THE IMPACT OF TAX POLICY REFORMS ON REVENUE GENERATION IN NIGERIA. A RESEARCH PROJECT MATERIAL ON ACCOUNTING
This research study on the impact of tax reforms on revenue generation in Nigeria was carried out to ascertain the impact of tax reforms on the volume of revenue generated from various taxes collectable at the Federal Inland Revenue Service Calabar. Furthermore, the study seeks to discover the impact of the reforms on individual tax and also determine the direction of the impact. Accordingly secondary data of tax revenue for six years and from different tax type were collected. In order to manage the data size, the data were treated as log. The percentage chi-square and Pearson’s Product Moment Correlation coefficient analysis technique were used for the analysis. The result reveals that while the reforms have impact on the volume of revenue generated in some taxes, it however did not have impact on others. It was therefore recommended that: in order to ensure sustainable fiscal policy, the various government tiers should seek the improvement in, the treatment of taxpayers and tax administrator, adequate investment for the tax system and judicious spending of tax payer money.
1.1 BACKGROUND OF THE STUDY
Nigeria is governed by a federal system; hence its fiscal operations also adhere to the same principle. This has serious implications on how the tax system is managed in the country. In Nigeria, the government’s fiscal power is based on three – tiered tax structure divided between the federal, state and local governments, each of which has different taxes jurisdiction. As of 2002, all three levels of government share about 40 different taxes and levies.
The Nigeria tax system is lopsided, and dominated by oil revenue. The most veritable tax handles are under the control of the federal government while the lower tiers are responsible for the less buoyant ones – the federal government taxes corporate bodies while state and local government tax individuals. While the federal government on average accounts for 90 per cent of the over all revenue annually, it only accounts for about 70 per cent of total government expenditure. In 1995, the breakdown of total tax and levy collection of the three tiers was 96.4 per cent for the federal government and 0.4 per cent for the local government (Phillips, 1997). A major element contributing to this development was the prolonged military rule that had ignored constitutional provision.
Over the past four decades, the country’s revenue was largely derived from primary products. Between 1960 and the early 19970s, revenue from agricultural products dominated, while revenue from other sources was considered as residual. Since the oil boom of 1973/4 to date, however, oil has dominated Nigeria’s revenue structure and its share in federally collected revenue rose from 26.3 percent in 1970 to 81.8, 72.6 and 76.3 in 1979, 1989 and 1999, respectively.