AN APPRAISAL OF TAXATION AND ITS LEGAL EFFECTS ON FOREIGN DIRECT INVESTMENT IN NIGERIA

CHAPTER ONE

1.1         GENERAL INTRODUCTION/BACKGROUND TO THE STUDY

Generally, countries of the world interact with each other and engage in activities across their borders for social, economic, cultural, religious, political or any other reasons. These transactions sometimes have tax implications in the source state, (that is, where the income is derived), as well as in the state of residence, (that is, where the income earner resides).

Incidentally, there is no tax statute known as International Tax Law, which the use of the term `International Taxation` may seem to suggest. In other words, even though taxation is based only on statutes, (as there is no common law of taxation), there is no statute anywhere in the world regulating international taxation. In fact, according to Yariv Brauner¹, the idea of a single worldwide tax system that would eliminate all international inefficiencies and assist all the nations in maximizing their relative advantages is not only an illusion but utopian. Brauner however advocates the possibility of worldwide adoption of a single set of international tax rules that would entail a gradual, partial harmonization effort aimed at eventual unification of all international tax rules.

However, there are treaties, which deal mainly with Double Taxation Agreements, (DTAs), that are applicable to the taxation of cross-border or international economic activities.