Nigeria: Increasing Tax Revenue: Is A New Approach Required?

Last Updated: 27 February 2017
Article by Deloitte Nigeria

Most Read Contributor in Nigeria, July 2017

The importance of taxation to a nation's economic wealth and development cannot be overemphasized. However, the achievement of this goal is often undermined by tax evasion and deliberate attempts by multinationals to shift profits from one jurisdiction to another, amongst others.

Over the years, Nigeria has attempted to use taxation as a compulsory tool for generation of revenue needed to meet its recurrent and capital requirements; however, there is no evidence that this has yielded the desired results.

The analysis below shows a five (5) year comparison of revenue generated from taxes as a percentage of total Gross Domestic Product (GDP) across three jurisdictions in Africa.

* Source1

From the above analysis, Nigeria has the lowest tax to GDP ratio in comparison with the other two countries. This may be attributed to factors such as; lack of expansion of the tax net, partial enforcement of compliance, bureaucratic tax procedures, lack of transparency and accountability. These factors are in no way strange to the government and tax authorities as some efforts have been made over the years to curb them, expand the tax net and increase tax collection. However, the key question is whether these initiatives have been well/fully implemented by the government and tax authorities to yield the desired results.

Due to the present economic recession in Nigeria, revenue allocation from the federation account to state governments has declined sharply by 35%2 between 2015 and 2016. Many state governments are faced with huge budget deficits as they struggle to meet their obligations and service debts that have accumulated over the years. Thus, the need for the federal, state and local governments to generate adequate revenue from internal sources has become a matter of urgency and importance.

Usually, governments turn to taxes by either increasing the tax rates or creating new taxes in order to boost revenue. However, the foregoing would be sub-optimal considering the economic recession being faced by the country. Each of the options will only increase the financial burden on an already impoverished populace, serve as a deterrent to potential investors and consequently impede recovery of the economy.

Consequently, there is a need to revisit some of the other awesome initiatives which had been put forward by the government or tax authorities in the past and examine if more can be done to achieve the desired objectives.

  • Implementation of the Integrated Tax Administration System (ITAS)

    In a bid to ease the administration and collection of tax in Nigeria, Federal Inland Revenue Service (FIRS) has long set out to implement the ITAS. However, after over five years of the initiation of the plan, the ITAS is still nothing but a dream yet to be realized as the manual procedures of tax filing remains the status quo.

    The proposed ITAS is meant to allow tax payers file tax returns and relevant documents, process tax clearance certificates, remit tax and obtain receipts, update tax information, check the tax identification number (TIN) of vendors, utilise withholding tax credits, amongst other things, electronically. No doubt the implementation of ITAS will eliminate a lot of inefficiencies, such as protracted tax audit processes, tax leakages due to bribery and corruption etc., in the current manual regime of tax administration and increase tax collection. But one would wonder what is delaying the full implementation of the ITAS by FIRS. Could this delay be as a result of focus of the tax authorities on short term measures of increasing tax revenue such as raising baseless tax assessments on tax payers or inadequate IT infrastructure? 

    In 2015, FIRS launched the electronic tax pay solution, a self-service FIRS channel available on all commercial banks internet banking platforms. Taxpayers were required to log into any bank's internet banking platform, and click the FIRS link to pay their and or submit necessary documents. However, most taxpayers still pay their tax manually.

    Government and the Nigerian tax authorities therefore need to learn from other countries around the world such as South Africa, Spain, Costa Rica, India, amongst others, that have since implemented electronic tax systems which has simplified the administration and collection of tax. All barriers preventing the full implementation of ITAS should be identified and addressed immediately. The sooner the ITAS becomes effective, the better it is for taxpayers and the Nigerian tax system.
  • Enforcement of compliance with tax obligations

    One of the reasons for the low tax revenue to GDP ratio is the fact that the tax revenue agencies do not fully enforce the powers granted to them within the ambits of the law. As such, they rarely scrutinize defaulting taxpayers especially those that are supposedly labelled as "untouchable".

    Although, a couple of years back, the tax authorities took action by apprehending top management staff of some companies who have defaulted in paying taxes due. They also ordered out staff of the defaulting companies and shut down their offices. These actions served as a deterrent to other taxpayers and encouraged voluntary compliance. However, few years down the line, there has been a negative change in the attitude of the tax authorities to enforcing compliance, especially in the areas of recovery of taxes, prompt rendition of tax returns and payment of tax assessed.

    One would expect that "violent compliance enforcement actions" that was applied couple of years back will be embraced by successive managements of the tax agencies. However, it appears this is not the case.  

    It is therefore imperative for the government and tax authorities to revisit their approach to enforcing compliance and discouraging tax evasion given the dire need to surge dwindling revenue through taxation. The tax officials need complete attitudinal change of the perception that some taxpayers are "untouchable" by progressively implementing measures that make tax evasion unattractive. This may include strict enforcement of the existing provisions of the law on imposition of penalties. It may also involve amending the tax laws to ensure that certain insufficient punitive penalties are removed and replaced by more punitive ones.

The above are just few of the many initiatives which the government at all levels may utilize to achieve the desired economic transformation. This will however not come easily until the government institutionalizes the focus on revenue generation through taxes as a primary option. We are aware that this issue has been addressed in the recently released revised National Tax Policy. Therefore, it is expected that taxation would be a major source of revenue to drive the country's economic growth and development in the near future where the right approach towards implementing relevant initiatives is adopted.


1. Federal Inland Revenue Service tax revenue statistics
"The institute of Certified Public Accountants of Kenya fiscal analysis 2010 to 2015"
"2014 tax statistics a joint publication between National treasury and South Africa Revenue Service"

2. National Bureau of Statistics

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.

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
Check to state you have read and
agree to our Terms and Conditions

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.

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 by clicking here .

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.


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.