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1.1 background of the study

The Nigerian Tax System has undergone significant changes in recent times. With the help of various studies and research done by tax experts, tax laws are being reviewed with the aim of repelling outdated provisions and simplifying the main ones. Under current Nigerian law, taxation is enforced by the 3 tiers of Government, i.e. Federal, State, and Local Government with each having its sphere clearly spelt out in the Taxes and Levies.

Adam smith (1976) in his book said that ‘tax is a ability imposed upon the essence by a public authority, to pay specified amount within a specified period.

The definition point towards one direction that is the characteristic of tax, firstly, it is compulsory contribution imposed by government on the people with her jurisdiction since this is a compulsory payment, any person that refuses to pay a tax is liable to punishment. Secondly, it is also a compulsory payment imposed by the government agent on people that is able to pay. And thirdly, a tax is a payment made by the payer which is used by the government for the benefit of the citizens. Fourthly, a tax is not levied in return of any special service rendered to the tax payers by government. Thus tax payers cannot get any special benefit from government in return.

Tax policy seeks to provide a set of guidelines, rules and modus operand that would regulate Nigeria tax system and provide a basis for tax legislation and tax administration in Nigeria. Tax administration which also refers to the implementation of tax policy, including tax payer compliance with tax rules, it enumerates the monetary chargers imposed by government on individuals, companies, transactions or properties for the purpose of revenue generation. However, tax revenue mobilization as a source of financing developmental activities in less developed economies has been a difficult issue primarily because of various forms of resistance, such as evasion and corrupt practices attending to it. These activities are considered as sabotaging the economy and are readily presented as reasons for slow or none development of the country. Government collects taxes in order to provide non-revenue services such as infrastructure, education, health, communications system etc, providing employment opportunities and essential public services (such as maintenance of law and order) irrespective of the prevailing ideology or the political system of a particular nation (Worlu and Nkoro, 2012).

In Nigeria, the contribution of tax revenue has not been encouraging, thus expectations of government are being cut short. Corruption, evasion, avoidance and tax haven indicators are strongly associated with low revenue (Attila, Chambas, and Combes, 2008) and indeed, corruption functions like a tax itself. According to Adegbie and Fakile (2011), the more citizens lack knowledge or education about taxation in the country, the greater the desire and opportunities for tax evasion, avoidance and non-compliance with relevant tax laws. In this respect, the country become more adversely affected due to absence of tax conscience by individuals and companies and the failure of tax administration to recognize the importance of communication and dialogue between the government and the citizens in taxation related matters. In the face of resource deficiency in financing long term development, Nigeria has heavily resorted to foreign capital such as loans and aid as the primary means to achieve rapid economic growth. Thereby, this has accumulated huge external debt in relation to gross domestic product and serious debt servicing problems in terms of foreign exchange flow and as such, majority of the populace live in abject poverty. Government has expressed concern over these and has vowed to expand the tax revenue in order to meet its mandate. Kiabel and Nwokah (2009) argue that the increasing cost of running government coupled with the declining revenue has left all tiers of government in Nigeria with formulating strategies to improve the revenue base. Ndekwu (1991) noted that more-than-ever before, there is a great demand for the optimization of revenue from various tax sources in Nigeria now. This probably influenced the decision of the Federal Government of Nigeria (FGN), which in 1991 set up a study group on the Review of the Nigerian Tax System and Administration. This review is what subsequently led to the development of the Comprehensive Tax Policy.


the reasons for reform and the decision to develop a National Tax Policy could therefore be traced back to the structure of the existing tax system and some of its inherent problems such as: the increased demand to grow internally generated revenue, which has led to the exercise of the powers of taxation to the detriment of the taxpayers who suffer multiple taxation and bear a higher tax burden than anticipated; insufficient information available to taxpayers on tax compliance requirements, which created uncertainty and room for leakages in the tax system; multiple taxation by government at all levels, which impacted negatively on the investment climate in Nigeria.

However, Elimination of multiple taxation is therefore of major concern at all levels of Government; lack of accountability for tax revenue and its expenditure; lack of accountability for tax revenue and its expenditure; lack of clarity on taxation power of each level of Government/encroachment on the powers of one level/state by another; lack of skilled manpower and inadequate funding, which led to the delegation of powers of revenue officials to third parties, thereby creating uncertainty in the tax system and increasing the cost of tax compliance; use of aggressive and unorthodox methods for tax collection; the non refund of excess taxes to tax payer, due to the lack of an efficient system arid funds; the non-review of tax legislation, which had led to obsolete laws, that do not reflect Nigeria's current realities; and the lack of a specific policy direction for tax matters in Nigeria and the absence of laid down procedural guidelines for the operation of the various tax authorities.

Furthermore, other problems plaguing Nigeria's tax system have not been adequately tackled for many years. One of the reasons for this was Government's heavy reliance on revenues derived from oil, as a result of which little or no attention had been given to revenue from other sources, such as taxation.


In-order to achieve the purpose of this research, the following is the objectives of the research:

1       To identify the challenges tax policy on the performance of revenue profile of Nigeria in Nigerian custom service.

2       To investigate the impact of value added taxes.

3       To examine the performance of revenue in Nigeria

4       To identify ways of properly addressing the challenges of Nigerian tax policies.


In order to achieve the objectives stated above, the following research questions were used as a guide in achieving the objectives of this research:

1.    What are the various challenges facing tax policy on the performance of revenue profile of Nigeria in Nigerian custom service?

2.    What are the impacts of value added taxes?

3.    To what extent is the performance of generated revenue in Nigeria?

4.    What must be done to address the challenges of tax policies in Nigeria affect small business?

1.5                    SIGNIFICANCE OF THE STUDY

This study gives a clear insight into the various ways in which tax policies in Nigeria can be executed efficiently and how some taxation policies in Nigeria can be properly tackled. The study also gives a clear insight into the various causes of why revenue and tax reform fail in Nigeria as well as the challenges of the tax policies in Nigeria. The findings and recommendations of the researcher will help in building a strong and better tax policy system in Nigeria, if taken seriously by government and the general public. The challenges of taxation in Nigeria are outlined in-order for drastic measures to be taken to tackle these challenges and meet the prospects of the general public so that revenue from tax policy to the government can be increased.

1.6          SCOPE OF THE STUDY

This research focuses mainly on the tax policy on the performance of revenue profile of Nigeria in Nigerian custom service. The study only torches on the performance and challenges tax policies in Nigeria and how it can affect the Nigerian custom and order government agencies.

Based on the findings of this study other possible researchable areas may include studies on the various challenges of other forms of tax such as the Value Added Tax (VAT), Capital gains tax, Import and Export duties tax. Etc. Further research can also be done on curbing tax evasion in Nigeria

1.6         LIMITATION

The research is limited to the tax policy on the performance of revenue profile of Nigeria in Nigerian custom service. The researcher in the course of carrying out this study is the cause of delay in getting data from the various respondents. Most respondents were reluctant in filling questionnaires administered to them due to their busy schedules and nature of their work. The researcher found it difficult to collect responses from the various respondents, and this almost hampered the success of this study.

1.7          CHAPTER SCHEME

Chapter one of this study includes the general introduction, background information about the study, statement of the problem, objectives of the study, research questions, scope of the study, significance of the study, and the limitation of the study.

Chapter two reviews all relevant literatures relating to the study as well as the researcher’s views concerning previous studies on the challenges of tax policies.

Chapter three includes the methodology applied in collecting and analyzing data, population definition, study site, and limitations.

Chapter four presents the results of the study as well as data analyzed, and the interpretation of the analyzed data.

Chapter five includes a summary of the study, conclusion and recommendations based on the findings from the study.

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