TAX POLICY ON THE
PERFORMANCE OF REVENUE PROFILE OF NIGERIA
(A CASE STUDY OF
NIGERIAN CUSTOMS)
1.1 background of the study
The Nigerian Tax
System has undergone significant changes in recent times. With the help of
various studies and research done by tax experts, tax laws are being reviewed
with the aim of repelling outdated provisions and simplifying the main ones.
Under current Nigerian law, taxation is enforced by the 3 tiers of Government,
i.e. Federal, State, and Local Government with each having its sphere clearly
spelt out in the Taxes and Levies.
Adam smith (1976)
in his book said that ‘tax is a ability imposed upon the essence by a public
authority, to pay specified amount within a specified period.
The definition
point towards one direction that is the characteristic of tax, firstly, it is
compulsory contribution imposed by government on the people with her
jurisdiction since this is a compulsory payment, any person that refuses to pay
a tax is liable to punishment. Secondly, it is also a compulsory payment
imposed by the government agent on people that is able to pay. And thirdly, a
tax is a payment made by the payer which is used by the government for the
benefit of the citizens. Fourthly, a tax is not levied in return of any special
service rendered to the tax payers by government. Thus tax payers cannot get
any special benefit from government in return.
Tax policy seeks
to provide a set of guidelines, rules and modus operand that would regulate Nigeria
tax system and provide a basis for tax legislation and tax administration in Nigeria.
Tax administration which also refers to the implementation of tax policy,
including tax payer compliance with tax rules, it enumerates the monetary
chargers imposed by government on individuals, companies, transactions or
properties for the purpose of revenue generation. However, tax revenue mobilization as
a source of financing developmental activities in less developed economies has
been a difficult issue primarily because of various forms of resistance, such
as evasion and corrupt practices attending to it. These activities are
considered as sabotaging the economy and are readily presented as reasons for
slow or none development of the country. Government collects taxes in order to
provide non-revenue services such as infrastructure, education, health,
communications system etc, providing employment opportunities and essential
public services (such as maintenance of law and order) irrespective of the
prevailing ideology or the political system of a particular nation (Worlu and
Nkoro, 2012).
In Nigeria, the contribution of tax revenue has not been
encouraging, thus expectations of government are being cut short. Corruption,
evasion, avoidance and tax haven indicators are strongly associated with low
revenue (Attila, Chambas, and Combes, 2008) and indeed, corruption functions
like a tax itself. 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 respect, the country become more adversely affected
due to absence of tax conscience by individuals and companies and the failure
of tax administration to recognize the importance of communication and dialogue
between the government and the citizens in taxation related matters. In the
face of resource deficiency in financing long term development, Nigeria has
heavily resorted to foreign capital such as loans and aid as the primary means
to achieve rapid economic growth. Thereby, this has accumulated huge external
debt in relation to gross domestic product and serious debt servicing problems
in terms of foreign exchange flow and as such, majority of the populace live in
abject poverty. Government has expressed concern over these and has vowed to
expand the tax revenue in order to meet its mandate. Kiabel and Nwokah (2009)
argue that the increasing cost of running government coupled with the declining
revenue has left all tiers of government in Nigeria with formulating strategies
to improve the revenue base. Ndekwu (1991) noted that more-than-ever before,
there is a great demand for the optimization of revenue from various tax
sources in Nigeria now. This probably influenced the decision of the Federal
Government of Nigeria (FGN), which in 1991 set up a study group on the Review
of the Nigerian Tax System and Administration. This review is what subsequently
led to the development of the Comprehensive Tax Policy.
1.2 STATEMENT OF PROBLEM
the reasons for reform and the decision to develop a
National Tax Policy could therefore 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 the taxpayers who suffer multiple
taxation and bear a higher tax burden than anticipated; insufficient
information available to taxpayers on tax compliance requirements, which created
uncertainty and room for leakages in the tax system; multiple taxation by
government at all levels, which impacted negatively on the investment climate
in Nigeria.
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 plaguing Nigeria’s tax system
have not been adequately tackled for many years. One of the reasons for this
was Government’s heavy reliance on revenues derived from oil, as a result of
which little or no attention had been given to revenue from other sources, such
as taxation.
1.3 OBJECTIVE OF THE STUDY
In-order to achieve the purpose of
this research, the following is the objectives of the research:
1
To identify the
challenges tax policy on the performance of revenue profile of Nigeria in
Nigerian custom service.
2
To investigate the
impact of value added taxes.
3
To examine the
performance of revenue in Nigeria
4
To identify ways of
properly addressing the challenges of Nigerian tax policies.
1.4 RESEARCH QUESTION
In order to achieve the objectives
stated above, the following research questions were used as a guide in
achieving the objectives of this research:
1. What
are the various challenges facing tax policy on the performance of revenue
profile of Nigeria in Nigerian custom service?
2. What
are the impacts of value added taxes?
3. To
what extent is the performance of generated revenue in Nigeria?
4. What
must be done to address the challenges of tax policies in Nigeria affect small
business?
1.5
SIGNIFICANCE OF THE STUDY
This study gives a clear insight into the various
ways in which tax policies in Nigeria can be executed efficiently and how some
taxation policies in Nigeria can be properly tackled. The study also gives a
clear insight into the various causes of why revenue and tax reform fail in
Nigeria as well as the challenges of the tax policies in Nigeria. The findings
and recommendations of the researcher will help in building a strong and better
tax policy system in Nigeria, if taken seriously by government and the general
public. The challenges of taxation in Nigeria are outlined in-order for drastic
measures to be taken to tackle these challenges and meet the prospects of the
general public so that revenue from tax policy to the government can be
increased.
1.6
SCOPE OF THE STUDY
This
research focuses mainly on the tax policy on the performance of revenue profile
of Nigeria in Nigerian custom service. The study only torches on the
performance and challenges tax policies in Nigeria and how it can affect the
Nigerian custom and order government agencies.
Based on the findings of this study other possible
researchable areas may include studies on the various challenges of other forms
of tax such as the Value Added Tax (VAT), Capital gains tax, Import and Export
duties tax. Etc. Further research can also be done on curbing tax evasion in
Nigeria
1.6 LIMITATION
The research is limited to the tax
policy on the performance of revenue profile of Nigeria in Nigerian custom
service. The researcher in the course of carrying out this study is the cause of
delay in getting data from the various respondents. Most respondents were
reluctant in filling questionnaires administered to them due to their busy
schedules and nature of their work. The researcher found it difficult to
collect responses from the various respondents, and this almost hampered the
success of this study.
1.7
CHAPTER SCHEME
Chapter one of this study includes
the general introduction, background information about the study, statement of
the problem, objectives of the study, research questions, scope of the study,
significance of the study, and the limitation of the study.
Chapter two reviews all relevant
literatures relating to the study as well as the researcher’s views concerning
previous studies on the challenges of tax policies.
Chapter three includes the
methodology applied in collecting and analyzing data, population definition,
study site, and limitations.
Chapter four presents the results
of the study as well as data analyzed, and the interpretation of the analyzed
data.
Chapter five includes a summary of
the study, conclusion and recommendations based on the findings from the study.