In a developing country such as Nigeria, one of the major functions of the government is the provision of infrastructural services to the citizens. These infrastructural services include electricity, schools, hospitals, pipe-borne water, good roads and as well as ensure a rise in per-capital income, poverty alleviation to mention a few but in order for these services to be adequately provided, the government should posses enough revenue to finance them.
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However, one of the major problems facing the government is the task of financing these responsibilities. Based on the limited resources of government, this is where the need to impose tax on all taxable individuals and companies /organizations arises.
What is Taxation?
Taxation, is the imposition of compulsory levies on individuals or entities by governments.
Taxation is the most significant form of revenue for the government and for Taxation to take place, it requires the cooperation of the citizens.
To ensure this, the government have always enacted various tax laws and reformed existing ones to stand the test of time. Some of these laws include Income Tax Management Act (ITMA), Companies Income Tax Decree (CITD) etc… All of these are aimed at ensuring adherence to tax payment and discouraging tax evasion and avoidance.
Away from social projects, governments also form sectors that are important for the well-being of their citizens.
These sectors include security, scientific research, environmental protection, etc. Funding of projects is also carried out with these taxes, some of which includes pensions, unemployment, childcare and so on. and all of this cannot be achieved without funds.
When the government collects money from taxes, it ploughs this money into the development of this infrastructure and in turn promotes economic activity throughout the country. These taxes are also essential as it aids the government put the money back into the economy in the form of loans or other funding forms. Taxes are important and citizens need to understand that it is more than just a “money grab” means for government.
The Tax administration in Nigeria is vested in the three tiers of government. Taxes payable to the Federal Government are administered by the Federal Inland Revenue Service (FIRS), those payable to the State Governments are administered by the State Boards of Internal Revenue (SBIRs) of the thirty- six states of the Federation while the Local Governments also administer rates and levies collectable by them through their various councils.
Some of the taxes payable by persons doing business in Nigeria include companies’ income tax, personal income tax, capital gains tax, value-added tax, education tax, technology tax, stamp duties, and withholding tax. Failure to pay taxes when due usually attracts a penalty.
Taxes help to raise the standard of living of the citizens in a country. The higher the standard of living, the higher the level of consumption most likely is. With a higher standard of living, businesses would be assured of higher domestic consumption.
Being a major instrument of public policy, taxation can be used as a protective, distributive or stabilization instrument, employed to expand, stimulate, restrict, or regulate the economy depending on the path the government chooses.
Tax, which is a major source of revenue for the government in Nigeria calls for more attention in both states and federal Government Budget.
These taxes collected from all sources come back to the taxpayers in the form of social amenities which is provided for them. Taxation is an all-pervading subject which affects the lives of nearly everybody and no major accountancy or legal problem can be solved without considering the aspect of tax.
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Tax plays a major role In the growth and development of the Nigerian economy. Economy development is the process by which the economic well-being and quality of life of a nation, region, or local community are improved according to targeted goals and objectives. The development and growth of the economy are largely conditioned by the growth of capital formation, capital formation is the kingpin of economic development. In order to step up both public and private investment, the government taps tax revenues. Through proper tax planning, the ratio of savings to national income can be raised.
Capital formation process can be done smoothly by raising the existing rate of taxes or by imposing a new tax rate. An important element of economic development is the raising of savings, that is, income ratio which can be effectively raised through Taxation policy.
If financial resources or investments are channelled in the unproductive sectors of the economy, economic development may be jeopardized, even if savings and investment rates are increased. Therefore it is important that the tax policy has to be implemented in such a way that investment occurs in the productive sectors of the economy, including the infrastructural sectors.
www.sojworldnews.com (c) July 25, 2020
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