Nigeria: Will Change Come To Tax?

Last Updated: 28 April 2015
Article by Taiwo Oyedele

According to Albert Einstein, you cannot do the same thing over and over again and expect a different result.

It is not enough to simply set revenue collection targets and celebrate when they are met or exceeded. Taxation is not a game where the end justifies the means. On the contrary, it is the means that determines the end.

As we continue to bask in the euphoria of a peaceful election and the hope of a smooth transition to a new government, we must now begin to reflect on the things we have to do differently. Nigeria relies heavily on oil revenue to fund government activities and this is not sustainable. A more reliable and predictable source of revenue is taxation.

Coincidentally, there is a new head of the Federal Inland Revenue Service (FIRS) and by extension the Joint Tax Board (JTB). Since there will be competing demands and priorities, I have outlined my "Top 10" pick of concrete action points for the new government and FIRS leadership to consider in order to improve our tax system.

Action #1 – Review and implement the National Tax Policy

The National Tax Policy (NTP) was approved in January 2010. It was designed to provide a set of principles and direction for the tax system especially in terms of tax legislation and administration. Unfortunately it was never implemented and now it due for a review. Given the role we expect tax to play in funding government expenditure going forward, it is important to now review the NTP to ensure it is fit for purpose and then put a structure in place to ensure its full implementation. To facilitate this, there should be a body with representations from key stakeholders including tax authorities at all levels, organised private sector groups and relevant professional bodies. Their primary role will be to monitor implementation and report progress and desired changes periodically (at least once every year) to an appropriate authority such as the National Economic Council. The body will also have the responsibility of keeping the NTP under constant review and vet changes to tax policies and introduction of new tax laws.

Action #2 – Address multiple taxation and multiple agencies

There is an ongoing effort to address multiplicity of taxes including earmark taxes that are being introduced arbitrarily without regard to best practice and overall interest of the country. This effort should be fast-tracked. Ultimately, the problem must be addressed from the source through a review of the Constitution to clearly outline the powers of governments at different levels regarding imposition and collection of taxes. It should also streamline the approved list of taxes to ensure adherence by all tiers of government.

Closely connected to this is the menace of multiple revenue collection agencies especially at the federal level. This not only increases the risk of non-remittance of revenue collection but also duplicates administrative cost for government and increases compliance costs for taxpayers. Why should different agencies collect crude oil royalty; industrial training fund; and so on rather than the FIRS? Government should sanitise tax collection and allow the FIRS and Customs alone collect all revenues on behalf of the federal government. State governments should implement a similar structure at the state and local government levels.

Action #3 – Simplify tax administration and build world class capacity

Nigeria currently ranks 179 out of 189 economies on the ease of paying taxes in the 2015 survey conducted by the World Bank and PwC. We clearly cannot remain in this position and expect to be globally competitive. We must make the entire process of paying taxes to be as simple as it possibly can be. Tax administration should be redesigned to enhance taxpayer experience. The introduction of electronic tax system by the FIRS and the ongoing initiative by the JTB are commendable but must be harmonised for effectiveness. The authorities should pursue the implementation with vigour and monitor usage. It is pointless to have an electronic system that simply duplicates the compliance process or creates more problems than solutions.

An 'Office of Tax Simplification' should be established to continuously seek ways of improving the tax system. There should be quality capacity building for the tax authorities through quality training, exchange programme with developed countries, and recruitment of competent staff. Nigeria must actively get involved in global actions against tax avoidance and evasion so that our voice may be heard. Nigeria should also lead regional initiatives such as the ECOWAS integration. Ironically, like any investment, you must spend money to make money.

Actions #4 – Set the tone from the top and screen political office holders for tax compliance

The tax burden on individuals and companies should be proportionate to their level of income/consumption and their abilities to pay. Compliance should cut across both private and public sectors. All political office holders, whether elected or appointed, must pay adequate taxes in line with the law and on time. Along with declaration of assets, there should be full disclosure of income from all sources and corresponding taxes paid. History of tax compliance which bears some correlation with declaration of assets should be part of the screening process for political appointments. MDAs and tax officers must themselves be fully tax compliant too.

Action #5 – Make tax laws simple to read and understand

This will involve a review of tax laws to remove ambiguities and rewrite the legislation in plain English. We could even consider translation into the major languages – Hausa, Igbo and Yoruba for better reach. The legislative arm at all levels must consciously make laws which are clear and easy to understand. Lawmakers should be more diligent and avoid passing laws with easy to spot errors; it makes us look collectively unintelligent as a people. We should never impose changes with retroactive effect especially if the changes impose an obligation on people and businesses as was the case with the Personal Income Tax amendment in 2011 and the 2014 Pension Reform Act. We should always give a reasonable transition period for individuals and businesses to adjust.

To ensure adequate focus on tax matters – there should be a specific committee of the National and State Assemblies on Tax Matters. This will ensure that timely actions are taken and robust decisions are made from time to time in consultation with key stakeholders.

Action #6 - Declare tax amnesty and embark on taxpayer awareness campaign

Taxpayer education is key to increasing tax compliance which is currently embarrassingly low as shown by our ratio of tax to GDP. Tax awareness should not be one-off or only when there is a new tax project like transfer pricing. There should be continuous taxpayer engagement, education and awareness. This should go beyond the traditional targets in cities to villages and remote areas. We should also get creative; use social media, introduce raffle draws, annual taxpayer awards etc. Tax authorities should start gathering reliable data for taxpayers profiling and compliance monitoring. There should be collaboration among government agencies - FIRS, State Internal Revenue Services, Joint Tax Board, Corporate Affairs Commission, Nigeria Customs Service, Land Registry, etc.

Declare tax amnesty under which taxpayers will be given the opportunity to carry out self-reviews with part or full waiver of penalty and interest. The review period may be limited to 6 years for large companies and one or two years for small companies and the informal sector players. Any liability beyond these periods can be fully waived. This gesture will significantly improve the level of voluntary compliance after which the tax authorities will commence full enforcement with appropriate sanctions.

Actions #7 – Block tax leakages and streamline tax incentives

Create structures to stamp out corruption in tax administration especially through the use of technology and introduce a framework for whistle blowing.

Also, incentives and waivers should be streamlined and should be sector based to provide a level playing field and avoid economic distortion. This should include renegotiating existing tax treaties to limit tax give-aways. The existing tax treaties grant reduced withholding tax rates of 7.5% on investment income compared to 10% without treaty advantage. In many cases this is not reciprocated by the contracting state and given that Nigeria is predominantly a net importer of capital, we are giving away far too much than we are getting in return.

Action #8 – Set key performance indicators, improve tax revenue reporting and put taxpayers' money to work

If you don't have a predetermined destination, how do you know if and when you get there? It is not enough to simply set revenue collection targets and celebrate when they are met or exceeded. Taxation is not a game where the end justifies the means. On the contrary, it is the means that determines the end.

Government should set key performance measurements for the tax authority (and tax officers), and develop a framework for a robust reporting by the tax authorities. This should include analysis of value of tax relief granted, cost of collection, refunds paid to taxpayers and amounts outstanding. It should also highlight key success factors like tax to GDP ratio, ease of paying taxes ranking and duration of tax audit completion.

And more importantly, government must utilise tax money for social services and visible development and be accountable to the people for the taxes they have paid.

Action #9 – Remove prohibitive practices and legal barriers to investments

To encourage businesses and reduce unemployment, we must address various provisions of the law and tax practice that discourage investments. Notable among these are (1) excess dividend tax (2) minimum tax provisions and (3) commencement rules.

Excess dividend tax imposes double taxation on companies especially those that reinvest their profits and holding companies when they redistributes their dividends. This is a huge disincentive to economic growth and the use of Nigeria as headquarters location for group entities. The minimum tax provisions force companies to pay tax out of their capital if they make losses or small profits. This does not promote investment and growth. Commencement rules impose double taxation on start-up companies at the time they are most vulnerable and struggling to survive. Taxes should be paid only once on actual profit made, not twice given that such start-up companies are often fragile and therefore unable to bear the extra burden.

To reduce uncertainty in the economy, government budgets should be passed on time and include annual changes to tax policy. There should be consistency in policies with sufficient time for businesses to prepare for changes. Tax refunds should be paid on time and it should be possible to offset overpayment in one tax head against another. This is simple accounting!

Action #10 – Getting tax justice should not be rocket science

It is inevitable that there will be disputes between taxpayers and tax authorities. At the moment, tax dispute resolution takes about 10 years thereby making tax justice extremely expensive for taxpayers.

Getting tax justice should be less painful, less time consuming and inexpensive. To ensure a quick dispensation of tax justice, the Tax Appeal Tribunal should be given constitutional backing or better still establish a tax court. The tax appeal process should be simplified and less legalistic focusing on substance rather than strictly ticking boxes of legal form.


It is unrealistic to expect that a single administration will solve all our tax problems within four years or so but it is reasonable to expect good progress in key areas that is not only worth the elapse time but also help recover lost time and missed opportunities. The magic formula is to close the tap of tax corruption and raise compliance level. This is the only sustainable way to keep the lifeblood of our nationhood flowing and secure our future devoid of over dependence on resources that we can barely control.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Taiwo Oyedele
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions