**2.3. A review of national tax policies**

Similarly, Part II of the Schedule presents taxes and levies to be collected by the State Governments and they include: Personal Income Tax in respect of –Pay-As-You-Earn (PAYE) and direct taxation (Self-Assessment); Withholding tax (individuals only); Capital gains tax (individuals only); Stamp duties on instruments executed by individuals; Pools betting and lotteries, Gaming and casino taxes; Road taxes; Business premises registration fee; Development levy (individuals only); Right of Occupancy fees on lands owned by the State Government in urban areas of the State; and Market taxes and levies where State

Part III of the Schedule contains taxes and levies to be collected by the Local Governments and these include: Shops and kiosks rates; Tenement rates; On and Off Liquor Licence fees; Slaughter slab fees; Marriage, birth and death registration fees; Naming of street registration fee, excluding any street in the State Capital; Right of Occupancy fees on lands in rural areas, excluding those collectable by the Federal and State Governments; Market taxes and levies excluding any market where State finance is involved; Motor park levies; Domestic animal licence fees; Bicycle, truck. Canoe, wheelbarrow and cart fees, other than a mechanically propelled truck; Cattle tax payable by cattle farmers only; Merriment and road closure levy; Radio and television licence fees (other than radio and television transmitter); Vehicle radio licence fees (to be imposed by the Local Government of the State in which the car is registered); Wrong parking charges; Public convenience, sewage and refuse disposal fees; Customary burial ground permit fees; Religious places establishment permit fees; and Signboard and

And to address the hitherto inherent conflict of fiscal responsibilities and powers among the three tiers of government, the 1999 Constitution classifies governmental taxation responsibilities and powers into *exclusive*, *concurrent* and *residual* lists. The National Assembly, is empowered to issue legislation on the taxation of incomes, profits and capital gains, and on matters classified in the concurrent list—particularly those related to the division of public revenue. The State Houses of Assembly may prescribe the collection of any tax, fee or rate, or the administration of a law to provide for such collection by a local government council or any tax, fee or rate not expressly stipulated as being within the authority of the Federal government. The State government is empowered to impose tax on all items in the concurrent list as well as residual matters but to the extent that such laws are consistent with those of the

In sum, the Federal Government is limited to eight specific taxes while the State and Local Governments were restricted to 11 and 20, respectively. However, the Federal government controls most of the buoyant tax handles, accounting for 99% of the tax revenue. The most important tax laws in Nigeria include Company Income Tax Act (CITA), Capital Gains Tax Act and Stamp Duties Act, all enacted in 1990; value added tax (VAT) Act and Education Ac, both enacted in 1993; Personal Income Tax Act (PITA) of 2004; and the Petroleum Profit Tax Act and Information Technology Development Act, both enacted in 2007. In reality however, Nigeria's tax administration environment is fraught with the problem of multiple taxation, which in the extreme compels companies to pay income tax to Federal Government, and other

finance is involved.

68 Taxes and Taxation Trends

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National Assembly.

Tax policy provides a set of rules, *modus operandi* and guidance for all stakeholders in the tax system. Tax policy formulation in Nigeria is the responsibility of the FIRS, Customs Services, Nigerian National Petroleum Corporation (NNPC), and other agencies of government but under the guidance of the National Assembly. A good tax policy needs to satisfy both *efficiency* and *equity* criteria. Any tax policy is, however, continually subjected to pressure and changes. According to [22], the best approach to reforming taxes is one that considers taxation theory, empirical evidence and political and administrative realities and blending these with a good dose of local knowledge and sound appraisal of the prevailing macroeconomic and international situation to produce a feasible set of proposals sufficiently attractive to be implemented and robust enough to withstand changing times.

Whereas during the pre- Structural Adjustment Programmes (SAP) era tax policies were aimed at boosting government revenue; ensuring effective protection for local industries and equity in the geographic dispersion of manufacturing activities, the introduction of the SAPs in 1986 witnessed a shift in policy focus to using taxes to boost productivity and competitiveness of business enterprises; promoting exports of manufactures; and reducing the tax burden of individuals and companies. The specific measures introduced included a review of custom and excise duties; reduction of company and income taxes; granting of a wide array of tax exemptions and rebates; introduction of capital allowance; expansion of duty drawback and manufacturing-in-bond schemes; elimination of excise duty; introduction of VAT; and monetizing of fringe benefits and increase in tax relief to low-income earners [23].

More recently, a National Tax Policy (NTP) adopted in 2010 sought to provide a set of guidelines, rules and *modus operandi* that would regulate Nigeria's tax system and provide a basis for tax legislation and tax administration. The 2010 NTP seeks to resolve some inherent problems of the existing tax system such as multiple taxation; uncertainty and leakages in the tax system; lack of accountability of tax revenue and expenditure; inadequate clarity on taxation powers of each level of government and encroachment on the powers of one level or state by another; uncertainty in the tax system and increasing cost of tax compliance due to lack of skilled manpower, inadequate funding, improper delegation of tax powers to third parties; the non-refund of excess taxes to taxpayers, due to the lack of an efficient system and funds; obsolete laws which do not reflect Nigeria's current realities; and the lack of a specific policy direction for tax matters in Nigeria, as well the absence of laid down procedures for the operation of the various tax authorities. The 2010 policy in effect has shifted focus from direct taxation to indirect taxation. Its strategy is to reduce companies' income tax rate from 30 to 20%, top rate personal income tax rate from 25 to 17.5% and a gradual increase in the rate of VAT from the current level of 5%. These strategies are aimed at encouraging investments, creating employment, increasing tax compliance and limiting opportunities for tax avoidance.
