Discussing capital gain tax without first presenting a general overview of the entire concept of taxation will be tantamount to putting a cart before a horse. It is therefore very important that justice be done by explaining taxation and various types of taxes. Taxation: A General overview
Tax and taxation has been variously defined by different authors. Oyegbile (1996) defines tax as a sum of money paid by citizens of a country, state or community to the government for public purpose. According to him taxation is one of the sources of income for government; such income is used to finance or run public utilities and perform other social responsibilities. This implies that anybody that generates income must compulsorily pay taxes. Sanni (2007) define tax in the following ways: * Tax is a “compulsory levy imposed on a subject or upon his property by the government having authority over him; * Tax is a universal contrivance;
* Tax is the price of social security between the government and the governed; * Tax is the oxygen of every nation, a pre-condition for its prosperity; and * Tax is an instrument of social engineering
A thorough content analysis of the definitions reveals the following fundamentals about tax: ‘Tax is a social obligation; it is a civic responsibility and an important source of finance for the government’. Generally, Taxation is of two types viz: Direct and indirect taxation. Direct taxation: is the case where the person(s) paying is or are asked to pay for no particular service rendered or goods delivered but for the maintenance of government together with its services. Indirect taxation: is paid when one asks for services or supplies of goods. There are different forms of taxation. But for the purpose of this work, taxes that will be discussed will be limited to taxes that pertain to property. Property taxation includes the following: The value added tax, withholding tax, betterment tax, stamp duties, probate tax, capital transfer tax, severance tax, capital gains tax and site value rating. * Value added tax: Value added tax or VAT as it is widely known can be defined as a government levy on the amount that a business firm adds to the price of a commodity during production and distribution of a good. VAT was introduced in Nigeria by the value added tax decree no. 102 of 1993. VAT affect all goods and services produced or imported to Nigeria with few exceptions.VAT paid by a business on purchases is called input tax. On the company’s sale it is called output tax. If the output is greater than input in any single month, the excess is given to the Federal Board of Inland Revenue but where input is greater than the output, the tax payer should be given the excess from the FBIR though in practice this is not always possible. * Withholding Tax: This tax was introduced in Nigeria by the Finance (miscellaneous taxation provisions), Decree No. 98 of 1979. It is a tax directed on income earned on land, buildings and other identifiable incomes earned from contractual agreement. This tax is collected at the three tiers of government in Nigeria. * Betterment Tax: This tax came into effect via the town and country planning law, Cap 130, section 45, subsection 1-3 of 1963. The tax is levied on all beneficiaries of adventitious value on their landed property as a result of public works, development and planning control activities carried out by government. This tax is computed by first determining the open market value before and after the public works. The tax chargeable is 75% of the difference in value before and after the public works. * Stamp duties: This is a tax payable on all documents or instruments executed within a country where the tax is applicable. The stamp duty act of 1958 requires that all instruments executed in Nigeria like conveyance on sale, assignment of land, leases,...