Bridging Nigeria’s Taxation Policy: Implementation Divide.

Abstract

This study examined the taxation system in Nigeria, highlighting the gaps between tax policy and implementation. The research aimed to identify the challenges facing Nigeria’s tax system and propose solutions to bridge the gap between policy and practice. A doctrinal research methodology was adopted, analysing primary and secondary sources, including books, articles, and journals. The study found that Nigeria’s tax system was marred by inefficiencies, lack of fiscal federalism, multiple taxation, and inadequate technology. The research concluded that adopting the triple helix model, which fosters collaboration between government, industry, and academia, is crucial for creating a more efficient and effective tax system. Recommendations were made to address the challenges facing Nigeria’s tax system, including distributing social welfare programs equally, initiating financial controls and performance audits, and promoting infrastructure development.

Keywords: Efficient, Taxation, Tax Policy, Implementation, Economic Development.

Introduction

Taxation plays a crucial role in Nigeria’s economic development, serving as a primary source of revenue for the government. Nigeria’s tax system is riddled with inefficiencies which make tax administration and taxpayer compliance costly for all concerned. In Nigeria, due to over-reliance on oil revenues, taxes have not contributed significantly to the  revenue profile  of  any  level  of  government  for  many  years.

This research highlights the problem that Nigeria, unlike other countries lacks an efficient tax system despite the remarkable advancements worldwide .This research aims to explores the gap between tax policy and implementation in Nigeria .The doctrinal research methodology was adopted for this research through the analysis of relevant primary and secondary sources such as books, articles from, Research Gate included but not limited to, and journals. The scope of this study is Nigeria, and the limitation of this study relied solely on the doctrinal methodology therefore there is methodological Limitation, the significance of this research will adopt the triple helix model which emphasizes the collaboration between the three stakeholders: Government, Industry and Academia to ensure Nigeria eradicates inefficiencies in their tax administration.

The synopsis of this research is divided into 6 chapters. Chapter 1 discusses the introductory aspect of this study these include but not limited to the background of the study, statement of the problem, aim and objectives, and significance of the study. chapter 2.0 will discuss the conceptual clarification and applicable theories on Taxation, 3.0 will analysis the National Tax Policy, 4.0 provides for the challenges faced from Nigeria’s lack of an efficient Tax policy,5.0 summarizes and concludes the work. 6.0 provides the recommendations.

Conceptual Clarification

Tax concept is as old as civilization and it is the most constant means of revenue generation to the government.[1] Basically, tax is aimed at raising government revenue to enable the government to meet up with its expenditure as well as a means of creating a viable relationship between taxpayers (citizens) and the government.[2]

A good tax system should be sufficient, convenient, efficient and fair in nature.[3]

Theoretical Framework

The theory applicable to this research include:

1. Socio-Political Theory:
2. Proponent and Principle

Socio-Political Theory developed by Adolf Wagner. Adolf Wagner believed that socio-political goals should be the main determinants of citizens’ choice of tax.[4]

Relevance

 The theory suggested that the tax system should serve as a tool for restructuring the society. Although the society comprises of people, it is a sovereign entity and highly populated.[5] Thus, the need for the state to preserve the existence of the society and proffer solution to its problems. Therefore, government’s right in the imposition of tax is not hinged on benefit but basically an act of exercising power. Tax system should thus be structured, such that it serves as fiscal policy measure for generating income for the governments and also reducing unemployment and income inequalities in a country.[6]

Short comings

The theory therefore criticizes the perception or view that the tax system should be structured to serve individuals.[7]

Analysis of the Legal Framework

The legal framework regulating taxation in Nigeria derives its authority from the Constitution of the Federal Republic of Nigeria (CFRN) 1999 (as amended), which explicitly outlines the taxing powers and revenue jurisdiction of the federal, state, and local governments through the Exclusive Legislative List and the Concurrent Legislative List.[8]

The National tax policy was heralded by the setting up of a 20 men study group in the year 2002 to carry out a comprehensive review of the Nigeria tax system and legislations, review the tax administration structure and make necessary recommendations where needed. In 2004, a 12-member working group was formed to critically evaluate the recommendations of the 2002 study group and propose measures to reform the Nigerian tax system. In 2010, the federal government adopted the final draft of the national tax policy. However, the required legislative action to kick start the provisions of the National tax policy was not considered.[9]

Consequently, the recommendations of the policy were largely unimplemented and thus failed to meet government set objectives. The then Minister of Finance on 10th August 2016 inaugurated another committee to review, update and make recommendations on the implementation process of the National Tax Policy.[10] The committee in turn submitted its report on 29th September 2016 and on 1st February 2017, the new National tax policy was adopted by the Federal Executive Council and thereafter was passed to the National economic council for endorsement.[11]

The National tax policy establishes clear rules that are germane to the administration of tax at all levels of government. The policy compels tax authorities to ascertain that all taxable persons are duly registered and issued tax identification number.[12]

The National tax policy recommended financial and administrative funding for tax authorities and tax authorities are to ensure that tax payment procedures are easy and convenient.[13]

The policy also recommended that collection processes shall leverage on modern technology. This is in line with global best practices and further strengthens the implementation of electronic taxation in Nigeria.[14]

Although, there is no legislative framework for the operation of E-taxation in Nigeria, the policy advocates for the use of technology in tax laws administration. The policy likewise provides that: the Minister or Commissioner of finance shall ensure that the collection and remittance of taxes by all ministries, extra ministerial departments and agencies are automated.[15]

Federal Inland Revenue Service (Establishment) Act, which creates the Federal Inland Revenue Service (FIRS) as the primary federal tax authority is responsible for the assessment, collection, and accounting of taxes to the federal government.[16]

According to the Federal Inland Revenue Service (FIRS), Nigeria’s tax-to-GDP ratio stood at 10.86% in 2022,[17]a slight improvement from the 6% recorded in prior years but still far below global and regional averages.[18] By comparison, the average tax-to-GDP ratio for Sub-Saharan Africa is between 15% and 18%, while OECD countries average around 34%.[19]

Challenges

1. It follows that for the NTP to effectively address the challenges of the Nigerian tax system; it must address the issue of lack of fiscal federalism under CFRN 1999.[20]
2. Multiple and double taxation are among the major challenges confronting the Nigerian tax system. The National tax policy recognises that the ‘inordinate drive by all tiers of Government to grow internally generated revenue… has led to the arbitrary exercise of regulatory powers for revenue purposes.[21]
3. Technological Deficiencies: While the NTP recommends digital taxation, the infrastructure for e-taxation is either inadequate or poorly implemented across many tax authorities.
4. Institutional Weakness and Corruption: Tax administration suffers from poor personnel capacity, administrative inefficiencies, and endemic corruption, undermining public confidence by the legal officers and government.
5. Public Trust Deficit: The citizen’s reluctance to comply with tax obligations is fuelled by perceptions of government wastefulness and lack of accountability to manage the tax.

Summary

Nigeria’s tax system is marred by inefficiencies, affecting economic development. Irrespective of the fact that taxation plays a crucial role in revenue generation, the country’s over-reliance on oil revenues has relegated tax contributions to a secondary status. This research delves into the gaps between tax policy and implementation, emphasizing the need for a more efficient system. The study examines the National Tax Policy, highlighting the challenges faced by tax authorities. The main challenges include the lack of fiscal federalism, multiple taxation, and the need for electronic taxation. To bridge the gap between policy and implementation, the research proposes adopting the triple helix model, fostering collaboration between government, industry, and academia. Therefore, this research aims to inform policymakers and stakeholders on the necessary reforms to create a more efficient and effective tax system, driving Nigeria’s economic development forward.

Conclusion

In conclusion, Nigeria’s tax system requires urgent reform to bridge the gap between policy and implementation. The lack of fiscal federalism, multiple taxation, and adequate technology hinder the effectiveness of the tax system. Adopting the triple helix model, which is the collaboration between government, industry, and academia, is crucial for creating a more efficient and effective tax system. By implementing these reforms, Nigeria can unleash its economic potential, reduce reliance on oil revenues, and promote sustainable development.

Recommendations

1. Government should ensure to distribute its social welfare programmes equally to provide direct and indirect benefits to taxpayers. This will give them the assurance that a portion of their money paid for tax is effectively utilized by the government.[22]
2. The government should initiate more financial controls and performance audits to promote infrastructure development and curb corruption and inefficiencies in the Nigerian tax system as well as increase the contribution of taxation to the development of the country.[23]

Streamlined Tax regime involves eliminating overlapping taxes and harmonising tax laws to simplify Nigeria’s complex tax system. Multiple taxes imposed by federal, state, and local governments on the same tax base create double taxation, increase business costs, and deter investment. Harmonisation would align tax laws, unify tax rates where appropriate, and clearly define tax jurisdictions and creating a unified tax database.

Digitise Tax Administration by implementing comprehensive e-taxation infrastructure nationwide, backed by enabling legislation. This system would enable taxpayers to register, file returns, make payments, and access tax records online, reducing physical contact and administrative bottlenecks.

Enhance Fiscal Federalism by reviewing constitutional provisions on tax powers to grant states greater revenue-raising autonomy and utilizing statutes and legal frameworks on taxation.

Bibliography

Online Journal

  Adedeji F and Toyin Victoria F, ‘Taxation and National Development in Nigeria: Policies, Problems and Prospects’ (2022) 9(1) University of Port Harcourt Journal of Accounting and Business,<https://www.researchgate.net/publication/377218234_TAXATION_AND_NATIONAL_DEVELOPMENT_IN_NIGERIA_POLICIES_PROBLEMS_AND_PROSPECTS>.

  College O and Otuedon  AM,‘Taxation and Socio-Economic Development in Nigeria’ (2024) 7(1), African Journal of Accounting and Financial Research, <https://www.researchgate.net/publication/378028633_Taxation_and_Socio Economic_Development_in_Nigeria>.

   Richards, ‘Overview of the National Tax Policy and its Implication for Tax Administration in Nigeria’ (2019)10 (2) NAUJILJ 42-50< https://www.ajol.info/index.php/naujilj/article/view/183683/173040 >.

[1] Ajueyitse Martins Otuedon and Ogodogun College, ‘Taxation and Socio-Economic Development in Nigeria’ (2024) 7(1), African Journal of Accounting and Financial Research ,93-100 <https://www.researchgate.net/publication/378028633_Taxation_and_Socio-Economic_Development_in_Nigeria> accessed 9 July 2025.

[2] ibid.

[3] ibid.

[4] Fatoke Toyin Victoria and Fatoke Adedeji ‘Taxation and National Development in Nigeria: Policies, Problems and Prospects’ (2022) 9(1) University of Port Harcourt Journal of Accounting and Business,92-103 <https://www.researchgate.net/publication/377218234_TAXATION_AND_NATIONAL_DEVELOPMENT_IN_NIGERIA_POLICIES_PROBLEMS_AND_PROSPECTS> accessed 9 July 2025 .

[5] ibid.

[6] ibid.

[7] ibid.

[8] second Schedule, Part I, Part II CFRN 1999.

[9] Fatoke Toyin Victoria and Fatoke Adedeji ‘Taxation and National Development in Nigeria: Policies, Problems and Prospects’ (2022) 9(1) University of Port Harcourt Journal of Accounting and Business,92-103 <https://www.researchgate.net/publication/377218234_TAXATION_AND_NATIONAL_DEVELOPMENT_IN_NIGERIA_POLICIES_PROBLEMS_AND_PROSPECTS> accessed 10 July 2025 .

[10] ibid.

[11] ibid.

[12] ibid.

[13] National tax policy,2017, Chap 4, para 4.3.

[14] National tax policy,2017, Chap 4, para 4.4.

[15] National tax policy ,2017, Chap 5, para 5.1 (x).

[16] Federal Inland Revenue Service (Establishment) Act, No. 13, 2007,  1(1), 8(1), First Schedule (Nig.).

[17]Federal Inland Revenue Service (FIRS), ‘2022 Tax-to-GDP Performance Report’ (2023) .

[18] ibid.

[19] Organisation for Economic Co-operation and Development (OECD), ‘Revenue Statistics in Africa 2023’ (OECD Publishing 2023).

[20]  Richards, ‘Overview of the National Tax Policy and its Implication for Tax Administration in Nigeria’ (2019)10 (2) NAUJILJ 42-50< https://www.ajol.info/index.php/naujilj/article/view/183683/173040 > accessed 10 July 2025.

[21] ibid.

[22] Ajueyitse Martins Otuedon and Ogodogun College, ‘Taxation and Socio-Economic Development in Nigeria’ (2024) 7(1), African Journal of Accounting and Financial Research ,93-100 <https://www.researchgate.net/publication/378028633_Taxation_and_Socio-Economic_Development_in_Nigeria> accessed 9 July 2025.

[23] Fatoke Toyin Victoria and Fatoke Adedeji ‘Taxation and National Development in Nigeria: Policies, Problems and Prospects’ (2022) 9(1) University of Port Harcourt Journal of Accounting and Business,92-103<https://www.researchgate.net/publication/377218234_TAXATION_AND_NATIONAL_DEVELOPMENT_IN_NIGERIA_POLICIES_PROBLEMS_AND_PROSPECTS> accessed 17 July 2025 .