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BIBLIOGRAPHIC INFORMATION ON TAXATION IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Taxation is a crucial component of public finance, influencing economic policy, government revenue, and socio-economic development. In Nigeria, taxation has evolved significantly since the colonial period, shaping the country's fiscal landscape and impacting its economic growth. The historical and contemporary context of taxation in Nigeria provides a comprehensive understanding of its role and challenges.

Historically, Nigeria's tax system was influenced by British colonial policies, which established a framework that largely persisted post-independence (Adeniran, 2020). The initial tax laws were designed to support colonial administration, focusing on indirect taxes such as import duties and excise taxes. Post-independence, the Nigerian government reformed the tax system to address local economic needs and promote national development (Bello, 2021).

One of the significant changes in Nigeria's tax history was the introduction of the Personal Income Tax Act of 1993, which was aimed at decentralizing tax administration and allowing state governments to collect taxes from residents (Ojo, 2018). This shift was part of broader tax reforms intended to improve revenue collection and enhance fiscal federalism.

In recent years, Nigeria has faced numerous challenges related to taxation. Issues such as tax evasion, poor compliance, and inefficient tax administration have hindered effective revenue generation (Abiola & Adejumo, 2019). Despite reforms and efforts to strengthen the tax system, Nigeria's tax-to-GDP ratio remains relatively low compared to other countries, impacting the government's ability to finance development projects and services (Ogunleye, 2022).

The tax system in Nigeria includes various types of taxes, such as corporate income tax, value-added tax (VAT), and personal income tax. Each type plays a specific role in generating revenue and influencing economic behavior. For example, VAT was introduced in 1993 to replace the sales tax and broaden the tax base. However, the implementation of VAT has faced challenges, including issues with compliance and enforcement (Adeniran & Akinbode, 2021).

Tax policy in Nigeria has also been shaped by economic and political considerations. Economic fluctuations, changes in government administration, and global economic trends have influenced tax policies and reforms (Adewale, 2023). For instance, the introduction of the Finance Act 2019 was a significant development aimed at addressing gaps in the tax system and promoting investment (Nwogugu, 2020). This Act included measures to enhance tax compliance, simplify tax administration, and provide incentives for businesses.

The effectiveness of Nigeria's tax system is crucial for achieving economic stability and growth. Tax revenue is essential for funding public services, infrastructure, and social programs. Therefore, understanding the background and development of taxation in Nigeria is vital for assessing its current challenges and opportunities (Nwosu & Chukwuma, 2019).

1.2 Statement of the Problem

The tax system in Nigeria faces significant challenges that impact its effectiveness and efficiency. Despite various reforms aimed at improving tax collection and administration, issues such as tax evasion, compliance difficulties, and administrative inefficiencies continue to undermine the potential of the tax system. These challenges hinder the ability of the government to generate sufficient revenue for public services and economic development. The problem is compounded by a lack of effective enforcement mechanisms, inconsistent tax policies, and inadequate taxpayer education. Addressing these issues is crucial for enhancing tax revenue, supporting economic growth, and ensuring fiscal stability in Nigeria.

1.3 Objectives of the Study

The main objective of this study is to determine the effectiveness of the tax system in Nigeria and identify the challenges hindering its performance. Specific objectives include:

i. To evaluate the impact of tax reforms on revenue generation in Nigeria.

ii. To determine the factors influencing tax compliance among businesses and individuals in Nigeria.

iii. To find out the effectiveness of tax administration and enforcement mechanisms in improving tax collection.

1.4 Research Questions

i. What is the impact of tax reforms on revenue generation in Nigeria?

ii. What is the influence of various factors on tax compliance among businesses and individuals in Nigeria?

iii. How does the effectiveness of tax administration and enforcement mechanisms affect tax collection?

1.5 Research Hypotheses

Hypothesis I

H0: There is no significant impact of tax reforms on revenue generation in Nigeria.

H1: There is a significant impact of tax reforms on revenue generation in Nigeria.

Hypothesis II

H0: There is no significant influence of factors on tax compliance among businesses and individuals in Nigeria.

H2: There is a significant influence of factors on tax compliance among businesses and individuals in Nigeria.

Hypothesis III

H0: There is no significant effect of tax administration and enforcement mechanisms on tax collection.

H3: There is a significant effect of tax administration and enforcement mechanisms on tax collection.

1.6 Significance of the Study

This study is significant as it provides insights into the effectiveness of Nigeria's tax system and identifies key challenges affecting tax revenue generation. Understanding the impact of tax reforms, compliance factors, and administrative mechanisms will help policymakers design more effective tax policies and improve revenue collection. The findings of this study will be valuable for government agencies, tax authorities, and researchers interested in public finance and economic development.

1.7 Scope of the Study

The scope of this study includes an analysis of Nigeria's tax system, focusing on tax reforms, compliance factors, and administrative mechanisms. The study will examine both corporate and personal income taxes, as well as value-added tax (VAT). It will cover recent developments in tax policy and administration, with a focus on the period from 2018 to the present. The study will be limited to the impact of these factors on revenue generation and compliance within Nigeria.

1.8 Limitations of the Study

The study may face limitations such as data availability and reliability, as comprehensive and up-to-date tax data may not be accessible. Additionally, the study may be constrained by the scope of existing literature and research on Nigeria's tax system. The analysis may also be affected by the dynamic nature of tax policies and economic conditions, which can influence the findings.

1.9 Definition of Terms

Tax Reforms: Changes made to the tax system to improve its efficiency, fairness, and effectiveness. These reforms can include adjustments to tax rates, compliance measures, and administrative processes.

Tax Compliance: The extent to which taxpayers adhere to tax laws and regulations, including the accurate reporting of income and payment of taxes due.

Tax Administration: The process of managing and overseeing the collection of taxes, including the implementation of tax policies, enforcement of tax laws, and provision of taxpayer services.

Revenue Generation: The process of collecting funds through taxation to finance government expenditures and public services.

Value-Added Tax (VAT): A consumption tax levied on the value added to goods and services at each stage of production or distribution.

Fiscal Federalism: The distribution of financial responsibilities and powers between different levels of government, such as federal, state, and local governments.

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