers of government, the federal, state and local government, so as to reduce the negative impact on the taxpayers. This will also help to reduce double and multiple taxation on a single taxpayer.
The government cannot expect voluntary compliance with current issue within the Nigerian tax system. Individual cannot pay rates and license to local government authority, and as well pay sales tax to the state government, including Value Added Tax (VAT) at the same time and government is thinking perhaps, that will encourage voluntary tax payment, hence, there should be solution to multiple taxation.
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