A comprehensive tax history of Nigeria
Abstract
This book discusses the evolution of taxation in Nigeria within the framework of eight broad themes i.e., The Origin and Practice of Fiscal Federalism in Nigeria, The Constitutional Context for Taxation, The Three Eras of Taxation in Nigeria, The Structure and Jurisdiction of Nigerian Tax Authorities, Instruments of Tax Policy, Statutory Developments, Beyond Oil Revenue: The Case for Tax Reform and Making the Nigerian Tax System Globally Competitive.
... To accomplish this goal, Sir Lugard proposed a system of decentralized British rule, known as indirect rule, through local ethnic region leaders (Lugard, 1968;Okauru, 2012). He firmly believed in the superiority of direct taxation in maintaining internal stability (Lugard, 1968;Hicks & Phillipson, 1951;Okauru, 2012). ...
... To accomplish this goal, Sir Lugard proposed a system of decentralized British rule, known as indirect rule, through local ethnic region leaders (Lugard, 1968;Okauru, 2012). He firmly believed in the superiority of direct taxation in maintaining internal stability (Lugard, 1968;Hicks & Phillipson, 1951;Okauru, 2012). Vital to the functioning of this system was that when an ethnic region leader could be found 7 (as in a centralized region), they could be ''convinced" to comply with the mandate of British rule. ...
... The Caliphate had a reportedly sophisticated system of direct taxation and bureaucracy based on Islamic law and enforced by local kings or Emirs. 12 By contrast, the southern states exhibited more heterogeneity in their fiscal capacities, with capacities ranging from the reasonably organized bureaucracies of the Oyo Empire in Yorubaland to the more decentralized community fee systems of the Igbo (Okauru, 2012). Lugard was reported to be so impressed with the highly bureaucratic tax capacity of the Muslim north's Sokoto Caliphate, that he implemented this direct taxation system in the Muslim north, with the Native Revenue Proclamation No. 2 of 1906 (Okauru, 2012). ...
Although the literature has discussed the benefits of precolonial centralization for development in Africa, the findings and the mechanisms provided do not explain the heterogeneity in access to public services of formerly centralized regions. Using new survey data from Nigeria, a significant negative association between precolonial centralization and access to certain public services is observed. While the mechanisms driving these patterns are complex, I use historical evidence to suggest that the negative association may be partly driven by centralized regions whose leaders failed to comply with the autocratic federal regime, and whose jurisdictions may have been subsequently punished by underinvestment in these services, with impacts lasting until today. The results are robust to extensive controls and multiple empirical tests to differentiate among alternative explanations for the finding.
... Without taxes to finance economic and non-economic activities, the existing of any government is impossible (Adnan, 2009). Taxation is the primary practical sources of sustainable revenue globally for the government to take care of its expenditure (Ifueko, 2012), with most of the economy dependents on taxation (Edwin, 2011). The principal purpose of taxation by the government is to raise revenue to finance its expenditure. ...
... Before the discovery of oil in the country, the regional governments generate revenue to the federal government through different types of taxes. The Nigerian income and economic activities greatly are dependent on the agro-allied product before the independence of the country (Ifueko, 2012). The major state earnings before the independence of the country from British were cash crops such as groundnut, cocoa, palm oil, rubber from different regions of the country. ...
The tax system, policies, and structures have been one of the significant
factors that directly affect the social and economic activities of any nation.
Despite the importance of tax, the attitude of the taxpayers, their reaction
concerning tax, could in greater sense facilitate or draw back the policies
and system from their original intention and purposes, particularly from
an Islamic perspective. Islamic tax income is for the benefits of poor,
needy and less privileged people in the society. Even though, policies on
tax approved tax avoidance and made it legal, however, tax evasion is
illegal in all society because it will deviate from its purpose. The most
significant point, however, evading taxes by the people is viewed as
unethical behaviour in any economy as the consequences could be greater
to the economy and society. Several countries used Islamic system of tax
because of the ethics of the system and possibly fewer evasions by the
Muslims. Given that, with the number of the Nigerian Muslims,
adoption of Islamic tax system will improve the revenue generation, and
thereby enhance the economic development of Nigerian economy.
... According to the Nigerian tax laws, the administration of taxation in Nigeria is vested in various tax authorities depending on the type of tax under consideration. There are three tax authorities, namely: the Federal Board of Inland Revenue, the State Internal Revenue Board and the Local Government Revenue Committee (Okauru, Under the Taxes and Levies (Approved List for Collection) Act, the administration of the following taxes is vested in the State Boards of Internal Revenue: Personal income tax in respect of Pay-As-You-Earn (PAYE) and direct taxation (self assessment); Withholding tax (individuals only); Capital gains tax (individuals only); Stamp duties on instruments executed by individuals; Pools betting and lotteries, gaming and casino taxes; Road taxes; Business premises registration and renewal of registration fees in respect of urban and rural areas as defined by each state; Development levy (individuals only) not more than N100 per annum on all taxable individuals; Naming of street registration fees in the state capitals; Right of occupancy fees on lands owned by the state government in urban areas of the state; Market taxes and levies where state finance is involved (Okauru, 2012;ICAN, 2009) By virtue of the Taxes and Levies (Approved List for Collection) Act, the following taxes and levies can be collected at the local government level: shops and kiosks rates; tenement rates; On and off liquor license fees; slaughter slab fees; marriage, birth and death registration fees; naming of street registration fee, excluding any street in the state capital; right of occupancy fees on lands in rural areas, excluding those collectable by the federal and state governments; market taxes and levies excluding any market where state finance is involved; motor park levies; domestic animal license fees; bicycle, truck, canoe, wheelbarrow and cart fees, other than a mechanically propelled truck; cattle tax payable by cattle farmers only; merriment and road closure levy; radio and television license fees (other than radio and television transmitter); vehicle radio license fees (to be imposed by the local government of the State in which the car is registered); wrong parking charges; public convenience, sewage and refuse disposal fees; customary burial ground permit fees; religious places establishment permit fees; signboard and advertisement permit fees (Okauru, 2012). ...
... According to the Nigerian tax laws, the administration of taxation in Nigeria is vested in various tax authorities depending on the type of tax under consideration. There are three tax authorities, namely: the Federal Board of Inland Revenue, the State Internal Revenue Board and the Local Government Revenue Committee (Okauru, Under the Taxes and Levies (Approved List for Collection) Act, the administration of the following taxes is vested in the State Boards of Internal Revenue: Personal income tax in respect of Pay-As-You-Earn (PAYE) and direct taxation (self assessment); Withholding tax (individuals only); Capital gains tax (individuals only); Stamp duties on instruments executed by individuals; Pools betting and lotteries, gaming and casino taxes; Road taxes; Business premises registration and renewal of registration fees in respect of urban and rural areas as defined by each state; Development levy (individuals only) not more than N100 per annum on all taxable individuals; Naming of street registration fees in the state capitals; Right of occupancy fees on lands owned by the state government in urban areas of the state; Market taxes and levies where state finance is involved (Okauru, 2012;ICAN, 2009) By virtue of the Taxes and Levies (Approved List for Collection) Act, the following taxes and levies can be collected at the local government level: shops and kiosks rates; tenement rates; On and off liquor license fees; slaughter slab fees; marriage, birth and death registration fees; naming of street registration fee, excluding any street in the state capital; right of occupancy fees on lands in rural areas, excluding those collectable by the federal and state governments; market taxes and levies excluding any market where state finance is involved; motor park levies; domestic animal license fees; bicycle, truck, canoe, wheelbarrow and cart fees, other than a mechanically propelled truck; cattle tax payable by cattle farmers only; merriment and road closure levy; radio and television license fees (other than radio and television transmitter); vehicle radio license fees (to be imposed by the local government of the State in which the car is registered); wrong parking charges; public convenience, sewage and refuse disposal fees; customary burial ground permit fees; religious places establishment permit fees; signboard and advertisement permit fees (Okauru, 2012). ...
The main objective of this study is to enhance the revenue mobilization efforts from the informal sector in Nigeria by proposing a framework that would eliminate the economic losses occasioned by this sector of the Nigerian economy. The study examined the main features of the informal sector enterprises in Nigeria and noted specifically the tendency to evade tax. The study found that the tendency to evade tax as well as other challenges of tax administration in Nigeria account for the poor revenue mobilization from the informal sector. Thus, to eliminate the economic losses arising from the informal sector, the study recommends the adoption of the community taxation framework wherein the tax authorities would partner with the various associations in this sector towards a more comprehensive and transparent tax administration in Nigeria.
... The first taxes were employed for providing services that were in the common interest such as security and communal facilities like roads. The British introduced colonial power in the late 19th century, and they then put in place a structured taxation system to fund their administration and keep the indigenous populace in check (Okauru, 2012). Taxes have evolved over the years and are still a major part of the Nigerian economy. ...
... Small businesses have several challenges due to onerous tax duties, many taxes, high tax rates, and the overall complexity of tax regulations (Ali, 2018). Taxation is often recognized as the oldest method of producing cash for government sustainability, and most economies rely on it to meet their expenditure needs (Kira, 2017;Okauru, 2012). As a result, taxes has proven to be the most practical method for governments to raise cash to fund development projects (Tanzi and Zee, 2001). ...
The need to grow and expand the tax base targeting SMEs have given rise to discussions pertaining tax compliance. This study has therefore focused on the impact of tax policies on tax compliance. The government have to utilise the available tax policies such as tax penalty, tax rate and fairness of tax system. Researchers across the globe have attempted to study the phenomenon and most studies were done in Europe, Kenya, Nigeria, Malaysia and Pakistan. Research on SMEs taxpayers in Zimbabwe is mainly on e-tax filing. As such, this research was conducted to close the gap that exist. The study embraced positivism paradigm and quantitative research approach. The research utilised a cross sectional survey technique using stratified sampling. A sample of 110 SME owners or representatives was done in Chinhoyi, Zimbabwe. Regression analysis, ANOVA test, analysis of beta coefficients and T-Test was performed to test the research hypotheses. Study findings showed that low tax penalty, low tax rate and fairness and equity confirms strong positive impact on SMEs tax compliance. The research resolved that there is a positive association between tax policies and tax compliance. Lastly, it was recommended that government must charge low tax penalty or reasonable tax penalties that must deter tax evasion but must not be punitive since this may cause corruption by tax officials. The government must charge low tax rate to SMEs so that they encourage tax compliance and as a result increase tax revenue through more SMEs which will comply due to low tax rate. The government must also ensure that the tax policies are fair and equity in their enforcement and all staff in the ZIMRA offices must treat all clients with respect and dignity so that the perception of tax payers is positive and hence encourage tax compliance. Future studies may test the same variables in other towns such as Harare and Bulawayo or any other parts of the country, region or world so that they may infer if they can get the same results under different economies or environments.
... The vertical formula has changed over the years, ranging from 48.5% to 55% for the federal government, 24% to 30.5% for states and 10% to 20.6% for LGAs between 1981 and 2016 (Okauru, 2012;Onuigbo and Innocent, 2015). There is also a horizontal allocation formula that determines how much of this disbursed revenue should go to each state and local government. ...
Can citizen-led protests lead to meaningful economic redistribution and nudge governments to increase redistributive efforts of fiscal resources? We study the effects of protests on fiscal redistribution using evidence from Nigeria. We digitized twenty-six years of public finance data from 1988 to 2016 to examine the effects of protests on intergovernmental transfers. We find that protests increase transfers to protesting regions, but only in areas that are politically aligned with disbursing governments. Protesters also face increased police violence. Non-protest conflicts do not affect transfers and protests do not affect non-transfer revenue. The results show that protests can influence fiscal redistribution. JEL classification: D7, H2, H7, O10, O43, N37
... The vertical formula has changed over the years, ranging from 48.5% to 55% for the federal government, 24% to 30.5% for states and 10% to 20.6% for LGAs between 1981 and 2016 (Okauru, 2012;Onuigbo and Innocent, 2015). There is also a horizontal allocation formula that determines how much of this disbursed revenue should go to each state and local government. ...
... 2016 (Okauru, 2012;Onuigbo and Innocent, 2015). There is also a horizontal allocation formula that determines how much of this disbursed revenue should go to each state and local government. ...
Can citizen-led protests lead to meaningful economic redistribution and nudge governments to increase redistributive efforts of fiscal resources? We study the effects of protests on fiscal redistribution using evidence from Nigeria. We digitized twenty-six years of public finance data from 1988 to 2016 to examine the effects of protests on intergovernmental transfers. We find that protests increase transfers to protesting regions, but only in areas that are politically aligned with disbursing governments. Protesters also face increased police violence. Non-protest conflicts do not affect transfers and protests do not affect non-transfer revenue. The results show that protests can influence fiscal redistribution.
... Without taxes to finance economic and non-economic activities, the existing of any government is impossible (Adnan, 2009). Taxation is the primary practical sources of sustainable revenue globally for the government to take care of its expenditure (Ifueko, 2012), with most of the economy dependents on taxation (Edwin, 2011). The principal purpose of taxation by the government is to raise revenue to finance its expenditure. ...
The tax system, policies, and structures have been one of the significant factors that directly affect the social and economic activities of any nation. Despite the importance of tax, the attitude of the taxpayers, their reaction concerning tax, could in greater sense facilitate or draw back the policies and system from their original intention and purposes, particularly from an Islamic perspective. Islamic tax income is for the benefits of poor,
needy and less privileged people in the society. Even though, policies on tax approved tax avoidance and made it legal, however, tax evasion is illegal in all society because it will deviate from its purpose. The most significant point, however, evading taxes by the people is viewed as unethical behaviour in any economy as the consequences could be greater
to the economy and society. Several countries used Islamic system of tax because of the ethics of the system and possibly fewer evasions by the Muslims. Given that, with the number of the Nigerian Muslims, adoption of Islamic tax system will improve the revenue generation, and thereby enhance the economic development of Nigerian economy.
... Tax revenue is the longest existing and most sustainable means of generating revenue for governments globally. This helps governments to meet their expenditure requirements and hence, the high dependence of most economies on taxation (Kira, 2017;Okauru, 2012). Similarly, taxation has proven to be the most realistic source of government revenue used in financing development projects in any economy 63 (Alkhatib and Abdul-Jabbar, 2017; Tanzi and Zee, 2001). ...
A complex and great challenge cutting across almost all types of economies from developed to developing economies is the phenomena of shadow economies. A number of factors are responsible for peoples' involvement in such practices of shadow economies around the world. One of such factor is government policies especially those concerning taxation and regulation. Shadow economy practices such as tax evasion, results in the loss of tax revenues for the government and consequently affect government performance. The implications of loses in tax revenue is the incapacitation of the government's ability to finance projects essential for economic growth and societal welfare. The current study revealed two major variables that can possibly influence the shadow economy level. The variables are: firstly, the probability of detection and secondly, the penalty rate. The present study therefore builds on the existing body of knowledge on taxes from a deterrence perspective. Since shadow economy is subject to individuals, this suggests that deterrence factors should be given priority, compared to other factors. The proposed framework, from a deterrence perspective, would benefit tax administrators in comprehending and mitigating the phenomenon of a shadow economy.
... Tax revenue is globally regarded as the oldest means of generating funds for sustainability of governments and most economies rely on taxation in order to meet up their expenditure needs (Kira, 2017;Okauru, 2012). This implies that taxation has been the most realistic means of generating revenue by governments for funding their development projects (Tanzi and Zee, 2001). ...
Tax evasion remains an issue confronting most policy makers worldwide. Palestine, as an evolving developing country highly depends on tax revenue and funds from international aids to finance the country's growth plan. The current study aims at examining relationships between probability of detection, tax penalty, tax rate and income tax evasion by applying the Deterrence Theory. A proportionate sampling technique was employed to collect data for the study through the use of questionnaires. The total number of useable questionnaires collected for analysis was 184. The collected data were analysed using the Partial Least Square (PLS). The result of analysed data shows that probability of detection and tax penalty were found to be negatively significant, while tax rate was positively significant in relation to income tax evasion. The implication of the findings of the current study is that income tax administration effectiveness can maximize tax collections and discourage tax evasion.
... This level of organisation was arguably an arbitrary condition, whereby weaker/less organised states received a smaller percentage of accrued tax revenue, while the stronger states received a larger percentage. Such a system was in place until it was abolished in 1948 (Okauru, 2012). the government (private ownership was non-existent in native land tenure). ...
We construct three measures of political and economic institutions that cover a 150-year period (1862–2011) for Nigeria. To do so, we rely on a theoretical definition of the institutional measures, broken down into relevant components that assess the extent to which the Nigerian legal framework provides for specific rights and freedoms. We make use of preexisting (de jure) legislations, ordinances, and constitutions to assign scores to every relevant component. The newly constructed indicators (civil and political liberties, freehold property rights, and customary property rights) provide a platform for a comprehensive analysis of institutional change in Nigeria since 1862. We document the manner in which the evolution of these de jure institutional measures are shaped by Britain’s colonial objectives of gaining administrative control over the region to facilitate trade endeavors, the introduction of indirect rule, the amalgamation (unification) of the northern and southern parts of the country as well as postindependence military rule. We show that our measures of institutional quality are strongly correlated with existing and popular measures (for overlapping periods spanning at most 50 years). This finding bodes well for the reliability of our institutional indicators.
... They are unreciprocated in the sense that benefits provided by government to taxpayers are not normally in proportion to their payments. According to Okauru (2012), and Miller and Oats (2009), taxation is one of the major sources of government revenue and it is a compulsory levy on taxable but natural and artificial persons. Section 24(f) of the Constitution of the Federal Republic of Nigeria 1999 (as amended) provides that "It shall be the duty of every citizen to declare his income honestly to the appropriate and lawful agencies and pay his tax promptly". ...
This presentation explores the evolution, reforms, and challenges of the Nigerian tax system, tracing its development from the colonial era to the present. Initially designed by the British colonial administration to finance governance and infrastructure, taxation in Nigeria has historically been met with resistance, as seen in events like the Aba Women’s Riot of 1929. Post-independence, efforts to reform the tax system aimed at broadening the tax base and improving revenue collection, but these initiatives were often hindered by political instability and economic fluctuations. The Structural Adjustment Program (SAP) of the 1980s and 1990s introduced key tax policy changes to address socio-economic inequalities. More recently, the Nigerian government has implemented modernization efforts, including the National Tax Policy of 2012 and proposed reforms to streamline tax structures and enhance compliance. However, controversies, such as the Value Added Tax (VAT) revenue-sharing formula, have sparked regional concerns over fiscal equity. Despite ongoing reforms, challenges such as systemic corruption, a large informal sector, and public distrust in government institutions continue to impede effective tax administration. This presentation critically examines these developments, highlighting the complexities of Nigeria’s tax system and the need for further reforms to ensure transparency, efficiency, and economic stability.
The 36 federating states of Nigeria have a persistent paucity of funds for the provision of public goods and services for the citizens. However, this came when the Taxes and Levies Approved List for Collection Act 1998 availed the states of eleven different taxes, which, if properly harnessed, could alleviate the financial difficulties. Therefore, this study aims to longitudinally evaluate the contributions of road taxes, which are one of the taxes collected by states in Nigeria. To achieve this aim, data on collection from state road taxes was collected from the National Bureau of Statistics 2010-2022 annual reports. Descriptive statistical tools of tables, charts, and percentages are utilized in analyzing collected data, while a public policy analytical framework underpinned the study. Results from the study revealed that road taxes are making moderate contributions to total taxes collected by states. Therefore, if the states could strengthen policies, laws and regulations on road taxes, it could greatly enhance their total collections from taxes. The policy implication of this finding is that road taxes as a public policy impact taxes collected by states even though insignificant; therefore, policymakers should strengthen this policy for national development
This study provides empirical evidence in relation to a growing body of literature
concerned with the ‘economic and political’ effects of natural resource wealth on
economic growth. A prevalent criticism within this literature is that the
abundance of natural resources in many developing countries, by assuming an
economic channel of effect, ignores the implicit political economy assumptions
by which economic growth is underpinned. In particular, it has been noted that
developing countries blessed with natural resources, especially those rich in
crude oil create a political state that is predatory and distorts the economy in the
pursuit of rents. This paper reports on the results of an econometric analysis
with both economic and political factors in a developing oil-rich country –
Nigeria. The main question which arises in this context is to what extent did oil
production and political economy development affect different sectors, such as
manufacturing and agriculture in Nigeria from 1960 to 2010 using impulse
response functions (IRFs) and OLS techniques? The main results from the IRFs
show that manufacturing and agriculture respond positively to changes in oil
output but in a way that declines over time. In addition, the NNPC impacts
positively on oil and manufacturing sectors, while political instability, OPEC
membership and oil sector reforms that coincided with a return to democratic rule and political party dominance in Nigeria show no relationship with the oil sector, however, political instability does show a positive impact on the manufacturing
sector.
Key words: VAR model, Economic, Political, Oil, Economic Growth, Nigeria
Tax evasion is a universal phenomenon that challenges every government worldwide. The purpose of this paper is to propose a conceptual model for understanding factors influencing tax evasion that can be used to study and address tax-related challenges. The proposed model built upon a review of tax studies from behavioural aspect, particularly the social influence perspective. The current review identified four key variables that likely influence tax evasion behaviour of taxpayer. The variables are: corruption, fairness, ethics, and peer influence. The present model adds to the existing body of tax knowledge from behavioural perspectives. As the compliance behaviour is dependent on individual taxpayers, behavioural factors should be given a serious consideration compared to economic factors, as the former is highly dynamic in nature and change over time. In a country like Palestine, with a high uncertainty, the proposed behavioural framework from social influence perspective would benefit tax administrator in understanding and mitigating the tax evasion phenomenon.
Literature on worldwide colonialism by Europeans is pervasive, unlike scholarship on the colonialism of Africans by Africans that predated the European model. This chapter tests the applicability of colonial theory by focusing on internal and external colonialism in the Old Oyo Empire (ca. 1430–1836). Though pre-modern, this state’s characteristic trajectory and hegemonic legacies in Yorubaland fit well into the colonial paradigm. Colonialism in the African context, as in the Old Oyo case, is similar to Western colonialism in many respects differing in degree, not in kind. This article argues that Old Oyo rule was indeed colonial in nature and consequences, exhibiting internal colonialism within Yorubaland and external colonialism outside Yoruba territory in relatively distant places.
The increasing emphasis on internally generated revenue (IGR), especially with the dwindling oil revenue and increasing cost of governance, has resulted in aggressive search for IGR by states and local governments through various strategies. Existing analyses posit that the concurrent revenue drive by the three tiers of government engender multiple taxation. Others highlight the outcomes of various revenue mobilisation strategies used by the three tiers of government to improve IGR. However, the effect of the culture of violence by armed and unarmed revenue collectors in urban cities in Nigeria is yet to attract systematic scrutiny. Thus, this study examines the effects of the emerging culture of (un)armed violence by legal/illegal revenue collectors in Enugu metropolis. The study utilised the mixed methods for data collection and analysis. Our analysis shows that states and local governments experience fiscal challenges due to the lopsided federal structure of the post-colonial Nigerian state, which concentrates major sources of revenue at the centre. However, since the constitution empowers all the three tiers of government to collect specified rates and taxes concurrently, states and local governments, against the backdrop of rapid reduction in oil revenue, increasing cost of governance and growth of neoliberal ideology—which emphasise the need to increase tax rates while reducing government spending, have continued to adopt the strategies that translate to the use of armed and unarmed agents to enforce rates and taxes. In this light, Enugu metropolis has gained notoriety for the activities of armed and unarmed revenue collectors of state ministries, department and agencies (MDAs) and local government, which are turning the state into the Hobbesian state of nature by the crude and violent revenue collection strategies. The major victims of this violence are the helpless operators in the informal economy such as commercial drivers, owners of small and medium businesses and tenants in residential apartments in the state.
The main objective of study in this chapter is an appraisal of some definitions given to tax by authors nationally and internationally. The chapter highlights the shortcomings in them and states the characteristics and features that must be present in a payment before such can be categorised as a tax. At the completion of the study in this chapter, readers are expected to: know about the limitations in various definitions given to tax by previous authors;demonstrate the characteristics and features that qualify a payment to be tax as against other related payment such as Charges, Fee, Tolls, etc;be able to explain what taxes are used for andknow who Levies, who pays and who collects tax as provided for under the Nigerian tax laws. know about the limitations in various definitions given to tax by previous authors; demonstrate the characteristics and features that qualify a payment to be tax as against other related payment such as Charges, Fee, Tolls, etc; be able to explain what taxes are used for and know who Levies, who pays and who collects tax as provided for under the Nigerian tax laws.
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