CHAPTER ONE GENERAL INTRODUCTION

1.1       BACKGROUND TO THE STUDY

The international multinational corporate taxation vis-à-vis foreign investments, together with issues of double taxation and non-adherence to corporate rules are some factors that have brought companies to ruins. The viability and health of corporations have direct bearing on a country‘s economic growth and revenue generation.

It is definite to state that taxation is the key to a sustainable development. This is because no government can survive without sufficient revenue to finance its activities. This explains why revenue generation is one of the basic objectives of taxation1. As a matter of fact, fiscal considerations are paramount in shaping development policies of a given economy either at micro or macro level. In his remark, Felix Frankfurter2 states the significance of tax thus:

Taxation has always been the sensitive nerve of government. The enormous increase in the cost of society and the extent to which wealth is represented by intangibles, are putting public finance to its severest tests. To balance budgets, to pay for the cost of progressively civilized social standards, to safeguard the future and to divide these burdens with substantial fairness to the different interests in the community, strains to the utmost the ingenuity of statesmen.

Nigeria has many taxes through which sufficient revenue can be generated to meet government expenditure3. Some of these taxes include companies‘ income tax and

1       Other objectives of the taxation include re-distribution of wealth and management of economy.

2        ― Justice Branders and Constitution” 45 Harvard Law Review 33 reproduced in Ervin H. Pollack. The Brandies

Reader Oceana, Docket series, vol. 7 (1965) p.38 quoted In O. Akanke (ed) Tax Law & Tax Administration in Nigeria, Nigeria Institute of Advanced Legal Studies (NIALS), 1991, p.109.

3 The major taxes in Nigeria are: Personal income tax governed by Personal Income Tax Act 1993, (Now Cap P8 Laws of Federation of Nigeria (LFN) 2004), Companies’ income tax regulated by Companies Income Tax Act 1990 (Now Cap C21 LFN 2004), Petroleum profit tax regulated by Petroleum Profit Tax Act 1990 (Now Cap C1 LFN 2004), Value added tax regulated by Value Added Tax Act 1993,(Now Cap V 1 LFN, 2004), Education tax regulated by Education Tax Act 1993 (Now Cap E4

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petroleum profit tax among others4. These taxes are capable of generating sufficient revenue to finance the government activities if they are effectively administered and enforced. However, there is no gainsaying despite the fact that Nigeria has many companies and other taxable persons from whom revenue can be generated, the government is repeatedly complaining of the widespread incidence of tax avoidance and evasion5. Our tax system has not succeeded in achieving the goals of revenue adequacy and equity. Revenue authority attempts to generate too much reve