Nigerian Tax System: Details, Merits & Demerits

The Nigerian tax system has been taken through several reforms and modifications.  The purpose is to further enhance the process of tax collection and administration in Nigeria.  The government is also seeking for a way to incur minimal cost in the process of enforcing tax on Nigeria’s.  There was the introduction to TIN, which is a unique Taxpayers Identification Number and TIN became effective since February 2008.

The purpose was to simplify the process so tax collection in Nigeria.  This is an automated tax system and it helps to track the tax position of every Nigerian that has the TIN and those who do not have are compelled to go for theirs in order to make tax tracking very easy. With the tax system, there is faster and smother tax payment and processing.

Benefits

The TIN idea reduces those incidences of tax touts. Special purpose tax officers were also employed to oversee tax compliance. These officials work in collaboration with several other security agencies in Nigeria and together they ensure strict compliance of Nigerians to tax payment. To say the fact, the system had helped to improve the state of tax compliance and administration in Nigeria.

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In recent times also, the Nigerian tax system has been taken through several development processes.  Several changes had been implemented already.  The government is making effort to review the system on regular basis so as to bring about more improvement and make it run more smoothly than ever before.  The effort they have been making had proved successful as obsolete provision as have even removed and simplification had been brought into many aspects of the Nigerian tax system.

The three tiers of government are responsible for enforcing tax payment; they are the federal, state and local governments.  Each of these tiers of government has its specified role in tax administration their roles are clearly stated in the Tax and Levies Decree of 1998.

Demerits

Some uncomfortable aspects of the Nigerian tax system are still seen today.  There are times state governments find themselves slogging it out with federal government on the issue of who should collect tax from companies and individuals.

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This shows the duties of the three tiers of government is not properly spelt out or that the participants do not know where their limits are as far as tax collection is concerned.  Such problems may continue if each of the participants do not quite understand their jurisdiction.

The three tiers of government also end up administering multiple tasks on individuals and companies and this is not helpful to businesses at all since business owners may end up spending huge part of their profit on tax payment.  Data base problem is yet another problem facing the Nigerian tax system. Due to this, many Nigerians can still evade tax without anyone holding them responsible.

What about corruption? This is yet another problem associated with the Nigerian tax system.  Because of endemic corruption in Nigeria, confidence of many Nigerians has been reduced in the Nigerian tax system and they now lack trust in the process.  Lack of infrastructural development is yet another factor working against the Nigerian tax system.

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