THOUGH one of the most effective tools for national development has remained taxation, it is equally the most misunderstood item on the table of governance around the world. While many governments have used taxation and its principles to turn the lives of their people around for better, some have continued to use it as a conduit pipe through which citizens are intellectually robbed of their hard earned income under the cover of using it for developmental purposes.
Wikipedia, an online encyclopedia defines tax as a mandatory financial charge or levy imposed on individuals or legal entities by a governmental organization to support government spending and public expenditures collectively or to regulate and reduce negative externalities. In economic terms, taxation transfers wealth from households or businesses to the government. This in turn affects national economic growth and people’s welfare, which can be increased or decreased. Consequently, taxation becomes a highly debatable topic by some, as though it is deemed necessary by consensus for society to function and grow in an orderly and equitable manner through the government provisions of public goods and services.
Some of the prominent types of taxation include; personal and corporate income taxes, wealth taxes, inheritance taxes, gift taxes, property taxes, capital gains tax, sales taxes (also known as Value-added-tax, VAT), use taxes, environmental taxes, payroll taxes, exercise duties, or tariffs as well as tax on tax, as with a gross receipts tax.
However, the Federal Government of Nigeria under the leadership of President Bola Ahmed Tinubu has, right from inception in 2023 noted that the country’s tax policy was begging for rigorous reforms. According to the president, most of the provisions in the nation’s tax administration are obsolete, just as there is need to eliminate the incidences of multiple taxations via multiple billing channels. These and other reasons led to the tax reforms bill proposed by the number one citizen of the country through his presidential committee on Fiscal Policy and Tax Reforms which he approved on July 7, 2023 with Mr. TaiwoOyedele, a Fiscal Policy Partner and Africa Tax Leader at Price Waterhouse Coopers as chairman.
The tax bills, captioned; ‘The Nigeria Tax Bill (Fair Taxation), Nigeria Tax Administration Bill, Nigeria Revenue Service (Establishment) Bill, and the Joint Revenue Board (Establishment) Bill’ were passed into law by the nation’s National assembly and given ascent by President Tinubu on the 27th day of June, 2025.
Some of the fall-outs from the president’s action include the fact that the country’s Value-added-Tax (VAT) will remain at 7.5%, tax items to be reduced from over two hundred to about twenty, Federal Inland revenue Service (Now, National Revenue Service, NRS) to be solely responsible for national revenue collection and the deferment of implementation date to 1 January, 2026.
The father of modern economics, Adam Smith, in his; “Wealth of Nations” (1776), has argued that Taxation should follow the four principles of fairness, certainty, convenience and efficiency.
It is in the light of these that Nigerians eagerly await the commencement of the law with expectations that all its grey areas will be so thoroughly explained that every citizen will understand the law and be very willing to comply with it in the interest of the nation’s economic growth and development.
For example, if organisations such as the Nigeria Customs Service, Nigerian Upstream Petroleum Regulatory Commission, and several federal ministries and agencies lose their tax collection mandates, what happens to their employees? And what are the arrangements on ground to ensure that the poor revenue accountability of the Nigerian National Petroleum Company Limited is put into proper shape, bearing in mind that the company is currently pleading with the National Assembly to grant her two full months to respond to the N210trn discrepancy discovered in her 2023 audited financial report.
The position of NNPCL on the query she received from the National Assembly Committee on public accounts as a result of an account prepared by its own staff is, to say the least, very appalling, given the fact that she uses one of the income and labour reward packages in the job market for itself. This exposes the organization to the truism that the place is filled with an array of incompetent hands leveraging on quota system and federal character commission to offer services that are grossly below the remuneration standards put in place there by the Federal Government of Nigeria. And this is an act perpetrated at the detriment of many qualified Nigerians without god fathers to help them.
The new tax regime therefore requires that NNPCL, going forward, must prioritize its financial record keeping in the interest of transparency in the complex accounting practice in the petroleum industry.
Given the enormous benefits derived by Britain from the tax reforms of Mrs. Margaret Thatcher in her early days as the country’s Prime Minister in 1979, President Tinubu’s noble intentions with tax administration in Nigeria must be pursued with the utmost vigour it deserves for the required result to also come to fruition. Without borrowing a dime, Thatcher’s proceeds from taxation aided her immensely in prosecuting the Falkland Island war that the United Kingdom won in 1982 against Argentina. This feat positioned the Iron Lady for a second and third tenure in governance even though it was her introduction of poll tax that led to her forced resignation from office in 1990.
Additionally, it is not enough to exempt Nigerians earning N250,000 and below from paying taxes as commendably proposed by Nigeria’s president. Government must equally consider Negative income tax system where certain folks could be made to earn extra monies from government as a result of their low income levels. After all, the essence of tax impositions includes the need to reduce the prosperity gap between the rich and the poor in a given society.
Finally, the revenue collector-induced fraudulent practices like being forced to pay taxes for specified number of years even when an entrepreneur was not involved in any taxable activities, with evidence within the period must not be allowed to continue. Besides this, appropriate sanctions must continue to be seen to have been appropriately meted to tax evaders, avoiders and manipulators as a means of persuading people to comply with tariff laws.
