CHAPTER ONE
1.0 INTRODUCTION
Nigeria is organized by a federal system, hence its fiscal operation adhere to the same principle. This has serious implications on how the tax system is administered in the country. In Nigeria the government’s fiscal power is based on a three tiered tax structure divided between the federal state and local government, each having a different tax jurisdiction, as at 2003 about forty (40) different taxes and levies are shared among the three levels of government which are their sources of revenue.
The Nigeria tax system is lopsided and dominated by oil revenue. The most veritable tax are handled by the federal government and the lower tiers are responsible for the less buoyant ones. The federal tax corporate bodies while state government and local government tax individual except the residence of federal capital territory, personnel income of police, armed forces department of foreign affairs which are strictly for federal government. The federal government on average account for 90% of the overall revenue annually. In 2005 the breakdown of total tax and levy collection of the three tiers of government was 96.4 percent for the federal state and 0.6 percent for the local government (Philips) (1997). A major element contributing to this development was the prolonged military rule that has ignored constitutional provisions. Indeed because of the various quest of the government in redistribution of income, poverty eradication emphasizing the rise in per capital income solving unemployment problems and reduce inequality which is a breath on the nostril of a modern government.
Taxation therefore, is a compulsory levy imposed by the subjects or upon his properties as to up it’s over sight function. The main purpose of taxation is to raise fund to meet government’s expenditure and redistribute incomes or wealth and management of the economy. Tax collected comes back to the people informed of social amenities. As these amenities increase taxation assure as greater importance since it’s the major source of government revenue. Taxation encourages savings and regulates expenditure. The granting of tax relief provides incentives for the private sector; the direct tax especially the pay-as-you-earn (PAYE) is progressively high so as to redistribute income of individuals equitably. Some individual regard taxation as important fiscal measures not only for the benefits it yields to the government but also because it directly affects this income level and therefore, their standard of living.
1.1 BACKGROUND OF THE STUDY
Then Nigeria Inland Revenue which eventually passed through series of transformation was created in 1943 when it was cut out from the erstwhile Inland Revenue Department that covered what was then the Anglo-phone West Africa (Including Ghana, Gambia and Sierra leone) during the colonial era.In 1958, the Board of Inland Revenue was established under the Income Tax Ordinance of 1958. The name was later changed in 1961 when the Federal Board of Inland Revenue (FBIR) was established under section 4 of the company Income Tax Act (CITA).
A further transformation of the FBIR took place when the finance (Miscellaneous Taxation Provisions) Act No. 3 of 1993 established the Federal Inland Revenue Service as the operational arm of FBIR.
The federal Inland Revenue Service is a statutory body which has the administrative responsibility for the assessment, collection and accounting for the following taxes:
Petroleum Profit tax
Companies Income tax
Withholding tax on Compaqnies,residents of the federal capital territory and Non-residents
Value added tax
Education tax
Capital gains tax on persons, corporate, residents of the federal capital territory ande Non-residents individuals
Stamp duties on bodies, corporate and resident of federal capital territory
Personal Income tax of all eligible persons.
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