An Examination of Tax Administration Contribution to Nigeria’s National Development
By
Kehinde Emmanuel Oladele[1]
Taxation is important for national progress, especially in Nigeria[2] where it serves as a bedrock for advancing developmental initiatives and attaining Millennium Development Goals (MDGs).
Undoubtedly, fiscal instruments such as taxation wield substantial influence on national development by reallocating resources from private to public sectors to meet economic and social aims, as outlined by Ajie et al in 2008[3]. While ICAN[4] in 2006 view tax as an enforced contribution of money enacted pursuant to legislative authority[5], tax administration involves a broad range of procedures and measures carried out by the tax authority to guarantee compliance with tax regulations and policies[6].
The Longman Dictionary of Contemporary English defines “national” as a phenomenon that encompasses a whole nation. Thus, national development means the entire progress of a country or nation in terms of its socioeconomic, political, and religious aspects.[7] This according to the writer, connotes the synergy between tax administration and its effect on the development of Nigeria as a nation.
In Nigeria, each tier of government possesses the legal authority to levy and gather taxes within its designated jurisdiction without impinging on the jurisdictional authority of other levels of government, whether explicitly stated or implied.
According to the Federal Ministry of Finance, in 2016[8], this invariably involves individuals, residents, non-residents, employees, businesses, and corporations deriving income from Nigeria meeting their tax payment responsibilities and consequentially contribute to the national development and severe penalties and fines are enforced for failure to comply with tax withholding, remittance, or payment obligations as created by the extant statutes[9].
The preoccupation of Nigeria’s tax system is to generate revenue for government operations. and effective tax administration and systematic tax reforms are crucial for promoting a culture of taxation and reduce corruption and tax evasion, which on the whole, will culminate into Nigeria’s national development[10].
Effective tax administration and systemic tax reforms backed by law which led to the adoption of pertinent statutes[11] governing taxation in Nigeria made adherence to tax responsibilities mandatory by law and this has significantly contributed to the national development of Nigeria.
The contributions of taxation in Nigeria’s national development are numerous. It has helped in the funding of infrastructural amenities in the country, this means that the livelihood of the citizens of Nigeria has become better in terms of standards of living and reduction in cost of living.
The availability and construction of good roads, bridges has bridged the gap that broke economic development in terms of transportation of goods and services[12]. Taxation also supports social services like education[13], healthcare[14], welfare programs[15]
Additionally, the regime of tax has further promoted more inclusive and sustainable development process through the redistributions of wealth basically among the wealthy and the poor, by creating a level ground for development after tax has been enforced.
Significantly, it has helped in alleviating the impact of fluctuations in oil prices on the Nigerian economy, this is fundamentally economic stability. It is submitted that Nigeria might not have been a beneficiary of taxation in the absolute form but, the degree of taxation contributions to national development is still evident and manifest.
Be that as it may, the FIRS[16] is the body statutorily empowered to administer and enforce the various tax laws in Nigeria at the federal level. The States’ governments administer tax through the various State Boards of Internal Revenue, while the Local Government Revenue Committee of each State administers taxes at the local government areas[17].
It is lucid that the contributory effect of the administration of tax in these levels has helped in the development of Nigeria as a whole. However, one critical impediment that continually inhibits returns on tax efforts is the lack of engagement of High-Net-Worth Individuals (HNWIs)[18] The Organization for Economic Co-operation and Development (OECD) contends that in many nations, the wealthiest people pay the lowest taxes which is not supposed to be, and, most particularly tax evasion has a dangerous effect on national development.
Meanwhile, countries around the globe including the UK and Uganda[19] have acknowledged the fact that taxes on high-net-worth individuals (HNWIs) represent a lucrative tax market which will foster national development, but Nigeria has not really embraced this innovation.
According to a 2016 HMRC[20] report, statistically the UK[21] has approximately 6500 HNWIs (1 out of every 5000 taxpayers) in its database who has wealth exceeding GBP 10 million,. According to report, HNWIs[22] paid over GBP 4.3 billion in income taxes, capital gains tax, and national insurance contributions during the 2014–2015 fiscal year. But this is not the case in Nigeria.
Additionally, a recent review by FIRS[23] reveals that just 214 people in the country pay up to NGN 20 million in taxes, the majority of whom live in Lagos State. With more than 180 million people[24] living in the nation and a large number of unreported millionaires and billionaires, it is clear that this population segment is not well engaged, contrarily, the level of our national development would have passed the current through the advent of modern taxation.
Conclusion and recommendations
A good tax system is notable for equity and administrative convenience and facilitates taxpayer compliance and minimize government collection and collation bottlenecks.
Nigerian tax system is argued to fall short in meeting the characteristics of a good tax system as taxpayers encounter numerous compliance challenges which including lack of clarity of tax jurisdiction, and seizure of local government funds by their state governments.[25] Agreeably, these consequently, inhibit the level of expected national development.
The writer therefore suggests that there must be a plan involving coordinating nationwide awareness initiatives to underscore the potential advantages of such taxes in advancing Nigeria’s development objectives as such efforts will also underscore the importance and essential role of tax revenues in bolstering government social obligations.
In order to increase its efficacy and efficiency, the Federal Inland Revenue Service should also strive to adopt worldwide standards in its operations. All things considered, comprehensive tax reform is required in Nigeria in order to build a more efficient tax system, as taxes constitute a significant non-oil revenue source for the Federal Government and significantly contribute to national progress.
Also, investing in human capital is essential because educated individuals tend to be more skilled, innovative, productive, and pay more taxes—all of which contribute significantly to national development and ultimately, the goal should be to diversify the economy in order to lessen reliance on oil income. It is inappropriate for oil money to account for the majority of government revenue. Consistent rise in per capita income is assured in an economy that is diverse.
References
Appah, E. and Eze, G.P. (2013). “A Causality Analysis Between Tax Audit and Tax Compliance in Nigeria”, European Journal of Business Management, 5(2): 107-120.
Appah, E. (2014). Principles and Practice of Nigerian Taxation. Lagos: Andy Best Publishers. Ariyo, A. and Ene, E. (2009). “Effects of Tax Incentives on Manufacturing Investments in Nigeria”. Nigeria Research Journal of Accountancy, Vol. 1(1): 17-43.
Azubike, J.U.B. (2009). “Challenges of Tax Authorities, Tax Payers in the Management of Tax Reform Process”, The Nigerian Accountant, Vol.42 (2):36-42.
Chigbu, E.E., Akujuobi, L.E. and Appah, E. (2012). “An Empirical Study on the Causality between Economic Growth and Taxation in Nigeria”, Current Research Journal of Economic Theory, 4(1-2): 29-38.
Jhingan, M.L. (2012). Money, Banking, International Trade and Public Finance. New Delhi: Vrinda Publications (P) Ltd. Lee, Y and Gordon, R.H (2004), Tax Structure and Economic Growth. Journal of Public Economics. 89(5-6): 1027-1043.http://www.sciencedirector.com/contactus, Netherlands.
Ogbonna, G.N. and Appah, E. (2011). “Impact of Tax Reforms and Economic Growth in Nigeria: A Time Series Analysis”, Current Research Journal of Social Sciences”, 4(1): 62-68.
Ogbonna, G.N, and Appah, E (2012). Impact of petroleum revenue and the economy of Nigeria. Current Research Journal of Economic Theory 4(2):11–17.
Ogechukwu, O.S. & Uche, A.J. (2016). Evaluation of the Contribution of Non Oil Revenue to Government Revenue and Economic Growth: Evidence from Nigeria. Journal of Accounting and Financial Management ISSN 2504-8856 Vol. 2 No.5
Oji, N. (2018). Stimulating Economic Growth through an Efficient Tax System. A Paper Presented at the Second Annual Conference of the Chartered Institute of Taxation of Nigeria.
Unegbu, A.O. and Irefin, D. (2011), Impact of VAT on economic development of emerging nations. Journal of Economics amd International Finance. 3(8), 492 – 503.
[1] Department of Civil Law, Ahmadu Bello University, Zaria. LIFIN Editor of the Year 2023. The Author of the book titled; “Demystifying Nigeria Laws on Contemporary Social Legal Issues”, published by Eliva press in 2023. He is a contributor to “The Jurists” journal and CLASFON Abu Zaria magazine, and has published over 25 articles to his credit. He is also the secretary to the Lifin Editorial Board among others.
[2] Federal Republic of Nigeria is a federal nation that consists of 36 states by virtue of section 3(1) of the 1999 constitution as amended in 2011
[3] C. Prince Nwakanma (Ph.D.) & Kelechi C. Nnamdi, “Taxation and National Development” published on Research Journal of Finance and Accounting <www.iiste.org> ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol.4, No.19, 2013
[4] The Institute of Chartered Accountant of Nigeria
[5] Lekan Oluba Ojo; “Impact of Tax Administration on Government Revenue in Developing Economy: A Case Study of Nigeria”; Published by International Institute of Advance Scholars Development <http://iiasdpub.co.uk/ajfir/> assessed on the 19th of March, 2024.
[6] Nigerian Tax System: Structure and Administration, available online on < https://pml.com.ng/nigerian-tax-system-structure-and-administration> on the 19th of March,2024.
[7] Tolu Lawal & Abe Oluwatoyin, “National development in Nigeria: Issues, challenges and prospects” Journal of Public Administration and Policy Research Vol. 3(9), pp. 237-241, November 2011 Available online <http://www.academicjournals.org/jpapr > assessed on the 19th March, 2024
[8] Dr. Fedelia Nebechi Onuigbo, “Addressing the Challenges of Tax Administration in Nigeria: A Overview” International Journal of Innovative Finance and Economics Research 9(3):86-96, July-Sept., 2021
[9] Taxation of Non-Resident Companies: It’s Implications, Relevance, and Regulatory Compliance; available online<https://siao.ng/taxation-of-non-resident-companies-its-implications-relevance-and-regulatory-compliance/> assessed on the 20th of March,2024.
[10] Samuel Omofojoye,” Basic Principles of Taxation In Nigeria” <https://sowprofessional.com/basic-principles-of-taxation-in-nigeriahttps-www-firs-gov-ng/ > assessed on the 20th of March,2024.
[11] There are a number of laws that address the structure, roles and responsibilities of tax administration in Nigeria, these among others include sections 87 – 93 of the Personal Income Tax Act (PITA) 2004 (as Amended 2011), National Tax Policy (2017), State laws and the FIRS Establishment Act 2007.
[12] Section 15 (3)(a) of the Constitution of the Federal Republic of Nigeria as amended (2011) states that the government must provide adequate facilities for and encourage free mobility of people, goods and services throughout the Federation. Taxation could help to make this a reality.
[13] Section 18(1) CFRN; Government shall direct its policy towards ensuring that there are equal and adequate educational opportunities at all levels, it is the submission of this writer that this could also be fulfilled through proper enforcement and regulation of taxation
[14] Section 17(3)(d) CFRN provides that government should ensure that there are adequate medical and health facilities for all persons.
[15] Section 20 CFRN also provides that the State shall protect and improve the environment and safeguard the water, air and land, forest and wild life of Nigeria. Adequate tax reforms and legal framework put in place will justifiably help in improving the welfare of Nigerians and finally aid national development.
[16] Federal Inland Revenue Service
[17] Nigerian Tax System: Structure and Administration; available online on <https://pml.com.ng/nigerian-tax-system-structure-and-administration/> assessed on the 24th of March,2024.
[18] HMRC’s approach to collecting tax from high net worth individuals: Report by the Comptroller and Auditor General, National Audit Office, HC 790 SESSION 2016-17 1 November 2016
[19] Kangave, J.; Nakoto, S.; Waiswa, R.; Zzimbe, P.L. Boosting Revenue Collection through Taxing High Net Worth Individuals: The Case of Uganda. ICTD working paper 45. The International Centre for Tax and Development at the Institute of Development Studies, Brighton, UK (2016) ISBN 978-1-78118-285-7
[20] His Majesty’s Revenue and Customs.
[21] United Kingdom
[22] High-Net-Worth Individuals
[23] http://www.pwc.com/ng/en/assets/pdf/voluntary-assets-income-declaration-scheme.pdf
[24] 2006 Census by the National Population Commission (NPOC)
[25] Dr. Fedelia Nebechi Onuigbo, Addressing the Challenges of Tax Administration in Nigeria: A Overview, International Journal of Innovative Finance and Economics Research 9(3):86-96, July-Sept., 2021