Taxation is a dynamic subject which grows with the constant change in the economic environment in which it operates, hence the need to review the regulating instruments from time to time. Nigeria is governed by a federal system hence its fiscal operations also adhere to the same principle, a fact which has serious implications on how the tax system is managed. The country’s tax system is lopsided, and dominated by oil revenue. It is also characterized by unnecessarily complex, distortionary and largely inequitable taxation laws that have limited application in the informal sector that dominates the economy. The primary objective of this paper is to prepare a case study on tax administration in Nigeria, with the specific objectives of examining the main tax reforms in the country; highlighting tax revenue profile and composition; analysing possible distributional impacts on the poor; discussing major problems that could prevent effective tax implementation in the country; and offering suggestions for reforms.
1.1 HISTORY OF TAX IN NIGERIA
In the Stone Age, tax was collected in Nigeria long before the coming of Europeans. It was collected by the Local Chiefs for the purpose of administration and defence. Every person was expected to give part of his or her proceeds from cultivation of land to the state. Those who were cultivations were required to give their sources for public work such as clearing the bush, digging the pit latrines, wells etc for the benefit of the community as a whole. Failure to render such services usually resulted in loss of properties, which might be reclaimed after payment of line. With the coming of Europeans, taxes were collected from individuals through local chiefs. In 1946, a legislative council was set for the whole country, which obliged the regional council with a large measure of financial responsibilities. After independence state government were to find out other sources of generating revenue. The...