Taxation has been with mankind since the creation of the world, tracing the history from medieval times to the modern age, the tax system has gone through a chequered History.

Modern day taxation can however be traced to the British in the 18th century when they were involved in the war with Napoleon. To be able to duly execute the war successfully the then government imposed a tax of one penny (1p) on a pound (£1) on every adult. When collected revenue was used to purchase arms and ammunitions, take care of the injured soldiers and plan other warfare logistics. They however saw it as a veritable source of income after the war and decided to modernize the system

In Nigeria however modern day taxation can be traced to the activities of Lord Luggard who in 1904 introduced community tax in the northern part of the country. In 1940 the emergence of the direct Taxation Ordinance came to be via the merger of the Native revenue ordinances of 1917, 1918 and 1928.

The Implementation of one of the aspects of the recommendations of the Rainsman Fiscal commission which suggested having a uniform set of tax laws and which will apply to the taxation of incomes of individuals and unincorporated organisations in all the regions led to the promulgation of the Income Tax Management Act (ITMA) of 1961.

The urgent need to meet the challenges and problems encountered in the implementation of the provisions of the ITMA of 1961 led to the coming into force of the Income Tax Management (Uniform Taxations Provisions) Act of 1975. This law was repealed in 1993 and replaced with the Personal Income Tax Act No104 of 1993 which consolidated amendments so far made to the income tax management Act. The improvement made to this Act led to the enactment of the Personal Income Tax Act, Cap P8, and Laws of the Federation of Nigeria (LFN) 2004 which was again amended in 2011.

Presently Personal Income Tax in Nigeria is governed by the provisions of the Personal Income Tax (Amendment) Act, 2004, as amended by the Personal Income Tax, (Amendment) Act 2011.

Payment of tax is a compulsory levy; section 24 of the 1999 constitution of the federal republic of Nigeria enjoins every citizen to declare to the appropriate and lawful agencies his income for tax purposes. This also has to be paid once imposed on promptly, Failure to pay Tax as at when due attracts sanctions which may be in form of interests, penalties or imprisonment.

Taxation is basically for revenue generation by the government to meet its financial Needs, The yield must be enough so as not to expose the government and the society to avoidable debts incurred via loans. This in turn helps redistribution of income for development and bridging of the gap between the rich and the poor in turn creating an equitable, just and peaceful society.

If the government practices the cardinals of a good tax system, growth and development is inevitable, what makes up a good tax system if you may ask?

  • Equity and Justice
  • Convenience
  • Certainty
  • Efficiency

The Nigerian Tax policy thrust from the beginning of the early nineties was essentially aimed at enhancing Maximum tax collection at low cost and minimal economic disruptions can be best described as follows

  1. Change from direct or income tax to indirect and consumption tax with the aim of assisting the government in curbing the consumption of harmful goods and also assist in preventing the incidence of tax evasion.
  2. Introduction and Implementation of friendly or low tax rates with aim of encouraging savings and investments and also reduce personal and organizational tax burden. When savings and investments are positively encouraged this will engender faster economic growth and development
  3. Movement from the British autocratic and coercive method of tax assessment to the American styled democratic and taxpayer friendly self assessment tax system.
  4. Provision of the necessary machineries and incentives that will encourage tax payment and reduce greatly the incidence of tax evasion and avoidance
  5. Using the media and other information dissemination mediums to educate and enlighten citizenry on their tax rights and duties

To this end its required that for sustainable development and growth taxes need to be paid, Like the inscription on the internal revenue service building in Washington DC, USA, “Taxes are what we pay for a civilized society”