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This chapter aims at discussing the brief history of taxation and various sources of tax law and types of tax Acts promulgated by the Federal Government of Nigeria.  Taxation can be defined as a compulsory levy by the government imposed on the incomes of individuals firms and corporate bodies.  Emphasis will also be regained towards examining the different versions of tax authorities responsible for the tax laws and other relevant problem that confront its smooth operation and growth.  Moreover the various tax  laws or  involved  in the collection of taxes  and to  know their impact  in the implement of taxes how they have  contributed either negatively  or positively in the course of their operation.  These Regulatory bodies include the Federal Board of Inland Revenue (F.B.I.R) and the state Board of Inland Revenue (S.B.I.R) Tax objective and it classification principles concepts incidence e.t.c.


        Taxation system had been in operation from time immemorial dated back to the time  of our forefather during which communities taxed each other as a result of the failure  of their member  to  carry  out  their communal  assignment such assignment such as bush clearing pit  digging well e.t.c. all for the  benefit of the community  concerned.   Failure to render, such service usually resulted in Seizure of property which might be reclaimed on payment of money.  This practice continues until 1904 when late Lord Lugard introduced the first income tax into the system.   With the emergence  of the Native Revenue ordinance of 1917  and subsequent amendment, the income tax became operative in the southern  Nigeria in 1918  precisely  Abeokuta in the Western Nigeria and Benin city in Mid-Western  Nigeria and by 1928, it has extended  to the Eastern Nigeria.  With the passages of time the Native Revenue ordinance of 1917, 1918 and 1928 were transform into Direct Taxation Ordinance in 1940 and this automatically replaced the Nature Revenue Ordinance and the Native Direct Taxation (Colony) of 1937 which of course was regarded as been discriminatory in nature for the fact that it only applies to native in Nigeria other than Lagos Colony or township.  In 1943, the Federal Board  of Inland Revenue (F.B.I.R)  was  born as the sole tax  authority  to asses  employees to tax  on a  current on Actual basis  in respect of his emolument.

        It must be emphasized here that the Government accounting gear then was between 1/4/19 – to 31/3/19 – e.g. An employees assessed to tax between 1/4/1943 and 31/3/1944 would be taxed based on 1993/44  year of assessment.


The following entities represent the various tax authorities during the colonial Era.

(i)          The Resident appointed by the Government to administer a particular province.

(ii)        Any other officer authorized by the Resident to perform such duties.

(iii)      The chiefs, Elders and other persons of influence in each district.

(iv)       Any native authority appointed by the Governor to be a tax collection authority.

(v)         Any village council, district headman or other suitable person on group of person appointed by the Governor.


The duties of the colonial Tax Authorities were to supply  information,  supervise tax collection  render  tax  collection account e.t.c. penalty for non – accountability  of tax collected  attracted  a five  of four hundred naira (400.00)  or imprisonment for  two (2) years.


(i)          Income from land

(ii)        Rent derived  from land

(iii)      Annual profit of the produce from land which were enjoyed by the community or individual.

(iv)       Profit from trade  and manufacturing

(v)         Dividend or Interest 

(vi)       The value of all livestock owned by individual or the community.


Where any native was assessed to tax within the area of the authority of a District council and to the Resident if need be.  In the light of seeking tax exemption, than Governor otherwise called the chief commissioner reserved  the right to exempt individual  from tax and as  well make regulation far carrying out the provisions of ordinance i.e. he provides statements on the tax returns, claims for remedy, deduction of tax at source  or monthly deduction  known as  pay As – You Earn System.


        Tax  laws or Acts in Nigeria came into being as a result of lack of uniformity in the tax collection system  as observed  between the Africans and non – Africans living in some part of the regions of Nigeria most especially Lagos Territory.  Informed sources revealed that income of a larger population of Europeans were not taxed.  This recommendation was embodies in the Nigeria  order in council (Constitution), 1960 and formed the basis of the income  Tax  management Act (I.T.M.A) 1961  thereafter  –  referred to at the ACT.  With the emergence of the Act,  the unfair  treatment of some African  resident and the unjust exception given to the non-African (e.g. Europeans) were faced out.


The following are the various tax laws which have been promulgated by the Federal Government of Nigeria.

(i)          INCOME TAX MANAGEMENT ACT (I.T.M.A): This gives rise to law relating to individual partnership, trustees and executors (in settlement and family).  It was promulgated by the Federal Government in 1961 with further amendment and modifications full date.

(ii)        PERSONAL INCOME TAX ACT (P.I.T.A): This give rise to law relating to personal income.  It was promulgated in 1961 by the Federal Government with further amendment.

(iii)      COMPANY INCOME TAX ACT (C.I.T.A): This is administered on companies by the Federal Board of Inland Revenue (F. B.I.R) it was promulgated by the Federal Government in 1968 and further amended in 1979.

(iv)       PETROLEUM PROFIT TAX ACT (P.P.T.A): The Federal Board of Inland Revenue is the only tax authority that is responsible for assessing and collecting petroleum profit tax from all companies engaged in petroleum operation in Nigeria.  The tax payable relates to profit made by companies dealing controlling and sales.

(v)         CAPITAL GAIN TAX ACT (C.G.T.A):- This Act  was enacted in 1967 and deemed to  introduce  taxation of capital gains on assets into the Nigeria tax  system.  Initially, when this act was introduced, stocks and share were specifically exempted from the provision of the Act.

(vi)       CAPITAL TRANSFER TAX ACT (C.T.T.A): This tax the total value of a person property at graduated rates starting from a minimum of one hundred thousand  naira  (100,000.00) either at death  or  on gift made interview during his life time.  This Act was enacted by the Federal Government in 1979 gazette No. 18 Vol. 66 of 12th April 1979.


The statements of the study are as follows:

(i)          What are the constraints put against the smooth tax generation in Nigeria with particular reference to Lagos State.

(ii)        Has location in Nigeria effective in it various functions with particular reference to Lagos State.

(iii)      Another Statement is what are the problem confronting the collection of tax in Nigeria.

(iv)       Moreover, how does an external body influence the poor collection of tax in Nigeria with reference to Lagos State.


The mains and objectives of the study are as follows:-

(i)          To look into the introduction of taxes in Nigeria its meaning and its operational process.

(ii)        To find out and evaluate the problem confronting the effective tax collection in Nigeria and its solutions.

(iii)      One other objective of the study is to know the function and activities of the various tax authorities in Nigeria and their operational process.

(iv)       Furthermore, the study will also try to find out the impact of taxation in Nigeria and the economy at large.


In view of the constraints regarding time and money.  The scope of this study has been restricted to selected offices of state of internal Revenue and the Federal Inland Revenue Department in Lagos metropolis.  Another reason was the uniformity in tax law applicable throughout the country and the fact that the Lagos State is the centre spread of all commercial activities.  In this regard therefore, the population on which the sample have been draw with from the basis of analysis.  While limitation can be the scope of study constrained by time, money and reluctancy of the tax authority staff of divulge information to a third party for fear that such information may not be used for the purpose other than intended.


It is relevant to conduct this research in order to find out the problem confronting the generation of taxes in Nigeria with particular reference to Lagos State.

Furthermore, the study will also reveal the function of taxes and roles and active of various tax authority.

The research work will also be of immense help in under standing the fact that administrate and ensure the fair redistribution of wealth and income among the low medium and higher income earners.


(i)     What are the problem confronting the smooth and effective generation of taxes in Nigeria with particular reference to Lagos State .

(ii)    Has taxation in its responsibilities of regulating and administering fair redistribution of wealth and income among the low, medium and higher income earners contribute to the problem confronting its smooth and effective operation.

(iii)      What are the other regulatory bodies that constraints the smooth and effective generation of taxes in Nigeria, the regulatory bodies like the Joint Tax Board (J.T.B.) Federal Board of Inland Revenue (S.B.I.R) how have they imitate the smooth and effective tax general in Nigeria.


The study as a whole is divided into five chapters while the individual chapters deal with various districts but related topics.

Chapter one introduce the topic spells o8ut the background of the study, the statement of the study, the objective, scope, significance and research question of the study and references.

Chapter two comprises various related literature review and bring out the meaning of taxation its objective, classifications, principles, concepts and the incidence of taxation.  It also stress the composition and duties of Nigeria Tax authorities, Taxation and its effect in Nigeria Economy, Budget and Taxation, Taxation as an agent of social change.  Relief’s And Allowance and references.

        Furthermore chapter three examine the research design and methodology – scope and method of the study, description of population sample sizes hypothesis of the study and the limitation of the study.

        Chapter four focuses on data collection and analysis and the frequency table analysis.

        Finally, chapter five is concerned with the summary of the findings, recommendation, conclusion, suggestion, bibliography and appendices of the project.

This material content is developed to serve as a GUIDE for students to conduct academic research

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