1.1. Background to the study
From remote antiquity, tax as a fiscal instrument of regulation and control is a ―necessary evil‖ that societies have been compelled to stay with. At the time of Jesus Christ, there was an established tax system that led the people to ask him if he approved the payment of tax to the old Roman Emperor, who was the imperial lord of Jerusalem1. In other words, since the inception of statehood, tax has been an instrument for generation of revenue in running the state. Prior to the discovery of other sources of wealth creation like natural resources, science and technology, production and distribution of goods and services,; tax had been that loyal servant of the state.
In recent times, tax has become a viable source of revenue generation to states such that it has shown its capability of being the main revenue stay of some countries all over the world. ―Countries like Canada, the United States of America, the Netherlands and the United Kingdom are some 1examples of a tax based economy with their internal revenue generation being over 50% of their revenue base‖2. States3 are beginning to accept the reality that taxation is a very good avenue for blocking the shortfall from funds transmitted from the Federation Account.4
- An interesting reading is the content of The Gospel According to Saint Mathew Chapter 22 verse 21 related in the Synoptic Gospel also known New Testament of the Bible and the famous cliché of giving to Ceaser what is of Ceaser and to God what is of God‖
- Prest A. R., (1985) Public Finance in Underdeveloped Countries; Palgrave Macmillan, United Kingdom p.
- This term does not mean the same thing as the generally recognized entities with territorial sovereignty but the federating components in Nigeria.
- Orogun W. and Ezigbo O (2009). ―Nigeria: IGR –Lagos, Sokoto lead the way‖, Thisday Newspaper published on 26 July 2009 p. 1. It was reported that states like Lagos State which is in the forefront of this quest, Kano State, Edo State, Oyo State are some of the states in Nigeria giving taxation a pride of place in its Internal Revenue Generation(IRG) drive.
The Black‘s Law Dictionary5 defines tax ―as a reliable portion of the property and labour of the individual citizens, taken by the nation in the exercise of its sovereign rights for the support of government, for the administration of the laws and as the means for continuing in operation, the various legitimate functions of the state.‖
The New Shorter Oxford English Dictionary6 defines tax as ―a compulsory contribution to the support of government levied on persons, property, income, commodity, transactions etc, usually at a fixed rate mostly, proportionate to the amount on which the contribution is levied.‖ Taxation is the process of compulsory exaction of the money by a public authority from individuals and corporate bodies, such monies being for public purposes7.
From the above definitions, we can safely say that taxes are compulsory payments levied by the government on the people (i.e. governed) so as to create revenue for the running of the apparatus of government and the provision of social amenities to the citizens of the state. They are the contributions by the people to the general revenue pool of the governmen
- Black H.C; (1980) 6th Edition The Black’s Law Dictionary, West Publishing Co. New York p. 1457
- (1993) The New Shorter Oxford English Dictionary Vol. 2, N-Z Clarendon Press Oxford, p. 3229
- Per Justice Robert in the case of US v. Butler 297 US 1
- Odewale R. O. (2004) 2nd Edition Principles of Nigerian Taxation. DBM Publishers, Ibadan, p. 54.
―… tax policies represent key resource allocator between the public and private sectors in a country. It is usually imposed on individuals and entity that make up a country. The funds provided by tax are used by the states to support certain state obligations such as education systems, health care systems, pensions for the elderly, unemployment benefits, and public transportation. A nation‘s tax system is often a reflection of its communal values or the values of those in power. To create a system of taxation, a nation must make choices regarding the distribution of the tax burden-who will pay taxes and how much they will pay-and how the taxes collected will be spent.‖9
Before the discovery of crude oil (the black gold) in Nigeria, the Nigerian economy was a
tax based economy.10 Upon discovery of the crude oil, Nigeria shifted its source of
revenue to the income accruable from the exploration of crude oil and abandoned taxation
or merely paid lip service to its implementation to the extent that the Nigerian budget is
based on the projected selling price of crude oil in the international market; and the
performance of the budget is fundamentally dependant on how much revenue is generated
from the actual sale of the product. Thus, the success or otherwise of the performance of
the government is dependent on how much revenue it is able to generates from the sale of
crude oil. There had been no obvious problem with this fiscal policy until lately.11 The
problems arising from the over reliance on revenue generated from crude has led to the
need to review other revenue options. This work is an attempt to consider the tax options
available to the states under the current legal regime in Nigeria.
AN EXAMINATION OF THE CONCEPT OF FISCAL FEDERALISM AND TAX LEGISLATION IN NIGERIA: A CASE STUDY OF LAGOS STATE